A2004/01 - Fair go for team player (Courier Mail opinion piece 16.2.04)
Queensland National Party senator Ron Boswell disputes the dark scenario painted for the sugar industry by commentators.
With greatest respect to Peter Charlton, an accomplished and usually compassionate journalist, his article comparing the struggling Queensland sugar industry to a hotdog vendor misses some important points.
Charlton's economic theory is sound, and most would agree that competition and efficiency should be encouraged in domestic and overseas markets. It is not right to throw taxpayers' money at industries which simply cannot compete in the long term.
However, fair competition can't be achieved without an umpire, and the Australian Government has a role in ensuring market issues and industries are dealt with fairly, aiming for the best outcomes for the nation and our industries.
I will stick with Charlton's comparison to the competition-plagued hotdog business, but with some extra variables thrown in.
Let's say that a woman named Harriet builds an empire of hotdog stands to serve hotdog lovers all over the nation.
Thanks to Harriet, hotdog production becomes one of Australia's landmark industries, contributing enormously to the economy. Harriet's hotdog factories become the basis of communities and economies in country regions with whole towns emerging to provide support for the hotdog industry.
Harriet's Hotdogs becomes so successful and efficient over time that the company exports top-quality hotdogs all over the world. In fact, 95 per cent of Harriet's product is exported.
However, times begin to get tough with most other players on the world hotdog market being given subsidies by their governments. Other foreign hotdog interests emerge, also subsidized by their governments to diversify into new, valuable hotdog by-products.
Harriet's Hotdogs are forced to reduce prices to compete on a subsidy-corrupted world market, and the business is soon running at a loss, rapidly eating up equity. Harriet's is eventually forced to appeal to the Government for assistance to diversify, increase efficiency and compete with their subsidised competitors. What should the Government do now?
The reality is, like Harriet's Hotdogs, Australia's sugar growers, rated as the second most efficient in the world, do not compete against the rest of the world's sugar growers but against large foreign chequebooks.
If you were a grower in the US, EU or Japan you would have access to $13 billion a year in subsidies. We can't match that.
The inability to gain better market access for Australian sugar through US free trade agreement negotiations has understandably left the sugar industry disappointed. To their credit, however, growers have remained supportive of the FTA and I commend the canegrowers organisation for not adopting a dog-in-the-manger "if not sugar, then no one" approach to negotiations.
They also recognize the benefit of Australia retaining our single-desk selling arrangements for sugar under the deal.
Out of adversity comes opportunity and the industry now has the full attention of the Government. The Prime Minister, the Deputy Prime Minister and Treasurer recognise the industry needs help and stand ready to provide it.
The industry deserves help. Sugar injects an estimated $4.7 billion into the Australian economy each year, and sugar exports were about $900 million last year, falling from $1.7 billion in recent years. The sugar industry has always supported Australia, employing 35,000 people in our regions with immeasurable knock-on employment that provides a backbone for many small rural communities.
If we allow the industry to collapse, what happens to communities such as Proserpine and 24 other regional communities that exist only because of their sugar mill?
In 1998 Proserpine produced 256,000 tonnes of sugar and received $90.3 million. In 2003, the same mill produced 259,000 tonnes, and only received $59.6 million because of changes to the world price.
I have been to the Proserpine mill's general meetings and know that when the mill is making money, the community benefits from donations to sporting, youth and service groups.
The Government might be able to compensate farmers for not producing sugar, but we can't buy the infrastructure and the social aspects of our sugar towns.
It takes around 2 million tonnes of cane grown locally to make a mill viable. Buying out farmers would only exacerbate the problem as the critical mass of cane required could no longer be reached. Mills would close, 10,000 mill workers would lose their jobs and entire communities would collapse.
The only viable way forward for the sugar industry, and its communities, is through investment in new efficiencies, diversification and production of new sugar-based products – ethanol, bioplastics and electricity co-generation.
Ethanol in particular needs our support. There are mouthpieces for the oil industry that keep putting the boot into ethanol, but that is no reason to bow to them. Ethanol has proved itself as a safe, clean, viable alternative to oil-based fuels.
The assurance from the Howard Government is that we will not abandon the sugar industry or communities such as Proserpine after they have provided so much to the nation. We restructured the car industry to great benefit and it would be heartless, cruel and un-Australian not to do the same for sugar, which still has a great future.
• Contributed by Senator Ron Boswell - Leader of The Nationals in the Senate.