Tasmanian Times

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche


Tasmania keeps apple ban

The Tasmanian Government is seeking advice on how the decision to lift a ban on New Zealand apples coming into Australia affects its quarantine restrictions for fruit from fire blight affected areas.

Lucy Gregg of the local fruit growers association says Tasmania can export apples to countries out of the reach of other states because of the regulations and its fruit fly-free status.

“We have a clean green image here, we do not have a lot of diseases and we ideally want to keep the Tasmanian fruit industry that way,” she said.

“We need to be competitive and our costs of production we need to control and fire blight would just increase our cost of production and decrease our productivity.”

The Tasmanian Farmers and Graziers Association has welcomed the state government’s decision to maintain its ban on New Zealand apples for now.

The association’s Jan Davis says Tasmania successfully banned uncooked Canadian salmon, when mainland Australia allowed it to be imported.

More, ABC Online HERE

• Richard Colbeck

Senator for Tasmania
Shadow Parliamentary Secretary for Fisheries and Forestry
Shadow Parliamentary Secretary for Innovation, Industry and Science

18 August 2011

Australian growers deceived:
New Zealand growers have apples en route

The Federal Government has again deceived apple and pear growers over the New Zealand apple import issue, with revelations today that seven New Zealand packing houses already have permits and fruit is en route to Australia.

Agriculture Minister Joe Ludwig only announced to Parliament yesterday that the Government would accept the Director of Animal and Plant Quarantine’s decision to allow the importation of New Zealand apples into Australia.

“It is now clear New Zealand growers and exporters have been privy to information, while Australian apple and pear growers were left in the dark.

“It is absolutely disgraceful that the Minister would tell New Zealand growers what was going on before he informed Australian farmers.

“In fact, New Zealand was so prepared for this announcement that it will have apples in Australia within days.

“These will be apples that were picked in April this year – before draft regulations were made public, before orchards could be registered, and before the final protocols and farm management practices could be verified.

“The Minister’s disrespect to Australian growers is symptomatic of his Government’s overall response to industry all through this process.

“The Government will try to give the impression that apple and pear growers have had input during the import risk assessment process but essentially industry’s concerns and suggestions for risk management have been ignored.

“Ever since Julia Gillard’s public and premature capitulation on the floor of the New Zealand Parliament, the Federal Government has been determined to get New Zealand apples onto Australian shelves despite clear risks to our fruit growing industries.

“Australian apple and pear growers have every right to be furious. It is outrageous that our Government has given such blatant advantage to New Zealand,” Senator Colbeck said.



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  1. William Boeder

    August 31, 2011 at 8:46 pm

    20. Saul Eslake, thank you for your responses to my comments made in #19.
    It is well understood by all commentors and readers of this Tasmania Times Forum that we all as a whole do appreciate your opinions statistics and data as quoted by yourself in relation to many matters brought into discussion.
    Firstly I would like to address the matter of the “sneering dismissal” as you described my mention of figurative data in my comments.
    I do believe you have reacted in an abject manner to my reference to numericals as being a non-consumable item, or put simply, are in fact just thought, voice and opinion messages, albeit as to their degree of prudence and good advice.
    EG: the products delivered by such as financial planners, superannuation advisers and that type of non-consumable and often costly invisible objects that have of recent time delivered minimal returns.

    Yes there is an important defined need for the data that you yourself are well qualified to provide, by way of which you have often so generously put forward, and in how these percentages and statistics etc, do indeed shape a great deal of the data essential for political consideration and subsequent actions.

    As to my references to job exports, I did refer to those persons in the Federal Liberal government whom when in the top spot at that stage or era of our economic development, whom became quite amenable and agreeable to the outsourcing of so many prior Australian employee jobs now cutting into the number of our employed personnel.

    I speak of those jobs once held here in Australia, when many of such jobs were transferred out of Australia, (back when the larger Banking and or financial institutions, along the likes of Telstra,) began to zip their office-johnny clerical work and computer input and data recording activities, overseas to Countries with the facility to achieve the same level of performance, but by lesser remunerated personnel than was the case here in Australia.

    Indeed this is still going on with the corporate world, they now dictating their terms or their now firmly entrenched policy of what they expect from each Federal government party, no matter if it be Liberal or Labor.

    As to manufacturing, perhaps I did not provide sufficient clarification earlier, this was intended toward the Primary Producers sector of Tasmania, then the flow on jobs of processing (or manufacturing,) that resulted from the prior high volumes of Primary Production for local and overseas markets.

    Traditionally Tasmania’s “clean and green” slogan- was a major attraction to buyers seeking quality farm produce, of course nowadays goodness knows where some of these products originate due to the far from adequate labelling practices as engaged in by our Supermarket Duopoly.

    Furthermore my comments were I believe quite relevant to the magnitudinal reliance to today’s strong reliance of exporting of our mineral resources and wherewithal commodities.
    Thus leading to the ignored collapse of much of our former major manufacturing industries.

