Back
to Top

Skip to main content
 
  • Share this page on Facebook
  • Print this page

Evaluation Report Series - Evaluation Report 6

Review of Chemical Standards

September 2004

Foreword

In 2002/03 the Victorian Government conducted a review of the State’s chemical standards function managed by the Victorian Department of Primary Industries (DPI). The review focussed on the role of government in the provision of services. While centred on Victoria, the review is relevant to the future management of chemical standards programs in all jurisdictions, particularly given that many such programs are coordinated at a national level.

Both the review and this report, which outlines the review findings, were prepared under the direction of Gary Stoneham, Chief Economist, DPI Economics and Policy Research Branch and Terry Truscott, then Director, DPI Agricultural Industry Policy Branch. Senior staff in the DPI Agricultural Quality Assurance Branch (now Biosecurity Victoria) assisted the review.

However, because the material outlined in this report was prepared during 2002, it may not reflect some of the more recent initiatives and decisions by the Commonwealth, States and industry. Some minor changes have been made to increase clarity, such as updating the names of government agencies, but otherwise the report is an accurate record of the review at the time it was undertaken.

PETER J. BAILEY

Executive Director, Biosecurity Victoria
Department of Primary Industries

Acknowledgments

This report was prepared by Bill Fisher, Arthur Ha and Anne Cole (Economics & Policy Research Branch) and James Hider (Agricultural Industry Policy). Zoë Glasson, who was on leave from the Queensland Department of Primary Industries, assisted by reviewing economic research on chemical standards issues and contributing to the overall analysis. Gary Stoneham (Economics and Policy Research Branch) provided advice on issues and approach.

The authors acknowledge the co-operation, advice and assistance of Dr Catherine Hollywell and staff in the Chemical Standards Branch.

The authors also acknowledge the assistance of Nancy Mills, Millwright Context, who edited this report for publication. 

Table of Contents

Foreword

Acknowledgments

Executive Summary

  • 1. Background
  • 2. Registration and use of Agricultural and Veterinary Chemicals
    • 2.1 Commonwealth Responsibilities
    • 2.2 State Responsibilities
      • 2.2.1 Chemical Standards Branch
    • 2.3 Market Failure
      • 2.3.1 Negative impact on workers (worker safety problems)
      • 2.3.2 Negative impact on food safety
      • 2.3.3 Promotion of trade
      • 2.3.4 Changing consumer preferences
      • 2.3.5 Protecting the environment
      • 2.3.6 Water
  • 3. Fertilisers

References

Appendix 1: Types of Market Failure 

Executive Summary

Chemicals

The output from this component of the Victorian Government’s chemical standards function can be defined as activities to ensure chemical use is safe for consumers, users, the environment, crops and animals and does not pose unacceptable risks to trade.

Chemicals are an important input in Australian agriculture. They contribute to the ongoing competitiveness of the sector.

Radcliffe (2002) has estimated that around $1.6 billion was spent on agricultural and veterinary chemicals in Australian agriculture in 1999. New and improved chemicals have led to cost savings in the management of pests and diseases, improved yields and higher quality produce. Overall, chemicals have made a significant contribution to the large gains in productivity achieved in Australian agriculture.

There is a strong rationale for public involvement because inappropriate use of chemicals can impose costs on the economy.

Inappropriate use of chemicals can impose costs on the economy through:

  • negative impact on workers
  • negative impact on food safety
  • negative impact on trade
  • negative impact on the environment.

Governments may have a role in each of these areas if the benefits of involvement are likely to exceed the costs.

The Commonwealth and the States regulate chemicals. The DPI Chemical Standards Branch is responsible for the relevant legislation in Victoria.

In Victoria, the Agricultural and Veterinary Chemicals (Control of Use) Act 1992 complements Commonwealth legislation. The DPI Chemical Standards Branch is responsible for this legislation.

The Commonwealth is responsible for the registration of agricultural and veterinary chemicals through the National Registration Authority (now the Australian Pesticides and Veterinary Medicines Authority).

The Commonwealth registers chemicals to ensure that all labels:

  • give clear directions for the handling and application of the chemical
  • clearly indicate directions for use to observe maximum residue limits (MRLs).

Commonwealth trade responsibilities that relate to agricultural and veterinary chemicals are:

  • the setting of MRL
  • the National Residue Survey and Total Diet Survey, which ensure compliance with trade requirements and assist trace-back activities.

The States are responsible for control of use of chemicals.

Chemical Standards Branch contributes to Victoria’s overall management of the use of chemicals by:

  • investigating and prosecuting chemical misuse incidents (Chemical Standards Branch is responsible where damage occurs to crops or results in contamination of animals or produce)
  • helping to educate and train users to avoid occupational health and safety (OH&S), residue or storage and disposal problems
  • assisting industry to develop quality assurance (QA) systems to reduce OH&S and residue problems to acceptable levels
  • conducting the Victorian Produce Monitoring Program to evaluate industry activities and survey high-risk areas.
  • Conducting audits of user groups, such as commercial operators, to verify compliance.
  • Licensing of chemical applicators (eg aerial operators) to ensure appropriate knowledge and expertise in the use of chemicals.

