Opinion Number. 287

Subject

BOUNTIES WHETHER STATE HAS POWER TO SUBSIDISE SHIPS CARRYING GOODS FROM THAT STATE : EXTENT OF STATE POWER TO DISCRIMINATE AGAINST TRADE : EXTENT OF COMMONWEALTH TRADE AND COMMERCE POWER

Key Legislation

CONSTITUTION, ss. 51 (i), 90, 91,92, 98, 102, 104

Date
Client
The Acting Minister for Trade and Customs

The Premier of South Australia has written to the Prime Minister a letter of which the following is the text:

I have the honour to invite your attention to the action of the Victorian Government in subsidising a line of steamers for service between Melbourne and Singapore via Sourabaya, Samarang, and Batavia being equivalent to granting a bonus for the export of Victorian products. This appears to this Government to be a contravention of section 91 of the Commonwealth Constitution which precludes the granting of such bonuses without the consent of the Federal Parliament and I shall be glad to hear what steps you propose in the matter.

The matter has been referred to the Minister for Trade and Customs. There is attached to the papers a cutting from the Melbourne Argus of 28 May 1907 as follows:

TRADE WITH SINGAPORE

The Subsidised Steamers

ADELAIDE, Monday-In the course of a letter received by the Minister of Agriculture from the Acting Secretary for Agriculture in Victoria, referring to the establishment of a five-weekly service of steamers between Melbourne and Singapore, the Victorian Acting Secretary for Agriculture points out that two vessels-the Darius, 4,600 tons, and Euryalus, 5,250 tons-are to be put on this service, and it has been arranged that one of these shall be fitted with refrigerating apparatus, and if the trade increases the other is to be similarly fitted. If necessary a third vessel is to be added to the line. It is a provision of the agreement that freights from Melbourne are to be at no time higher than those from Adelaide or Sydney, and it is also stipulated that the steamers are to be run to a time-table. Probably two or three months will elapse before a timetable can be prepared. In the meantime one of the vessels will probably make a trip on the route agreed upon. The State Government has undertaken to pay to the company a subsidy at the rate of £.2,000 per annum, or equal to about £200 per boat for each trip. The agreement is for a period of three years. The Adelaide millers will wait upon the Minister for Agriculture tomorrow to protest against the action of Victoria.

Sydney Millers Active

SYDNEY, Monday-The flour millers of this State will be affected by the subsidy of £2,000 which the Victorian Government has decided to grant annually to Messrs Archibald Currie and Co. for a five-weekly service between Melbourne and Singapore. They state that it will enable the Victorian millers to undersell them, and consequently divert trade. The Victorian millers would make bigger profits, especially as for the past two or three months prices for wheat, both in Victoria and in Adelaide, had been less than in this State. Complaint has been made by the Melbourne millers that the Sydney exporters were allowed preference as to freight space by certain of the shipping companies, but the Sydney exporters affirm such is not the case.

A leading Sydney miller said: 'It is a question whether the Government should not follow suit, and subsidise local companies. There is to be a rise in freight to the East of Is per ton, which will come into operation in August. At present certain shipping companies are taking flour to Hong Kong and Manila at 17s 6d. This will also have a serious effect on the exporter, and, as a consequence, a stoppage of business will result. America, where the millers and ship-owners work together to keep business, will, consequently, benefit. The Victorian exporters, as far as Java and Singapore are concerned, will, under the proposed subsidy, be on more favourable terms than the Sydney exporters, in consequence of the Currie line of steamers taking any quantity at the same rate, whereas the companies trading from Sydney have a graduated scale.'

Inquiries made at the offices of Messrs Arch. Currie and Co. showed that no instructions had been issued as to any alteration in freights so far as Sydney was concerned.

The papers are forwarded to this Department with the following memo by the Acting Comptroller-General:

The attention of Mr Chapman has been directed to the attached notice announcing the granting by the State of Victoria of a subsidy to a line of vessels trading to the East in consideration of special advantages to Victorian trade.

The Acting Minister is desirous of ascertaining whether such an arrangement is in any way an infringement of State Rights or rather if it be found to be a discrimination which will inflict an injustice on other States whether it may be dealt with under the Constitution Act or any other authority.

I do not think that a subsidy by a State to a line of steamers is necessarily a bounty on the production or export of goods. The Constitution does not debar the States from every kind of encouragement or assistance to production or export, but only from encouragement or assistance which takes the form of a 'bounty'.

Primarily, a bounty is a direct grant of money to the producer or exporter. Doubtless it would not be competent to a State to evade the constitutional prohibition by disguising what was in essence a bounty under some other name or some other form; but the fact remains that the thing forbidden is not the end, but the means; not the encouragement of production or export, but the granting of bounties for that purpose.

It is not necessary to decide whether a subsidy to a line of steamers might not under certain circumstances be regarded as a bounty within the meaning of section 90 of the Constitution. It is enough to say that from the facts as stated I do not see any reason to regard this particular subsidy as a bounty on the production or export of goods.

As to whether the arrangement, assuming it to be a discrimination, could be dealt with under the Constitution, the answer is clear. The Constitution does not itself prohibit trade discriminations by a State-unless they constitute a violation of freedom of trade between the States. There appears to be no suggestion of such a violation in this case. But the Federal Parliament has full power to make laws with respect to 'Trade and commerce with other countries, and among the States'-and in the exercise of that power could, it is conceived, regulate or prohibit any attempted discrimination, whether by a State or by an individual. The only limitations of this power expressed in the Constitution are those with regard to State railways (sections 102,104).

[Vol. 6, p. 133]