    For without this present hugely beneficial and profitable mining sector boosting our Australian economy, we as a Nation would be in the most dire of circumstances.

  2. Ben Quin

    August 31, 2011 at 6:20 pm

    Great debate!

    In the pursuit of Saul’s objective for the Tasmanian economy –

    “the production of highly differentiated goods and services with a high intellectual content and for which consumers can be persuaded to pay a premium price”

    – we obviously must stimulate agressive R&D and marketing by those willing to take the risks.

    Is this really a function for DED and other Government funded programs in Tasmania? Or is DED just providing another form of protection for Tasmanian businesses?

    Could we better utilise the DED budget?

    What other policy settings might encourage a new generation of Tasmanian risk taking entrepreneurs?

    How do we factor in appropriate environmental protection?

    Ben Quin

  3. Saul Eslake

    August 31, 2011 at 3:31 pm

    I actually agree with the point made by William Boeder in the first paragraph of #19 (although I don’t necessarily endorse his description of the two major supermarket chains).

    I’ve said previously that the difficulties faced by vegetable growers in the north-west of Tasmania stem largely from their complacent willingness to sign up to sell all of their produce to a single buyer, rather than developing diversified markets for more highly differentiated products. That would, of course, have required them to make the effort to differentiate their product – but they chose not to, and that left them highly vulnerable to any change in the purchasing decisions of their single buyer.

    That in turn is why I’ve been saying, for more than a decade now, that Tasmania’s future can’t lie (where its past has) in the volume production of essentially undifferentiated commodities competing solely on the basis of price; but instead has to lie in the production of highly differentiated goods and services with a high intellectual content and for which consumers can be persuaded to pay a premium price.

    You don’t get there by shutting off competition, or by forcing consumers to pay higher prices for what fall well short of being premium products. You get there by prudent risk-taking, by supporting innovation, and by increasing educational participation and attainment (among other things).

    I disagree with a lot of Mr Boeder’s other comments. In particular, while I don’t carry any candles for John Howard, to describe him as the ‘number one Exporter of Jobs’ has absolutely no basis in fact, and suggests an ideological or partisan bias to which Mr Boeder is of course perfectly entitled as a citizen but which doesn’t make the products of it factually correct.

    The facts here are that during John Howard’s tenure as Prime Minister, employment rose by more than 28%, the unemployment rate came down from 8.3% to 4.5%, and the proportion of the working-age population in employment rose from 58% to nearly 63%. There’s room for argument as to the extent to which any of those trends were the result of policies enacted by John Howard’s Government – but to say he was the ‘number one exporter of jobs’ is simply not true.

    Nor is it true to suggest that Australia, and even less so Tasmania, ever had ‘an excellent manufacturing record’. Of course there have been some individual manufacturers who have done, and still do, an outstanding job – in Tasmania, Dale Elphinstone and Bob Clifford come to mind. But in general, Australia’s manufacturing sector has only prospered when sheltered by tariffs, quotas, and other barriers to trade – which, as I’ve noted in earlier posts on this thread, amount to the conscription of consumers, forcing them to pay higher prices for a narrower range of goods, often less well-made, than would be the case in the absence of trade barriers.

    Finally, Mr Boeder’s sneering dismissal of “data, figures and charts” – that is to say, of evidence – suggests a belief on his part that prejudice and uninformed opinion should carry greater weight than evidence in determining government policy. That might work fine in, say, Iran or Saudi Arabia, but I’d hate to see it as the basis for shaping government policy in Australia.

  4. William Boeder

    August 31, 2011 at 1:05 pm

    I personally believe Tasmania and its farmers would all the better be if they were not contract enslavened to the 2 Corporate Supermarket duopolies, for they were once our main market until thse 2 corporate shysters began their imports in order to reduce farm gate prices.
    The greedy duopoly care not for trade agreements nor for Australia’s producers and manufactuers, unless they are able to use this for their own bottom line advantage.
    Life in Tasmania held more opportunity before this American Inspired World Trade Agreement was welcomed into Australia and by none other than our number one Exporter of Jobs, J W Howard.

    My concerns are for Tasmania rather than the economic data and figures that may fight against our State.
    Saul, I note at last there are murmerings gaining louder voice and by the right people, to the enormous losses of our one time excellent manufacturing record.
    Figures and charts should not hold back the progression of Tasmania, as figures and charts produce no edible or even tangible benefit or product that will help boost our Tasmania.

  5. "John"

    August 31, 2011 at 12:14 am

    Thanks Saul, well explained.

  6. Saul Eslake

    August 23, 2011 at 1:03 pm

    (Continuing from previous post)

    The accumulation of unsustainable levels of personal debt in the US does, I believe, have something to do with the fact that median real household incomes have actually fallen there over the past two decades, as over 90% of the increase in aggregate real incomes has gone to the top 1% of the income distribution: those in the lower two-thirds of the distribution had, until the GFC, been borrowing in order to sustain lifestyles that couldn’t be supported by their incomes.

