Second Reading – Competition and Consumer Amendment (Country of Origin) Bill 2016

Sunday, 27 November 2016

Mr Pitt (HinklerAssistant Minister for Trade, Tourism and Investment) (15:25): I rise to speak on the Competition and Consumer Amendment (Country of Origin) Bill 2016. I would also say how pleased I am that it is finally coming to fruition, after some time. I am sure you are very well aware, Mr Deputy Speaker, coalition MPs and senators, particularly those such as John ‘Wacka’ Williams—and many others—have been fighting for more accurate country-of-origin food labelling for more than a decade. In fact, Senator Williams, I think, attributes his somewhat declining and receding hairstyle to beating his head against a wall for more than 10 years over just this issue.

Over the years there have been numerous inquiries and reports. I will not go into the specifics of every single report or review but between 2003 and 2013 there were four inquiries, four reports tabled two reviews. In March 2014 the parliament’s Standing Committee on Agriculture and Industry agreed to undertake another one. The committee released its report A Clearer message for consumers in October last year. This committee was of the opinion that any country-of-origin food-labelling regime should not present an impediment to importers and/or provide non-tariff trade protection to our industries but it should provide clear information to consumers who wish to make an independent choice to support either Australian farmers or food manufacturers. The report also highlighted consumer support for local produce, stating:

The Committee acknowledges that many consumers want to support Australian businesses by purchasing Australian made products—consumers express a strong preference to support local industries including food processing and manufacturing.

The issue of berries in 2015 increased public awareness and support for something that the farming and fishing industries have been long calling for: a level playing field when it comes to labelling. The coalition government has taken action to support our farmers and they give consumers real choice. At the end of the day, it is quite simple: Australians deserve to be able to make informed decisions and to know exactly what it is they are buying at their local supermarket. We want Australians to have confidence in knowing where their food is coming from.

Research commissioned by the Department of Industry, Innovation and Science in 2015 looked at the value Australian consumers place on country-of-origin information when purchasing food. It found that being able to identify the country of origin of food was either important or very important to 74 per cent of consumers surveyed. Many consumers are interested in not just where something was made or packed but also how much of the food was grown in this country. Consumers want—and they deserve—peace of mind about labels. A claim that a product is ‘made in’ or is ‘a product of’ Australia in the new system will ensure that that is the case. In saying the product is made from ‘local and imported ingredients’ will, quite simply, not cut it.

Consumer dissatisfaction in the country-of-origin labelling system has been evident for many years. Most recently, the response to a Colmar Brunton online survey mirrored that of the CHOICE campaign earlier in 2015, which generated over 26,000 responses. It found that almost three-quarters of consumers believe that changes to country-of-origin labelling were necessary. That is almost as many, Mr Deputy Speaker, as I am sure you get to your online surveys. However, the importance of easy-to-find labels was indicated, in the Colmar Brunton research, by the clear preference of participants for the labels that included visual elements, particularly the label option that combined text statements with visual representations via the kangaroo logo and bar chart.

The participants in the same study were asked to estimate the proportion of time they spent during a regular but hypothetical 60-minute grocery shop, reading the back of the label to find where products have been made or processed or where ingredients come from. Their time amounted to eight per cent of shopping time, or five minutes in a typical hour-long shop. This is time that could potentially be saved if label information was more easily identifiable. Thankfully, the new food labelling system will quickly and easily show consumers where products are made, grown or packaged. The new labels for food will include a bar chart and words to indicate the proportion of Australian ingredients in the food.

All food for retail sale in Australia requires a country-of-origin statement, but there are additional graphic and information requirements mandated for labels for priority food. Importing ingredients and simply slicing or packing them here will no longer qualify for a ‘made in Australia’ claim. The bill will simplify the tests used to justify a country of origin ‘made in’ claim by clarifying what ‘substantial transformation’ means and removing the 50 per cent production cost test. The changes are aimed at providing businesses with increased certainty about what activities constitute or do not constitute substantial transformation. They will make it clear that importing ingredients and undertaking minor processes that merely change the form or appearance of imported goods are not sufficient to justify the ‘made in’ claim.

