NATIONAL Party “protectionists” are hampering free trade agreements (FTAs) and stifling growth which could benefit Australia’s farming sector, says Senator Penny Wong.
Senator Wong told the 2014 Economic and Social Outlook Conference in Melbourne on Thursday Labor wants to raise the threshold on foreign direct investment (FDI) in agricultural land to $1.078 billion to boost Australia's economic potential.
Under current regulations, foreign investors can make purchases of up to $248 million before the deals are subject to approval by the Foreign Investment Review Board (FIRB).
Among the 34 OECD member countries, Australia ranks in the top 10 most restrictive to foreign investors: the seventh most restrictive country overall for FDI, and tenth in agriculture.
“The government must not allow protectionists in its ranks to jeopardise an FTA with our biggest trading partner”
Recent trade deals such as the Korea-Australia Free Trade Agreement (KAFTA) and Japan-Australia Economic Partnership Agreement (JAEPA) have used FDI as a bargaining chip, as countries struggling with internal resource challenges look for opportunities to build long-term food security. While the Coalition recently relaxed FIRB scrutiny in the KAFTA from $248 million to $1.078 billion - the same amount for New Zealand and the United States - Australia retained the right to a lower threshold in sensitive areas such as agriculture.
Australia is reportedly prepared to offer China the same deal on the foreign investment threshold as included in the KAFTA and JAEPA.
Senator Wong said lower investment thresholds should still apply where issues of national interest can arise (such as with foreign state-owned enterprises), but that Labor “does not agree with the Abbott government’s policy of imposing more restrictive rules on foreign investments in agriculture”.
The Coalition plans to lower the FIRB’s review threshold to $15 million for individual farmland sales, $53 million for agribusinesses and $1 for any potential acquisitions by foreign state-owned enterprises, according to Agriculture Minister Barnaby Joyce.
“If we are serious about significantly expanding our food exports to Asia, we must front up to the reality and necessity of foreign investment in our agricultural sector," Senator Wong said.
“It is inconceivable that we will be able to scale up production to fully tap into the growing consumer markets of Asia without foreign investment.”
Port Jackson Partners estimated in an ANZ-commissioned report late last year that $400 billion would be needed to support farm turnover in Australia by 2050. Another survey of Australia's top insolvency specialists last April found at least 80 major farming operations, each worth more than $1 million, were either in receivership or some form of financial distress.
Senator Wong said the Australian government needed to focus on creating even more opportunities for trade in the Asian region, particularly with China.
“An ambitious free trade agreement (FTA) with China should achieve better outcomes for Australia’s agricultural industry than those contained in the China-New Zealand FTA.”
Meaningful improvements in market access should be secured for Australian sugar, cotton, canola and grains, the Senator said, but National Party opposition to FDI in agriculture was a stumbling block as Beijing pushed Australia to increase the FIRB screening threshold.
“We have Nationals MPs pushing for any FTA with China to impose restrictions on Chinese investment in the agriculture sector. And we have the government establishing an inquiry on foreign investment in real estate.
“The government must not allow protectionists in its ranks to jeopardise a free trade agreement with our biggest trading partner.”
“Australia has a pretty good system of checks and balances in our foreign investment screening regime”
While Labor wants to actively increase agricultural FDI, the Australian Greens proposed a much stricter foreign ownership policy ahead of last year’s federal election. Greens Leader Senator Christine Milne said the government should be cracking down on foreign investors buying up Australian farms to protect not only the economy but also long-term food security.
The Greens called for a lowering of the threshold from $248m to $5m for consideration of the national interest purchases of agricultural land and water, including cumulative purchases, to legislate a mandatory national interest test and maintain a live register of foreign ownership of agricultural land and water assets to track overseas purchases.
Development of a register was still on the agenda, Mr Joyce said last week, following the release of Australian Bureau of Statistics figures showing our farms and farm businesses remain largely Australian-owned.
The Agricultural Land and Water Ownership Survey reported just under 99 per cent of Australian farm businesses are fully Australian-owned and just under 90pc of farmland is fully Australian owned.
Australian Farm Institute executive director Mick Keogh said a register was needed to throw "more light and less heat" on the issue.
One of the most frustrating aspects of the debate was the "almost complete lack of available data" about the extent of or trends in foreign ownership of Australian farmland, he said, combined with "very serious misinterpretation of what the available data means".
Mr Joyce - who called on Australians to "make a big noise" about an Indonesian plan to buy up 1 million hectares of Top End cattle country a fortnight before becoming minister - has been accused of backflipping on the issue.
Shadow Agriculture Minister Joel Fitzgibbon said Mr Joyce's recent support of ag-focused FDI was in “very stark contrast” to the New England MP’s mantra when he was in the Senate, but Mr Joyce said his views have often been misinterpreted.
“I’ve always had strong views on not only foreign investment but also excesses in foreign investment because the most precious thing you stand on is the soil,” he said.
Mr Fitzgibbon said his counterpart’s views on the issue were “populist” rather than xenophobic. The National Party has repeatedly rejected any accusations of xenophobia over opposition to FDI in iconic ag holdings, including the sale of Australia’s largest single irrigation property Cubbie Station to Chinese interests in September 2012 and the political veto of US Archer Daniels Midland’s bid for GrainCorp in December 2013.
Singapore-based Wilmar’s 2010 Sucrogen takeover has also raised concerns about the FDI screening process following the company’s decision to exit current industry-owned export marketing arrangements to set up its own commercial model, despite an undertaking to the FIRB it would not significantly change the industry.
Mr Joyce stressed FDI remained vital to the continued growth of Australian agriculture.
“Australia has a pretty good system of checks and balances in our foreign investment screening regime to help ensure the investments that go ahead are the right investments for Australia,” he said.
However, Senator Wong said Australia was a capital-hungry economy which has historically relied on foreign investment for growth, and current regulations were stifling that.
“Placing hurdles in the way of foreign investment in our primary production industries will only jeopardise their growth.”