    While I’m not pretending that there hasn’t been any increase in inequality in Australia over the same period, it’s been a lot less than in the US, and in particular, every income quintile has experienced an increase in average real income over the past two decades, and the majority of the increase in Australian household debt has been incurred by households in the top 40% of the income distribution (who are reasonably capable of servicing it). That’s an important reason why our apparently higher levels of personal debt haven’t had the same devastating consquences as have occurred in the US. It’s got nothing to do with differences in trade policy, or in the relative sizes of the manufacturing sector.

  7. Saul Eslake

    August 23, 2011 at 1:02 pm

    I posted a response to Simon Warriner’s #13 a few days ago but it seems to have disappeared somewhere between my laptop and TT’s server. The gist of it was, as I recall, that I share Simon’s opinion of the quality of much Tasmanian produce, and together with my instinctive affinity for things Tasmanian, I (or my strictly my wife, since she does most of the shopping in our household) do look out for Tasmanian beef, cheese, cream, wine, fudge, etc. – and I’d hate to think that our desire to do so would ever be circumscribed by an insistence on the part of some future Victorian Government that we ‘had’ to buy Victorian-produced fare.

    However I also recall saying that while I was fortunate enough to be able to afford to indulge preferences of that kind, many others aren’t: and whom am I, or others in that position, to enforce the preference we might have for more expensive food items on people who would prefer to make a different trade-off between price and quality (or provenance)? Yet that is precisely what restricting international (or interstate) trade in the name of “protecting” particular producer interests does – imposes the preferences of a minority on a majority.

    Re #15, I’m in no position to dispute “John”‘s precise figures on the prices of particular cars. I would imagine (although I don’t know for sure) that the margin between the price of a typical Holden and the price of a marque such as a BMW would have been affected by the “luxury car tax” introduced around 1999, which may well have offset the effects of tariff reductions for cars at the upper end of the market.

    My point was more about the impact that the reductions in tariffs and removal of quotas have had on the price and availability of cars at the lower end of the market – the cheaper Japanese and Korean cars which would have been unavailable to Australian buyers, or only available at much higher prices, if we had continued with the protectionist regimes that we persisted with up until the mid-1990s, when tariffs on cars really started to come down.

    And on that score, the CPI tells me that over the past 15 years, prices of cars have fallen by 22% while the general price level has gone up by 51%. Movements in the exchange rate have obviously had some impact there, too, but clearly that’s a huge benefit to consumers. Even going back to 1974, car prices have risen by 324% while the CPI as a whole has risen by 634%, meaning car prices have fallen by 44% in real terms over that period.

    Currency pegs are a form of “protectionism” if the currency is pegged at an “artificially” low level. As I mentioned in #9 above, pegging a currency at an artificially low level is another way of forcing consumers to pay unnecessarily high prices for what are usually lower-quality goods or services (because producers have less incentive to care about quality if better-quality imports are kept out), and that’s “protectionism” just as much as if the same result were obtained through tariffs or quotas.

    Of course there is often room for rebate about whether a pegged currency is being pegged at “artificially low” level. In China’s case there’s general consensus that it is – although it’s worth noting that the yuan has risen by some 30% against the US dollar since China stopped pegging it absolutely in mid-2005 (and that’s a lot more than the Indian rupee, for example, has done). The Bank of Japan does intervene occasionally in an attempt to prevent rapid yen appreciation, but that intervention has been remarkably unsuccessful – the yen is at near-record highs against the US dollar and most other currencies despite that intervention. Intervention by the Swiss authorities has been similarly unsuccessful.

    I don’t deny that producers usually perform valuable services for the societies in which we live – taking risks, deploying capital, employing people, producing things we value, paying taxes and earning export income, among other things. But to my way of thinking producers have no more right to be guaranteed a market than individuals have a right to be guaranteed a job.

    In that context, I think it’s worth asking, why has there been so much more wailing and gnashing of teeth over the loss of 1000 manufacturing jobs at Wollongong & Port Kembla than over the same number of job losses at Qantas, or large numbers at Westpac, or (in total) among the book store chains that have collapsed in recent months?

    Why is it only the production of goods that is regarded as “productive” (in the sense that “John” used the term), and not the production of services – despite the fact that we Australians, like people in most “advanced” economies, spend (because we choose to) some 70% of our income on services? Why do so many Tasmanians (perhaps not so many TT readers) seem to think there’s something inherently more noble about driving a log truck than driving a tourist bus?

  8. "John"

    August 23, 2011 at 1:06 am

    It is a great opportunity to be able to debate with one of Australia’ best economists on Tasmanian times (#9), for this I am humbled and deeply appreciative. No sarcasm in that at all. Thanks once again Saul for the mostly factual and logical response to my hypothetical list.
    It was not my purpose to defend “protectionism” in my points, my aim was to describe something I have felt in my adult life, wondered about, and to ask for an interpretation as to why this happened.

