In the middle of Lent, Catholics are abstaining from pork the same time Australian pork farmers considering throwing in the towel. Australian industry should be taking notice – the future of pig farming hinges upon a decision that will determine how Australian governments deal with import surges.
The pork industry is in crisis – and it’s not the drought. Pork imports increased by 48% last year. They have been increasing at roughly 23% annually since 2002. Operators have downsized piggeries. Staff have been laid off. The industry could collapse within 12 months.
The Australian industry is ripe for the picking. Quarantine regulation prevents ham on the bone being imported, but in the past three months there have been two cases of importers wrapping imported ham around Australian pork bones for sale in supermarkets.
The industry has asked the Government to provide temporary import restraint as part of a restructuring plan. This is allowed by governments under World Trade Organization (WTO) rules, known as the Safeguards Agreement. Safeguards allow measures against unexpected and prolonged import surges – and is the only WTO instrument permitting their use.
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The body that assesses Safeguards cases is the Productivity Commission (PC). They handed down an interim finding on pork imports in December and will hand a final report to the Rudd Government this month.
The PC’s interim decision has effectively blocked the use of Safeguards. In its report, the PC stated there was no “clear evidence” that imports are injuring the industry – despite a mountain of data suggesting otherwise. The PC agreed pork importing nations like Denmark and Canada were benefiting from subsidies. It agreed pig farmers could not pass on higher costs to consumers because of cheaper imports. In the face of this, the PC remarkably ventured an opinion that Safeguards should not be used because domestic producers cannot match import prices – which is precisely the point of the Safeguards Agreement.
The PC has now effectively set a precedent where a recommendation for Safeguards is practically unachievable.
Australian industry should be watching keenly. In the face of a soaring dollar, increased costs and an increasingly protectionist EU and US, any number of sectors will be vulnerable to import surges. This represents the first significant challenge for new Trade Minister Simon Crean. Unless the PC determines otherwise at the end of this month, his ability to act on industry’s behalf will be severely diminished.
Khalil Hegarty is a senior consultant at ITS Global, a policy consulting group in Melbourne. ITS Global has provided policy advice to Australian Pork Limited.