Take foreign investment fears with a grain of salt

Crikey

How much economic damage will federal agriculture minister Barnaby Joyce be allowed to inflict during the course of this government?

If successful, the efforts of the Nationals, led by Joyce, to block the sale of GrainCorp to Archer Daniels Midland will send a clear signal to foreign investors: Australia is closed for business if you fall on the wrong side of the government’s political calculus.

Australia already has one of the most restrictive agricultural investment regimes in the developed world – the Organisation for Economic Co-operation and Development ranks us 10th in terms of restrictions on foreign direct investment in agriculture, ahead of most of Europe and the United States, countries not exactly known for their commitment to free trade in agriculture. That’s one reason why the overall level of foreign investment in Australian agriculture is so low: 1 per cent of Australian agricultural businesses are foreign-owned or part-foreign-owned, and they hold less than 12 per cent of Australian agricultural land – and around half of that is held by companies that are majority Australian-owned.

Joyce has long railed against foreign investment in mining and agriculture – indeed, foreign investment full stop. He was forced out of the opposition finance portfolio in 2010 after making a series of howlers about a looming Australian debt default, including conflating government and private foreign debt into a single "gross foreign debt" figure of over a trillion dollars that he said would bring on a biblical-sounding "day of reckoning". For Joyce, it seems, borrowing from foreigners is always bad, no matter what the circumstances.

So where should investment come from if we cut off foreign investment? Easy: taxpayers. That was Joyce’s alternative last year to allowing a Chinese-led consortium to acquire Cubbie Station, a failed confection of water licences whose interests Joyce has reflexively supported during his entire time in politics. He wanted the government to purchase the property and break it into smaller lots.

What is it with the Nationals and foreign investment?

Xenophobia has been a recurring phenomenon in rural politics over the decades. The anti-Semitic League of Rights, which struggled for control of the Country Party in the 1970s, was intensely hostile to foreign investment. So too was One Nation, a primarily regional entity. And it was the Coalition that brought to an end Australia’s post-war, open-door policy on foreign investment, with the Gorton and McMahon governments establishing foreign investment and ownership restrictions; the Whitlam government took that economic nationalism further after 1972, and it has never been substantially wound back except via selective free trade agreements.

But the Nationals have been growing ever more hostile to foreign investment in agriculture in recent years, and the reason lies in the success of that industry.

Success? Why, yes – agriculture has been one of the most successful industries in Australia in recent decades. The Productivity Commission notes that in the 40 years to 2004, total agricultural output has doubled in real terms. According to the Australian Bureau of Statistics, in the 30 years up to 2011, our agricultural exports grew by 5 per cent a year, nearly quadrupling in value. Australian Bureau of Agricultural and Resource Economics and Sciences data shows that even during the appalling drought of the 2000s, we were still exporting significantly more agricultural products than in the 1990s.

And this has been achieved while the industry has dramatically shrunk its workforce, mostly over the last decade. In 2001, the agricultural workforce stood at over 440,000; in August this year it was just over 300,000. That is, labour productivity has increased massively in the agriculture sector. And the average size of farms has increased significantly as well, further improving productivity. Deregulation has also helped, and has caused investment, including foreign investment, to lift in agribusiness companies, drawn by ever-increasing export levels.

Much of that is bad news for the Nationals, because it means smaller rural workforces and further pressure on regional demographics, with people moving to larger regional centres and cities. There’s a reason why Joyce wanted not merely to use taxpayers’ money to buy up Cubbie but to split it up – the Nationals prefer smaller, family farming over commercial farming. In attacking foreign investment in agriculture and agribusiness companies, the Nationals are targeting the symptoms of a ‘problem’ rather than the cause – and that problem is the growth and success of Australian agriculture as a deregulated industry.

This is also why the Nationals have fastened on ‘food security’ as a reason for opposing foreign investment. The issue of food security in the Australian context is an absurdity: short of the development of technology that enables foreign owners to pick up Australian farms and fly them offshore, the only food security policy needed is a free market. But for Joyce, the very existence of a free market for agriculture is a problem, because Australia is in danger, he claims, of becoming a "net food importer". This myth also peddled by independent MP Bob Katter and is easily debunked, but it is the basis for this food security nonsense that the Nationals, the Greens and even the previous government like to go on about.

The challenge for Treasurer Joe Hockey is to see off this noxious, deeply damaging xenophobia and approve the Archer Daniels Midland bid – and not approve it with conditions that prevent it from proceeding, which you sense some in government see as a solution to the dilemma. The delay in approval of the bid was bad enough, and merely puts off a key moment in the history of this government. If the Nationals win, they will be emboldened to prosecute a deeply damaging agenda of economic obscurantism. All power to Hockey in his fight against them.