    I agree with you on your first point (that some industries disappear in the face of international competition). The impact of Japanese manufacture and the work of W. Edwards Deming there is a classic example. However, I do not know if lower prices for the consumer are the inevitable consequence. You unfortunately mention the car industry (I love cars and their history) and we can go back and compare 1974 and 2008 to find out just if “As tariffs and other barriers to the import of motor vehicles came down, so did the prices of cars”. In this example, they have made NO difference. In 1974 an Australian built HQ Kingswood (6cyl automatic) cost $4032, an imported BMW 525 (6cyl automatic) $9705. In 2008 a VE Commodore Omega cost $39690, a BMW 525i $96910. The multiplier for the Holden is 9.84 times, and the multiplier for the BMW is 9.98 times. So in relative terms, the imported BMW is actually MORE expensive to the consumer in 2008 than in 1974, even after Australia losing its tarrifs and much of its manufacturing industry. No net benefit to the consumer. Certainly no benefit to those working in productive industry jobs. If in 1974 the consumer paid an “unnecessarily high” amount for the BMW, in 2008 they sadly paid MORE.

    Thank you for pointing out the flip side of the sword, namely that as countries peg their currencies at a relatively low level they impoverish their consumers. I had yet to understand this fully, and this is the benefit to the layman in being able to interact online. It also explains why Chinese people are being subject to heavy food-price inflation and explains to some degree the unrest in that country at present. I agree that China’s exchange policy has made its national savings at risk in USD denominated terms, but we should all note moves such as their encouraging citizens to own gold and silver, and stockpiling base metals and commodities, and diversifying into European (eg Greece) sovereign debt to escape this.

    Indeed, it seems the world currently suffers a complete mish-mash of currency pegs and floating rates. To what extent are currency pegs “protectionism” Saul? I note most of the EU is pegged to the Euro (enabling German manufacture to be more attractively priced internationally than if in Deutchemarks?), China pegs to the USD, the USD is in a policy of deliberate devaluation; Australia, NZ, Switzerland and others ostensibly “float” (though not the Swiss lately), and Japan intervenes to keep the Yen low. It’s a mess. How on earth can this foster a “free market” for consumer goods?

    My most concern regarding your response is in relation to the over-focus on the consumer. Surely it is the producer that powers society? In taking risks of capital and ingenuity, they offer goods which consumers can choose to purchase.

    If one is unable to produce a living in the world, how exactly are they to function as a consumer and pay any price at all for produce? Debt perhaps? (One could study the correlation between increasing personal debt in the West and the decimation of its productive industry as a fascinating study.) If a Tasmanian apple grower finds their business becomes unviable and their source of income is gone, how are they to be a consumer of New Zealand apples with no currency? Surely production comes before consumption.

  9. Saul Eslake

    August 21, 2011 at 10:39 am

    In response to #12, I don’t doubt for a moment the sincerity of William Boeder’s views nor the passion behind them, but I fundamentally disagree with the premises underpinning them.

    Yes David Syme founded a great newspaper (I’ve been writing for it every fortnight for the past two years), but that doesn’t mean that his every utterance has the status of Holy Writ. “Protectionism” arose in Victoria after the gold rushes because the expansion in the money supply induced by the surge in gold production caused much greater inflation in Victoria than in the other Australasian colonies (as well as sucking much of the economic air out of Tasmania for half a century), rendering Victorian producers uncompetitive with those from New South Wales and elsewhere.

    Syme’s solution was to impose tariffs on imports into Victoria from other colonies, and his newspapers supported any politician (including Deakin) who went along with that. And given Victoria’s position as the “leading” colony at the time of Federation, Victoria was able to impose its “protectionist” system on the rest of Australia, although for the first 10 years or so after Federation, “free trade vs protectionism” was the dominant issue in Federal politics.

    I don’t think “being self sufficient in manufacturing” freed us from any kind of “tyranny”. Most of those manufacturers were foreign-owned, sending their profits back to Detroit, London, subsequently to Nagoya or wherever. They weren’t “successful” in any sense except their ability to persuade successive governments to provide them with ever-increasing levels of “protection” – that is, to force consumers to pay ever-increasing prices for a diminishing array of declining-quality goods.

    The longer “protectionism” continued, the less capable Australian manufacturing became of succeeding in export markets, where they weren’t able to get pliant governments to rig markets in their favour.

    America is hardly an exponent of “free trade”, especially when it comes to agricultural products, and I’m certainly not holding up their trade policies as an example for Australia to follow.

