After Tony Abbott declaring on election night Australia is again “open for business”, it’s unfortunate that first up Treasurer Joe Hockey has soon to adjudicate on just how “open” the door is.
The decision by Hockey – in formal terms, his alone – on whether to approve the takeover bid by the US-based food company Archer Daniels Midland for Australia’s largest listed agribusiness GrainCorp will send out a major signal about Australia’s attitude to foreign investment.
It is one thing to make welcoming statements but international opinion is moved by what is done.
The man responsible for drumming up more foreign investment, Minister for Trade and Investment Andrew Robb told The Conversation: “It will be watched, mark my words, it is being watched by the international investment agencies and companies”.
Equally it is being watched by many – both critics and supporters - who want to judge how much influence the Nationals will have in this government. Senior Nationals have gone out on such a long limb over this, from leader Warren Truss down, that if the bid is approved they will be faced with explaining their impotence. They have already had their noses rubbed in their perceived protectionism by the trade job being awarded to a “dry” Liberal.
In June Truss warned “This bid would mean that every grain export facility in Queensland, NSW, SA and all but half of one in Victoria, would be foreign owned.” The takeover would hand ADM 280 storage sites in the eastern states, 19 grain trains, three container loading facilities and vital stocks information,“ he said. The owners of these vital assets have the ability to decide whether eastern Australia has a grain industry or not.
"ADM is not offering new investment or any new commitments to Australia – just new owners at above market value. What is in this deal for Australia?” Grain storage and handling charges would rise for farmers to pay for the purchase and the profits would be transferred to the new American owners, Truss said.
Truss is being careful in his public comment now, but new minister Fiona Nash, who is the Nationals’ deputy leader in the Senate, felt no such restraint this week. She could hardly have been stronger in her comments.
“[The bid] is absolutely without doubt contrary to the national interest,” and Hockey should reject it, she told Fairfax Media, noting that she was a grain grower herself, living amongst those communities. “This is going to have a huge impact on grain growers.” It wasn’t actually a question of foreign “investment”, because the level of extra investment would be minimal – it was just a takeover, she said.
Bank of America Merrill Lynch chief economist Saul Eslake sees the decision as a “key test of whether the template for this government is that of the Howard government or the Fraser government.
‘'In the Fraser government the Country Party combined with the PM to thwart the aspirations of authentic economic reformers. In the Howard government National Party leaders Fischer, Anderson and Vaile by and large supported market forces, and saw it as part of their role to sell market-friendly policies to otherwise sceptical constituents.
"I suspect that with the exception of Warren Truss, whose instincts are good the Nationals have reverted to their old McEwenite roots, and for them GrainCorp is what Tony Abbott would call a 'signature’ issue.”
Eslake says the outcome will be seen widely “as a litmus test for the extent of the Nationals’ influence, and for where Abbott stands when it comes to a contest between the Nationals and genuine economic liberals”.
Robb says it’s a difficult issue. “I’ve looked at both sides of it, and I’ll give my ultimate advice to Joe Hockey after I talk to more people. You can see that people on both sides of the argument have a legitimate basis.”
He says a lot depends on trust, and judgements about how things would play out in the future – “if they do take over, that the price of things across the wharf are not increasing unduly and that we get much better market access, or if they don’t take over that GrainCorp does in fact provide the continuing access to farmers across the country and that they can perform on world markets as we would expect”.
“My starting point is more disposed to encouraging foreign investment in most cases. But I do accept the argument that there are times when it may not be in our national interest for all sorts of different reasons. But my starting point always is to prove that it is against our national interest if you’re opposed, and those who have got those arguments will be listened to.”
“Whatever decision we take, it needs to be supported with sound arguments … then I think you move on, no matter the decision.”
Asked whether it could be a matter of requiring conditions Robb says he doesn’t want to prejudge it but notes that there are many investments that occur without such a glare of publicity where investors have agreed to conditions “because it would be more acceptable to the market. So they may get a 90% result rather than a 100% result. It’s not unusual to have conditions applied.”
Tony Hinton, who was the Treasury representative on the Foreign Investment Review Board for six years, and a strong supporter of foreign investment, sees the imposition of conditions as a possible way through. “There is a clear capacity of the Treasurer, under advice from FIRB and Treasury, to design conditions that would address any valid concerns of those in the agricultural sector and other interested parties,” he told The Conversation.
Conditions may address valid concerns (including about the company’s past behaviour, which involved price fixing by several executives in the 1990s). But conditions that manage to send the right international message while providing some political cover for the Nationals – they might take some authoring.