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Whilst I’m no wimpy vegetarian, but the cruel treatment of quasi-intelligent animals is wrong, especially if unnecessary. So, I broadly agree with the policy outcome being pursued by the Gillard Government. Let’s stop the live export trade if it leads to these sorts of animal welfare issues.

But designing this policy is a difficult challenge because we wouldn’t want to hurt Australian farmers who are already hurting from droughts and flooding rains.

If we place an instant ban on live exports to Indonesia, where will these cows (which are bred especially for live export) be sent? Shall we flood other live export markets like the Middle East and drop prices?

I don’t see why we couldn’t  place an instant ban, with an exemption for abattoirs that do follow Australian level standards. To monitor those abattoirs, we could simply have AFP or Department of Health officials sent to certified abattoirs who would ensure that cattle are slaughtered ethically. They could be paid for by the Australian meat industry body which is already responsible for such monitoring.

In the short run, no doubt the Indonesian abattoirs would be falling over each other to be amongst the few abattoirs which meet Australian ethical standards. But in the long run, would any ban be effective to reduce unethical animal slaughter?

The live export trade is, I assume, a competitive market where Australian farmers compete against those from the US and from other SE Asian countries. An Australian government ban is, effectively, like a cartel which aggregates the market power of individual Australian farmers. But even though that cartel has market power in the short run, such market power is due solely to its large market share. That market share would be quickly eroded by the other competitors (if the other farmers do not lobby as hard for ethical animal treatment).

But if the Australian government can secure some exclusive dealing arrangement with certain abattoirs, then the net effect will be to stabilise Australia’s market share whilst ensuring that our exports are slaughtered consistently with animal welfare. There are several effective barriers to this. Firstly, if the cost of slaughtering animals ethically is materially higher than slaughtering them unethically, then the tied-abattoirs will be less competitive than unethical abattoirs and Australia’s market share will drop. The second is if Indonesian competition law bans exclusive dealing (as Australian law does, in s 47 of the former Trade Practices Act). The third is if the certified abattoirs, having a tied arrangement, lose their incentives to keep up standards because they have guaranteed supply from Australian competitors.

The better solution would be to certify certain abattoirs and compensate them for adopting ethical slaughter methods. That way, Australian farmers do not restrict themselves to a few abattoirs. Such a restriction is anti-competitive and bad for the market in the long run. Instead, the market remains competitive and neither farmers nor abattoirs will be hurt. A certification process would only be useful in the short run.

So the live export ban, if the US and other major live exporters do not come on board, may have some effect because it acts as a cartel but it is not guaranteed to be effective in all instances. A national-level ban will be far less effective than an international ban which will require either support of the US (and whatever other major exporters there are) or a ban enforced by the international agency responsible for international health or slaughter standards.

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  1. By The Jackal’s Codex on 06 Jul 2011 at 10:07 pm

    […] In a previous post, I argued that the live cattle ban was essentially pointless because in a competitive market, other exporters would simply fill the hole that Australia left. It turns out I was right – in fact, it turns out the local cattle market is sufficiently well developed to sustain the Indonesian slaughterhouses without any Australian imports at all so Jakarta is drastically cutting its quota for Australian imports next year. As a result, Agriculture Minister Joe Ludwig has instantly resumed the cattle trade. […]

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