    Nor do I think their “present woes” tell us anything about “the corporate model of buying all and every business operation”, as William Boeder suggests. What their woes tell us is the consequences of inadequate regulation and supervision of the financial system, excessively loose monetary and fiscal policies, the pursuit of unsustainably high levels of home ownership, and a dysfunctional and easily manipulated political system.

    I would also think Mr Boeder needs to think very carefully before accusing anyone of importing “possibly diseased primary products”.

    My position remains that it shouldn’t be up to governments or producers to determine what goods and services are available in Australia, from where or at what price, but rather those things should be determined by consumers.

  10. Simon Warriner

    August 21, 2011 at 10:10 am

    Saul, thanks for your response. I am heartened by your concern at excessive market power in the hands of the supermarket twins. In response to your comment about the productivity commision, much has been written elsewhere, certainly in Tasmanian Country by David Byard, and, if memory serves, in “The Land”. The errors and shortcomings of the PC’s investigation have been well identified. I would not lean to heavily on that particular post.
    I agree that producers must be subject to market requirements. They certainly are at a farmers market, where the feedback is about as up close and personal as possible. I am just not at all convinced that they are when they are supplying through the corporate supply chains. What they are responding to are demands of intermediaries who are playing both ends. When I walk the supermarket aisles the vast majority of what I see has had the life quite literally processed out of it. Any linkage between end user and producer has been contaminated by advertising, product placement fees, industial manipulation and chemical enhancement to the point of being unrecognisable. Much of the advertising is more about what we need that what they have to sell. (Another blog site worth of discussion in that subject alone)
    Where the products actually resemble the raw material the wishes of the consumer are secondary to what the supermarkets think they can get away with. I would pay $2 each for avacado, as long as when I get them home they are not rotten, or stony green. T have yet to see them any other way in Burnie supermarkets. Consumers wishes are secondary to corporate profit. A similar story exists with red meat in Tasmania. We grow some of the best in the world, and apparently would eat more of it if it was available, but some of what I have eaten out of supermarket fridges was old, wet and tough as boots. 30% weight loss from supermarket meat is not uncommon in my experience. I am quite confident it was not the customer saying “pump that meat”, or the guy growing it. (my partner owned a butchers shop, so we know whats what). Quality will go up, and price down until an adjacent business is damaged beyond repair, and once gone quality decreases and price goes up to a new high. I have seen that game played several times, in 4 cities. As the rules of the corporate game dictate, the big players are buying up and/or driving out the smaller competitors, and the resultant monopoly means the consumers will get what they are given, and the producers will be little more than serfs with debts.

    The time for action is well before the end result, for everyones sake. I fear we have passed that point in a great many spheres, not just food.
    The question is whether our elected representatives possess the wits, integrity and masculine attributes to regulate in the public interest,(which will return choice to consumers, which we agree is desirable) or if they will simply continue business as usual, collect the corporate donations to party coffers, and all the time frantically build yet more of the fence that contains, as a section, some of the infuriatingly purile airport security I recall you identifying some time ago. If they continue, I fear your wishes for progressive income distribution and taxation will remain as wishes.
    I do not see them regulating for the common good any time soon.

  11. William Boeder

    August 20, 2011 at 11:51 pm

    Saul Eslake, I note you have pointed out a few of the attributes of allowing free market choices to out weigh that of placing emphasis on Tasmania where it could still be producing product for sale outside of Tasmania.
    The Father of Protection in Australia, David Syme, was also the originator of The Age Newspaper, a book has been written in exemplary prose by a man by the name of Ambrose Pratt, with introduction to this book provided by the Hon Alfred Deakin. Date of printing was 1908.

    Just to briefly explain the views as held by David Syme in the aftermath of the Great Gold Rush in Victoria, he noted at the time how Australia was held to ransom by the importers and agents that controlled most all the goods needed by Australians at that time of our long ago past.

    This man championed the need for Australia to produce its own goods, to have an active manufacturing industry, stating that we could eventually be free of the tyrannies cast upon the people by the likes of Henry Jones “the Tasmanian Jam manufacturer,” the pompous-like importers and their agents.
    Australia from that period onward was to become most self sufficient in food production, manufacturing capacities and whatever else resources were required to ultimately provide or allow Australia to be free of foreign market tyranny and market domination.
    We now move forward to the 1970s, soon Australia’s successful manufacturers, companies and whatever businesses were becoming attracted to the eye of overseas corporations. soon to come was their trimming of employee numbers, until finally manufacture and production in Australia was ended and the jobs essentially were exported with them.

    A brief look at America and its present woes shows us that the corporate model of buying all and every business operation, then soon comes the moment when the entire operation is moved overseas to engage with the cheaper labor markets.

    A look today at America’s enormous unemployment levels, whereby millions of jobs have been made redundant by these same wealthy American corporations, and of course they seeking to sell such now to be imported goods, at the former local manufactured and produced prices?

