INTER-STATE TRADE IN AUSTRALIA

Dominion, Volume 29, Issue 255, 24 July 1936, Page 10

INTER-STATE TRADE IN AUSTRALIA

The Dried Fruits Case CONSTITUTION GOVERNS MARKETING PRACTICE (By De. W. M. Smith.) The recent decision of the Privy Council in James v. The Commonwealth is the final act in a legal drama which has engaged the protagonists for more than 10 years. The difficulties have arisen, on the one hand, from attempts to build up marketing monopolies in Australia and, on the other, from the provisions of the Federal Constitution. Section 92 of the Constitution provides that “trade, commerce and intercourse among the States .. . shall be absolutely free.” Down to the war it was thought that, in view of this provision, neither the States nor the Commonwealth could interfere with internal trade between the States. However, secion 51 gives the Federal Parliament “subject to this Constitution,” power to make laws with respect to trade and commerce with other countries and among the States, The question therefore arose whether section 92 applied to the Commonwealth; for, if it did, this would nullify section 51.The controversy that has raged may be traced back on the legal side to 1915 and on the economic side to the post-war depression in the dried fruits trade. It was hoped to organise the industry so as to exact a domestic price higher than the export price, a proceeding which is now painfully familiar to consumers all over the world. Under the South Australia Dried Fruits Act, 1924-25, the State Dried Fruits Board was authorised to fix the proportion of the dried fruits output that might be marketed within the Commonwealth. In James v. South Australia (1927), the High Court of Australia held that this provision was obnoxious to section 92 of the Federal Constitution. It therefore became necessary to find some means of getting round this impediment. A Precedent in Wheat? lu 1915, owing to drought, the Government of New South Wales had seized wheat that was contracted to buyers in other States. The High Court decided that this was not an infringement of section 92, because the seizure had nothing to do with interstate trade, since it was effected in order to provide for a grave emergency. Seemingly, then, a State could expropriate goods, if it could find a legally sufficient excuse. Accordingly, South Australia resorted to expropriation, so that, having become the legal owner of the dried fruits output, it might help to maintain prices by limiting the quantity to be marketed within the Commonwealth. This action was upheld by a majority of the High Court as necessary to the maintenance and preservation of the industry, the court viewing the seizures as being on somewhat the same footing as the takings of wheat in New South Wales in 1915. The Privy Council, however, upset this new arrangement, holding that it was aimed at inter-State trade and therefore unlawful.

The Commonwealth Government thereupon intervened. It took over the control of inter-State trade and the High Court upheld tills control, declaring that section 92 of the Federal Constitution did not bind the Commonwealth, but applied only to the States. In view of this judgment, the statutory control of the dried fruits trade was confidently continued, and in 1934 a similar system was applied to the butter trade, in place of the voluntary Paterson scheme. Then came a further action in the High Court in 1935, in which Mr. Frederick James again sued the Commonwealth. The High Court speedily decided once more that section 92 did not bind the Commonwealth, and the Privy Council has just overruled this judgment. Likely Future Developments.

Though the legal basis of the marketing schemes has been destroyed, it is unlikely that chaotic conditions will immediately develop in the trades concerned. The dried fruits industry has a long record of monopolistic organisation under the Australian Dried Fruits Association dating back to pre-war days, and the dairy industry has 10 years’ experience of a similar kind. Apart from this the Privy Council’s decision will probably give little satisfaction to anyone. It has long been the view in certain quarters in Australia that the (Privy Council, being unaccustomed to such instruments at Home, has not Interpreted the Constitution in a helpful or understanding manner. Further, some objection has grown up to the taking of appeals to the Judicial Committee in respect of constitutional issues, a common view being that the High Court of Australia is properly the final arbiter upon such questions. Even so, it must be remembered that the present situation has arisen solely from attempts to distort the working of the economic system and not, as in the United States, from the judiciary’s dislike of economic experiments. However, democracy in Australia, as in many other countries, being largely a matter of group pressures, the marketing monopolies are likely to be saved by some constitutional amendment or otherwise.