Sunday, February 21, 2016
Bureaucracy and canned tomatoes
I initially thought this story was too trivial to be worth mentioning but it is such an hilarious example of bureaucracy in action that I thought I should mention it after all. The story concerns Australia but the lessons about bureaucracy are universal.
I first noticed the story because I do buy canned tomatoes. I tip a can of them into my crockpot as the first step towards making a curry. And I had noticed the odd price disparity between different brands. The "Home" brand I buy from Woolworths costs me only 59c whereas other brands cost as much as $1.40 per can. And the 59c cans come all the way from Italy -- something I have mentioned before.
And the first sentence from the Fairfax news report below is misleading. The bureaucracy has indeed laboured mightily but the assertion that "The days of cheap tinned tomatoes are over" is nonsense. The duties recently imposed range between 4% and 8% and they will be levied on the wholesale price. So say Woolworths buy my 59c can for 50c (it's probably less). So Woolworths will now have to pay how much extra to put that can on their shelves? 4c. So now I will have to pay about 65c for my tomatoes. Why bother? A 65c can of Italian tomatoes is still going to be hugely competitive with a $1.40 can of Australian-grown tomatoes. I can't see the price rise influencing any purchasing decisions at all.
So how come the bureaucracy has laboured and brought forth a nullity? Because it is a rule-following organism. The duty imposed was a dumping duty -- meaning the Italians sell their product for export at a lower prices than they charge local Italian shopkeepers. They do it because they still have some profit at the lower price and some profit is better than none. It keeps their volumes and market share up.
And dumping duty is calculated according to strict rules. You subtract the price to Australia from the price to Italy and express it as a percentage. You then add that percentage to the Australian price in the form of an import duty. So, as it happened, the Italian canners were selling us their tomatoes only a touch more cheaply than they charge Italian customers. The export discount was minor so the dumping duty was minor. A bureaucrat with a brain would have said "This is not worth bothering about". But a bureaucrat is not paid to think. He is paid to follow rules. And our lot did exactly that.
But that is not the only absurdity. The big market for tomatoes is for fresh tomatoes. As little as 2% of Australian-grown tomatoes end up in cans. So if Italian canned tomatoes took over completely, it would make no important difference to Australian tomato farming. The growers would continue growing as before. The main existing canners are owned by Coca Cola so sympathy for them is probably not large -- and they can lots of other fruit so their production lines would not be likely to lie idle.
So we see yet again why conservatives dislike bureaucracy and why Leftists love it. Leftists hate the society they live in so much that imposing anything inefficient, costly and wasteful on their society seems great to them.
And it is bureaucracy that created the problem in the first place -- the EU bureaucracy. EU farmers -- particularly French ones -- are prone to huge tantrums if they are not making enough money. They blockade things, burn things and generally create havoc. So to placate them, the EU bureaucracy pays them big subsidies. That 50c can of tomatoes probably cost $1 to produce -- with the EU taxpayer supplying the other 50c
Ain't government wonderful?
The days of cheap tinned tomatoes are over, with the federal government backing a decision to slap anti-dumping measures on two Italian giants that account for half of imported tinned tomatoes in Australia.
The Anti-Dumping Commission found exporters La Doria and Feger di Gerardo Ferraioli guilty of dumping - selling product for less than they sell for in their own country - and causing "material damage" to the local industry.
Industry Minister Christopher Pyne said the government would impose dumping duties on the two players: 8.4 per cent to Feger tomato products and 4.5 per cent to La Doria imports.
"This ruling will ensure that Australia's only canned tomato producer, SPC Ardmona, can now compete equally in Australian stores and supermarkets," he said.
The decision means all 105 canned tomato exporters from Italy will now be affected by dumping duties. An earlier ruling saw Feger and La Doria escape penalty for dumping.
With the price of a 400 gram tin of Italian tomatoes as low as 60 cents on shelves, consumers should expect overall prices to rise. A similar SPC tin is $1.40.
But Coca-Cola Amatil-owned SPC, which has suffered a loss of 40 per cent of volume and reduced profitability during its fight, urged consumers to consider "the quality, value, ethics and food miles" of Australian-grown products.
"This is a win for SPC and our growers, and for Australian industry, which faces daily pressure to compete with cheap imports and those cutting corners and putting slavery in a can," said SPC's managing director Reg Weine.
Mr Weine's "slavery in a can" remark refers to claims that Italian growers use poorly paid illegal immigrants from Muslim lands to do much of their harvesting. They probably do. Americans would understand
Posted by John J. Ray (M.A.; Ph.D.).