    Tell me Saul, is this to be the destiny of Australia generally, thus Tasmania, to be held tightly constrained by the wealthy and politically interfering mega-corporates of the day?
    For example: Coles and Woolworths would be the rogues behind the schemery of buying cheaper and possibly diseased primary products, apples and all manner of produce that we ourselves could or still can amply provide.

    I am no economist nor world player, just a reader of history and the cyclic ways of history, each succeeding era the wealthy furiously keen to prey upon the consumer in any way made easy for such companies and corporates, of course helped along by those dim-witted State ministers who have positioned themselves for election. (Then to begin immediately to fail the people….)

  12. Saul Eslake

    August 20, 2011 at 3:13 pm

    In response to #10, I readily acknowledge that Australian farmers have achieved significant productivity gains over the past few decades. And competitive forces have obliged them to share a significant proportion of those with consumers. To me, that’s a Good Thing, because I believe that producers exist to serve the needs of consumers, not the other way round, which is a fundamental (though never stated) premise of “protectionist” policies.

    It may come as a surprise to some readers, but I share the concern of many at the possibly excessive concentrations of market power in the hands of the two dominant supermarket chains.

    As an economist who believes (in general) in the efficacy of competition and market forces as a mechanism for efficiently determining what gets produced, by whom, at what price, and for whom (though not, I would add, for producing socially desirable or equitable distributions of income and wealth, which is why I also believe in “progressive” taxation and income transfer systems), I am disturbed by the exercise of either monopoly or monopsony power by those who have it to the detriment of those who don’t.

    That said, investigations by the Productivity Commission (which shares most economists’ distaste for imbalances in market power) haven’t found any evidence that the supermarket chains have used such market power as they have to the detriment of consumers.

    If people want to patronize “farmers’ markets” as a response to what they perceive as the abuse of market power by supermarket chains, or in order to support “their” farmers, or indeed for any other reason, even though it entails paying higher prices for products that are also available in supermarkets, then I genuinely wish them well. And if enough people share that view, then “farmers’ markets” will gain market share at the expense of the supermarkets.

    But whether that happens should be determined by the preferences of consumers, not by the preferences of farmers, and certainly not by the dictat of governments (in my opinion).

  13. Simon Warriner

    August 20, 2011 at 12:27 pm

    Saul, I will stick with intellectual consistancy, and support the agricultural subsidisation that happens in europe, and japan. America’s attempt at it I have trouble with, as the vast majority of the money, as I understand it, goes to the corperate end of the industry, while the family farmers get very little.
    IN Australia farmers get little in the way of direct subsidy for production. I am not saying they get nothing, just very little in comparison with many other nations. They have, as demanded by society, increased productivity steadily over the years and the gains now available are ever smaller and require higher levels of skill to achieve.
    There is a type of engine some motor racers build which they call a grenade. They hone, polish and lighten to wring the maximum horsepower out of a particular engine, knowing that it will only last for one event, and possibly only one pass or lap.
    It seems to me that is what we are doing to agriculture, without the foresight. It is not a race engine, it is our food source, Saul. Without it we are up shit creek.
    Is it wise, clever or prudent to be managing its welfare with economic performance to the forefront when that economic performace demands the sacrifice of diversity, resilience, disease resistance, and so much more?
    Our food production domestically is dominated by the demands of the duopolly that is Coles/Woolies.
    It seems to me that there has been massive subsidisation of food prices over the years by farmers, in the form of lost profit. It would be interesting to see graphs for farm product prices, farm finacial performance, supermarket prices, and supermarket financial performance over the last 30 years. Price to the consumer has increased at around or above inflation, depending on the item, supermarket margin has increased, and farmers prices have lagged well behind inflation in many cases. Remaining profitable is a continuing uphill battle to wring enough out of your system. If you cannot keep borrowing to grow your enterprise you run the risk of not having enough scale to benefit from the ever smaller increments of profit available to you. Many of those increments come with costs, such as those associated with GE varieties, where the price of the vital inputs can be expected to fluctuate with farmings fortunes. I know a number of farmers on this treadmill, and it is taking a toll on them that their children are refusing to countenance, openly and bluntly. The ones I know who are successful are vertically integrated and marketing direct to the consumer, but they are in the minority, and the supermarket move to house brands is designed to combat that, which will see them come under increasing pressure as real wages shrink, and choices get made. As we have seen with milk, and now bread, the supermarkets are brazen in their disregard for intent of competition policy.
    Saul, I am not an economist, I am an observer. I have been trained to make observations and from those observations identify possible future scenarios. It is a skill I have taken from my trade and applied to the wider world. If we keep honing and lightening the engine that is agriculture we are going to wind up with a broken engine. Allowing NZ apples into Tasmania is yet another stroke of the file. Will it be the one that causes the engine to fail? Probably not, but it is part of a process that is destined to end badly for humanity if we keep at it. Global free market ideologies drive this process.
    The growth of farmers markets, globally, is the response of sane individuals to this insanity.

