ADM’s proposed takeover of GrainCorp opens the door to a rent-seeking multinational while further highlighting the inadequacy of Australia’s anti-competition laws. Joe Hockey should not give his approval
Professor Henry Ergas is an excellent commentator on economic matters. He began his column in The Australian on Remembrance Day with what he described as an “heretical thought”. This was that Australian farmers aren’t idiots. If they’re concerned about the proposed acquisition of GrainCorp by Archer Daniels Midland, their fears shouldn’t be dismissed as ”hysterical rants”.
As he says, ADM is no poster child for global “agribusiness”’, to use that trendy word being thrown around these days.
It has been involved in a price-fixing conspiracy which resulted in record fines and criminal convictions for executives. There are allegations that it has been engaged in corrupt practices. The Cato Institute says ADM is a rent-seeker “drunk on tax dollars” from its very big investments in ethanol.
Nevertheless, Professor Ergas believes the Treasurer should approve the sale. He argues that GrainCorp’s network of ”up-country silos” now faces serious competitive threats. He says that with the segregation of grain into many quality classes, “yesterday’s soaring towers” are being replaced by ”tarpaulin-covered bunkers”, each reserved for a particular quality grade.
That may be so — in the long run. But as Lord Keynes said, “In the long run were all dead.” And ADM obviously doesn’t think GrainCorp is about to lose its monopoly position in Australia. Otherwise they wouldn’t touch Grain Corp with a barge pole.
According to News Weekly on October 26, 2013, ADM CEO Patricia Woertz (a strong Obama supporter) slashed 15% of its workforce and plans to move the company from Decatur, its home for four decades, to Dallas so that its executives can ”fly internationally more easily.” She is obviously not worried about CO2 emissions, even if the President is. (Incidentally, I was once severely criticised in Crikey.com.au for being seen on the Canberra shuttle for reading News Weekly. Apparently the bien pensants don’t do that, at least not in public.)
News Weekly points out that GrainCorp was formerly part of the New South Wales government, known then as the Grain Elevators Board and the Grain Handling Authority. After being privatised in 1992 it has taken over smaller companies and now enjoys a near monopoly in grain storage and handling down the eastern seaboard.
Had we decent competition laws, GrainCorp could never have become the monopoly that it did. And whatever the merits of privatisation, what is the benefit in privatising a monopoly? Especially when monopoly abuse is little regulated under Australian law.
In any event, because some key Australian shareholders have cashed in their shares at the peak of the market, GrainCorp is now ripe for sale. The question is, should this monopoly be sold to a big foreign company with a questionable record and which will hardly act in the Australian interest?
Once again, are our farmers to be sold upthe river? Not if Senator Bill Heffernan has his way. A Senate committee will be looking closely at this. Before any approval is given by the sale of assets, the government has an obligation to hear the Senate Committee.
Above all, it must first break up the monopoly. If it can’t do that it has to act on what everyone knows. Our competition laws are designed to give monopolists and oligopolists a dream run. And if anyone doubts that just look at the retail industry. That’s a scandal — the result of years of looking the other way by both Labor and coalition governments.
So the point is this, Treasurer Hockey. The extent of monopolisation, and its abuse, in this country is now your responsibility. And that means one thing, Treasurer. You have to say “no” to ADM.
Prof. David Flint’s latest book, written with Jai Martinlovits, is Give Us Back Our Country