The 50 per cent production cost test is an unnecessary burden on businesses and it means little to consumers. The test is difficult to administer, given the complexities of sourcing components through the global supply chain and the fluctuations in input prices and exchange rates. The removal of the 50 per cent production cost test will significantly reduce the regulatory burden for all businesses, not just food businesses. It is the main regulatory offset against the added costs imposed on food businesses by the information standard. The decision regulation impact statement estimated the total savings from removal of the production cost test at $49 million per year, or $550 million over a 20-year period in present value terms.

Research has shown that identifying the country of origin is the most important piece of information for consumers when it comes to food, and it can influence buyers’ decisions. The value consumers place on origin information can vary between food types, depending on the level of processing. Country-of-origin information is valued more for fresh and less processed food. This is supported by an international literature review of country-of-origin food labelling, which cited different studies in which country of origin was shown to be one of the most important cues demanded by consumers on meat products.

A comprehensive consultation with consumers, growers and businesses meant there was ample opportunity for people to have their say on the proposed labels. The green and gold triangle design was the overwhelming preference of more than 17,800 respondents to the government’s food labelling community survey. I thank those people who completed the survey and had their opinions heard. After all, the labelling is supposed to make it easier for consumers, not more confusing.

Importantly, the new food labelling system will not impose an excessive burden on businesses. At June 2014, there were over 17,300 food retailers in Australia, including almost 10,000 supermarket and grocery stores; around 4,700 fresh meat, fish and poultry retailers; and 2,500 fruit and vegetable retailers. There are also over 13,000 food and beverage manufacturing businesses in Australia. Bakery product manufacturers make up the largest proportion at some 45 per cent, followed by beverage manufacturers at 19 percent. Each of the other sub-sectors accounts for one to 10 per cent of food manufacturers, including meat manufacturers, fruit and vegetable processing, dairy product manufacturing, sugar and confectionery manufacturing, grain mill and cereal, seafood processing, and oil and fat manufacturing. Agricultural food production is the other key player in the food industry, with over 133,000 businesses.

While the reforms began on 1 July 2016, businesses will have up to two years to transition to the new arrangements and incorporate them into routine label changes, and all stock in trade can see out its shelf life. The government has developed an online self-assessment tool for businesses specifically to help them determine their new labels. Businesses can download the new labels using this tool. There is also a style guide and other information available to help businesses understand the changes.

To support the effective implementation of the reforms, the coalition government has provided the Australian Competition and Consumer Commission with additional funding of $4.2 million over five years to undertake compliance and enforcement activities in relation to these new requirements. The government is also funding $15.2 million for an information campaign to ensure consumers and businesses understand the revised framework. However, the consumer benefit from the time saving that will be generated from the visual elements of the label is estimated to far outweigh the cost to industry of providing them with that information.

The new labels are expected to appear on shop shelves later this year, so keep an eye out for them; they are around. But Australians also have to get on board. You should always ‘shop local’ and always read the label. I always encourage constituents in my electorate of Hinkler to ‘shop local’ wherever possible, and why wouldn’t they? There is so much on offer from our local businesses, whether it is macadamia nuts, avocados, tomatoes, sweet potatoes, limes, watermelons, pumpkins, rockmelons or strawberries, just to name a few. I even have a note here saying I can expand on this list if I wish.

We have several major food processing facilities in my electorate, including AustChilli, which has been featured on My Kitchen Rules; Simpson Farms, which was recently featured on ABC Landline with Pip Courtney; the Australian Ocean King Prawn Company in Hervey Bay and Urangan Fisheries. Those businesses export to the world and they employ hundreds of our local people. They, like other local companies around this great nation, deserve our support.