  14. Saul Eslake

    August 20, 2011 at 12:14 pm

    The hypothetical chain of events described in #8 is often trotted out by those who wish to impose, or defend, protectionist policies (which, to re-iterate, always and everywhere entail forcing your own consumers to pay higher prices than they otherwise would for a narrower range of usually less well made goods or services in order to keep otherwise uncompetitive producers in business on the sole grounds that they’re domestic).

    But has there ever been an example of this happening in real life?

    Yes of course businesses and sometimes entire industries have disappeared when confronted with international competition. But is that a bad thing if consumers gain access to a broader range of chearper and/or better quality goods and services?

    And where are the examples of foreign countries gaining a monopoly of sales of a particular product in a given country and then, having done so, dramatically raised prices? Surely, if a country is able to achieve steps 1-3 as outlined by “John”, and then tries to do 4, some other country will repeat steps 1-3.

    Consider, for example, what’s happened (and what hasn’t happened) following the dismantling of “protection” for the Australian motor vehicle manufacturing industry. Remember that this policy entailed forcing Australians to pay unnecessarily high prices for what were usually badly made cars in order to “protect” employment in an entirely foreign-owned industry.

    As tariffs and other barriers to the import of motor vehicles came down, so did the prices of cars, while the range and quality of cars available to Australian buyers improved significantly. The quality and reliability of Australian-made cars also increased – to the extent that we actually became able to export cars again, something which we had stopped doing in the 1960s. The share of Australian-made vehicles in the domestic market dropped from over 80% to less than 20%. But have those nasty foreign car-makers now taken advantage of that to dramatically raise the prices of cars? Er … no.

    Similarly, have the prices of TVs and other household appliances gone through the roof now that imports have completely replaced local production? Er … no.

    Countries who peg their currencies at artificially low exchange rates are impoverishing their consumers (by forcing them to pay higher prices, in their own currency for imported goods and services)in order to enrich producers. It’s another form of protectionism. And it’s one that can only be sustained for any length of time by dictatorships such as (and I assume this is the example that “John” had in mind) China. Since the break-down of the Bretton Woods system in the early 1970s, democracies haven’t done that.

    China’s exchange rate policy has also put at risk the savings of its people by accumulating them in the form of trillions of dollars worth of US Treasury bills – something it has to do if it wants to peg its currency to the US dollar. And that pile of US Treasury bills pays virtually zero interest, and will expose China to the risk of substantial capital losses as the US dollar depreciates against the yuan (and other currencies).

    So, like other forms of “protectionism” it entails short-term gains for producers at the expense of long-term losses for consumers.

    But of course those who seek to impose costs on consumers in order to advantage producers never spell that out. They use soft and cuddly words like “protection”, or wrap themselves in the flag, in order to disguise their intentions and motivations. But “protectionism”, in all its guises, should be seen for what it is. What’s surprising is that “protectionism” should be embraced by those who, at other times, purport to be standing up for individual citizens and railing against “corporations” in the pursuit of “profit”.

  15. John

    August 20, 2011 at 2:30 am

    Thank you Saul for the compelling arguments. Could you comment on something I feel I’ve lived through here in Australia within my lifetime:
    1. You gain entry to a foreign market
    2. You artificially peg your currency lower than its floating value would be to enhance the competitiveness of your produce (not that NZ does this).
    3. Dump your produce at below costs, until the competitive domestic industries there collapse.
    4. Raise your prices, and dominate that market.
    5. Smile, because you won.

  16. an apple a day

    August 19, 2011 at 6:51 pm

    Doesn’t Tasmania have codling moth, a serious pest of apples?
    Doesn’t Tasmania export apples into Japan? Hasn’t a biosecurity protocol been worked out which allows this?
    Don’t Japanese apple growers accept the situation, even though Japan doesn’t have codling moth.

    Should you do to others what you would have them do to you?

  17. Saul Eslake

    August 18, 2011 at 11:58 pm

    Re #4, Simon Warriner is of course entitled to his opinion – and if he also supports the actions of the Japanese, American and various European Governments in propping up otherwise uncompetitive agricultural producers at the expense of their own consumers and taxpayers then he is at least being intellectually consistent – but I nonetheless profoundly disagree with him.

    We’re not talking here about competing with third world countries paying what we would regard as “slave labour wages” and having no regard for their environment. We’re talking about New Zealand – a country whose wage structure is very similar to Tasmania’s, and which faces the same disadvantages of great distance and small scale as we do. If Tasmanian (or Australian) apple producers truly do have a “competitive advantage” vis-a-vis their New Zealand counterparts, then they’ll survive: if they don’t, then they don’t deserve to.

    To #5, why are consumers “selfish” if they want to spend a few cents (if that’s what it is) less on apples, but “struggling” (and deserving of our sympathy whenever they are “ripped off” by some allegedly nasty corporation? Is there something inherently more noble about farming than, say, retailing? With all due respect to farmers (and I do respect the good ones), I don’t believe so.

