It's competition, not cooperation

As a strong proponent of free trade in the international arena, Australia has set a good example with its unwinding of legislated cooperation. If the Doha trade negotiations are ever finalised and become a binding international treaty, we will be a key beneficiary in agricultural trade with only the rice industry needing to make adjustments. Canada's deregulated wheat industry will also benefit, although its dairy industry will require a painful process of change.

But a treaty is not needed to generate benefits from competition. Despite the Canadian Wheat Board's protests that it increases returns to producers, which AWB also used to claim, the evidence is lacking. Imposing average prices on producers increases the returns of those delivering poor quality wheat (who inevitably sing the praises of collectivism), but it has the opposite effect on those producing an above average crop.

Although three of New Zealand's four dairy processors are cooperatives, membership is voluntary and dairy farmers are highly competitive. With an average herd size of 375 cows (compared to Australia's 220 and the UK's 100), NZ dairy farmers can produce as much milk as they like and enjoy the proceeds as international prices soar.

The Australian Government's decision to abolish the Wheat Export Authority completes the job of creating a competitive wheat sector. Since the abolition of the single desk, wheat exports have expanded to 41 countries, up from 17, and growers are rewarded for quality rather than mediocrity. Growers gain no benefit from licensing wheat exporters, and lose nothing from the fact that exporters of cotton, beef and canola are not licensed.

Cooperation has its place, but it is not something the government needs to concern itself with. The Nobel Prize winning economist, Friedrich Hayek, summed it up well in his 1988 book The Fatal Conceit:

'Competition generally fosters discipline and helps motivate existing talent to achieve outstanding results. One revealing mark of how poorly the ordering principle of the market is understood is the common notion that cooperation is better than competition. Of course cooperation is also useful, but particularly in small homogenous groups in which there is a great amount of consensus. But when it comes to adjusting to unknown conditions there is not much merit in cooperation, ultimately is was competition that led man unwittingly to respond to novel situations, and through further competition, not agreement, we gradually increase our efficiency.'

He must have been referring to agriculture.