Australian food producers exporting their products can also use the new domestic label overseas, and they can do so proudly. The reforms to country-of-origin labelling comply with Australia’s international trade obligations. The coalition government has consulted with trading partners throughout the development of the reforms and will continue to work closely with them.

There is no doubt that our domestic product is in high demand. You only have to look at the success of free trade agreements with China, Japan and South Korea. Recently, I hosted a seminar on the Sunshine Coast to inform businesses of how they can take advantage of those FTAs. I would like to thank my colleagues the member for Fisher, Andrew Wallace, and the member for Fairfax, Ted O’Brien, firstly for their hospitality and secondly for their attendance and keen interest in the FTAs and what they can do for businesses in their electorates. The CEO of Sunshine Coast exporter Nutworks, Kylie Watson, spoke about her company’s experience following the reduction in Chinese tariffs on Australian macadamias. This was mandated, of course, under CHAFTA, the China-Australia Free Trade Agreement. She told the seminar that there had been an increase in demand for Australian macadamia products in China and if it were not for the FTA the costs would make it impossible for her compete with other countries.

I can also say that, most recently, this year my own electorate in the region has become the biggest producer of macadamia nuts in this country. They have far outstripped expectations. They are going incredibly well and, significantly, they are going very, very well because of the FTAs with those three countries.

I also recently had the opportunity to visit the Geraldton Fishermen’s Co-operative facility in North Fremantle, Western Australia, which is a long way from home and which is the world’s biggest exporter of rock lobster—right here in Australia, in the west. With a membership of 200 fishermen, the co-op employs 350 Australians and currently sells around $450 million worth of rock lobsters each year. Australia’s free trade agreement with China, in force since December last year, has seen the tariff for fresh or chilled rock lobster cut to nine per cent this year and it will fall again to six per cent in just four more months, on 1 January 2017. For the first six months of 2016, direct Chinese imports of live, fresh and chilled Australian rock lobster more than trebled compared to the same period last year to reach $20.7 million. Continuing tariff cuts under ChAFTA for these and many other Australian exports will boost trade opportunities leading to sales growth for Australian businesses abroad and increased jobs here at home to meet this demand.

A little closer to my own electorate, my colleague the member for Capricornia, Michelle Landry, and I visited tropical fruit farmers in Central Queensland who are interested in new market opportunities in Asia. Mangoes are an important fruit export for Queensland, and the China-Australia FTA has already cut the tariff for Australian mangoes from 15 per cent to nine per cent. The trade data shows that, in the early part of this year, Chinese imports of fresh Australian mangoes more than doubled compared to the previous growing season. This meant that Australia overtook Thailand as China’s principal supplier of mangoes in the first half of 2016. I am sure you will agree this is a fantastic result.

Elsewhere, under the Korea-Australia FTA, the 30 per cent tariff which Korea charges on shelled macadamias is down to 12 per cent already. These tariff cuts contributed to a tripling of macadamia exports to Korea in the first half of 2015 compared to 2014 and that higher export level has been maintained into the first half of this year. While it might have taken a while to get to this point, consumers will be the overall winners in having the new country of origin labelling systems and I cannot wait to see those on the shelves. When we talk about FTAs, when we talk about Australian products, there is no greater reflection, there is no greater introduction to an Australian product than actually using it, seeing it, tasting it.

On my most recent visit to China, I walked through the Guangzhou airport, which is obviously a very busy airport in China. There was a small fruit stall at the Guangzhou airport and I thought to myself ‘Here is an opportunity just to see what it is that they are selling in China, in Guangzhou.’ Much to my surprise, I picked up a mandarin from 2PH Farms, which is a very large citrus farm in Queensland. There were 2PH products, mandarins, right there in Guangzhou China. Through an interpreter, we took the opportunity to have a discussion with the vendor, who informed us that Australia products sell out not in two hours, not in one hour but in 30 minutes. They last just 30 minutes on the shelves. I would just like to say that this is a great bill for consumers and I commend the bill to the House.

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