    And who is “Max” to say that his assessment of the risks posed by allowing the import of apples from New Zealand should be given greater weight than that of the WTO, based on professional scientific advice (which, as I noted in #2, is something that in other contexts, such as global warming, we are all encouraged to accept)?

    Apple growers – be they amateur like “Max” or professional – have no more right to be “protected” from competition at the expense of consumers than do motor vehicle manufacturers.

  18. max

    August 18, 2011 at 4:46 pm

    Once you let the genie out of the bottle it is impossible to put it back. NZ apples may be safe but once you get fire blight it is there for ever. I have a single apple tree in my back yard that supplies me with organic apples but if we get fire blight I will have to cut this tree down, or spray. I am totally selfish in my wish to grow my own apples but people wishing to save a couple of cents by eating imported apples instead of eating local grown apples are not only selfish but are willing to inflict long term pain on local producers for a short term gain

  19. Simon Warriner

    August 18, 2011 at 2:12 pm

    Saul, global free markets sound like a wonderful thing until you realise that they suit, are set up by and are controlled by the largest players for their profit. There is always a lower cost producer.

    The Canadian Farmers Union did a study I have referred to before which detailed the structure in quite some detail and showed how producers were held in a trapped position of being price takers while their suppliers were price setters.

    Playing in the WTO free for all requires that we participate in a race to the bottom, and in the case of apples, means we sacrifice our competitive advantage to remain in the game. Given our competitive disadvantages of scale, remoteness, and a government who do not understand agriculture it is probable that this will be the straw that breaks the camels back. No more Tasmanian apple industry.

    Simon Warriner

  20. David Obendorf

    August 18, 2011 at 3:14 am

    Saul, let’s hope Lara Giddings reads your comment! Thank you.

  21. Saul Eslake

    August 17, 2011 at 5:13 pm

    It is unfortunate that protectionist sentiment still runs so deep in Tasmania. Language is powerful, and advocates of “protection” use that term because it conveys the sense that we are sheltering something from nasty, evil forces.

    The truth about protectionism, as Australians eventually learned after more than 80 years of experiencing ever-increasing doses of it, is that it entails forcing all Australian consumers to pay higher prices than they need to, for more restricted range of usually less-well produced goods, in order to keep otherwise uncompetitive producers in business, and their employees in jobs (often at the expense of people who could get jobs producing other goods or services if consumers didnt have to spend so much buying things which are the subject of “protection”).

    How can we expect the European Union, the United States and Japan to give up the protectionist agricultural policies which have imposed such high costs on their own consumers and taxpayers, and deprived Australian farmers of markets and incomes, for so long, if we seek to continue to defy the independent “umpire”, the WTO, whose rulings we expect other countries to abide by when they “suit” us – if we continue to seek to defy those rulings ourselves?

    In this particular case, the WTO has found, after considering numerous appeals from Australian producers, that Australian restrictions on the import of apples from New Zealand are not based on sound science.

    Why are those who urge us all to accept “the science” on climate change (as I do), silent when it comes to accepting “the science” on this issue?

    Why are those who continue to tell us that Australian consumers are “struggling”, “battling” and “doing it tough” in the face of ever-increasing costs of living, silent in the face of efforts by agricultural interests to force Australian consumers to pay higher prices for apples, or for that matter bananas, than they need to?

    By all means lets have clear labels that will allow Australian consumers to choose to buy Australian-grown fruit if they wish. But why should they be force to, if they’d rather not?

    Would we like it if people in other countries were denied the right to buy Tasmanian fruit, Tasmanian wine, Tasmanian salmon, Tasmanian beef, Tasmanian wool, or (as Americans other than their navy still are) Tasmanian fast ferries?

    Let’s not be hypocrites. Let’s not dwell in the past. And let’s remember that producers exist to meet the needs of consumers, not the other way round.

  22. David Obendorf

    August 17, 2011 at 3:27 pm

    Banning NZ apples is quite different to Tasmania’s unilateral imposition of a State quarantine ban on Canadian fresh salmon imports almost 10 years ago. There was no salmon grown in Australia because of climate limitations and packaging of fresh frozen Canadian salmon produce could not be trampered with.

    In this case, Tasmania ‘going it alone’ might be seen as an important local disease-free protection measure, but apples are grown in other parts of Australia and if Tasmanian Biosecurity bans apple imports from NZ, they will need to consider a ban on apple imports from Australia too! Why? Once a sticky label goes off a piece of fresh unpackaged or repackaged produce – apples or pears in this case – who to say where it came from – NZ or Batlow, NSW?

    DPIPWE, Andrew Wilkie and the Greens and the State Liberals will need to think this one through rather carefully.

    In addition there cutbacks in Biosecurity in Tasmania makes any intervention at a State level rather tokenistic at best!

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