Chemical Standards Branch liaises closely with other agencies that have key responsibilities. These include the Victorian Environment Protection Agency (EPA), Department of Human Services (DHS), WorkCover and local government.

In summary, there is no case for on-going government support for producer claims of superior standards (ie above minimum standards) of chemical use.

An increasing number of consumers want to purchase healthier foods or products that have been produced using environmentally friendlier production methods. For example, reduced chemical use in organics. However, it is difficult for a consumer to verify a claim that a product meets these criteria, because consumers have no way of cost-effectively assessing the producer's claims. This is an information asymmetry. When there are consumers willing to pay for such attributes, markets generally find a way to reduce this asymmetry. Firms either back up their claims by investing in their own reputations or by purchasing the services of a reputable third party.

Fertilisers

The output from this component of the Victorian Government’s chemical standards function can be defined as activities to ensure that fertilisers are safe for the environment and do not pose unacceptable risks to trade.

Fertilisers must comply with heavy metal standards under control-of-use requirements.

DPI Chemical Standards Branch ensures fertilisers comply with regulations under the Agricultural and Veterinary Chemicals (Control of Use) Act 1992.

Chemical Standards Branch undertakes a sampling program to ensure fertilisers comply with standards for control of use. These standards are designed to minimise environmental impact and avoid disruption to trade. Some heavy metals accumulate in soils and can lead to contamination of plants and animals, resulting in violation of residue limits.

Findings about chemicals and fertilisers

The National Residue Survey does not cover all agricultural industries. This could make Victoria vulnerable to economic loss from trade disruption.

Producers bear the loss if trade is disrupted due to residue violations. However, the impact of such a situation would be felt across the community. The risks could be reduced if all industries participated in the Commonwealth Government’s National Residue Survey.

The Victorian Produce Monitoring Program is an important element in monitoring chemical use. It is part of a strategy to encourage good industry practice

The Victorian Produce Monitoring Program survey is used to confirm that pesticide use complies with good agricultural practice and that produce is free from unacceptable levels of agricultural chemicals residues and heavy metal contaminants. In Victoria, the program is directed to areas where chemicals may be a concern. It is part of a conscious strategy to demonstrate improved methods. ‘Methods’ refers to the practices undertaken by growers/farmers. The detection of unacceptable residues in produce is an indicator that ‘good agricultural practices’ may not have been followed. Such practices include following label directions, observing relevant withholding periods, keeping required records, etc. Where improvements are demonstrated with certain produce groups (ie less residues), then those industries are more likely to become part of and fund future monitoring programs as they can see the benefits. Adequate resources should continue to be available for this program.

Industry-initiated requests for residue surveys to promote trade should be funded by industry

Surveys to establish residue levels to promote trade should be funded by industry because industry receives all the benefits of improved market access.

At present there is no systematic monitoring of pesticide use in the natural environment

The absence of any systematic monitoring of pesticide use in the natural environment is a major gap in monitoring the environmental impact of agricultural chemicals. This is under discussion between the Commonwealth and the States. There are very few clear standards or indicators available for measuring good environmental practice.

1. Background

Agricultural and veterinary chemicals are an important input in agriculture because they enable farmers to achieve higher farm productivity. Chemicals enable farmers to minimise the impact of pests and diseases. They also lead to higher quality produce, improved crop and livestock yields and healthier animals. Around $1.6 billion was spent on chemicals in Australian agriculture in 1999 (Radcliffe 2002).

Chemicals have contributed to the large productivity advances achieved in Australian agriculture over the past 20 years. Knopke et al. (1995) estimated that broadacre agricultural productivity in Australia increased at around 2.7 per cent a year in the 17 years to 1993/94.

The Commonwealth and the States regulate chemicals because inappropriate use and disposal of chemicals can impose costs on the economy through increased human health problems, disruption to trade, reduced farm productivity and environmental degradation.

The DPI Chemical Standards Branch has a major responsibility for the outcomes of chemical use in conjunction with Commonwealth and State agencies. A second area of Chemical Standards Branch activity is concerned with fertiliser standards. Overall, the work of the Branch is to identify agricultural chemical risks and to develop and implement strategies to minimise any potentially adverse impacts. This report examines these two broad areas of work.

2. Registration and use of Agricultural and Veterinary Chemicals

The Commonwealth is responsible for the registration of chemicals, which is required before products can enter the marketplace. The States are responsible for control of use activities to minimise risks to users, consumers, the environment, crops and animals, and trade.  These activities include education and training for users, licensing of commercial and aerial operators, auditing of users and residue monitoring and to limit the risk of adverse impacts affecting people, the environment or trade.

2.1 Commonwealth Responsibilities

The Commonwealth’s National Registration Authority (now the Australian Pesticides and Veterinary Medicines Authority, or APVMA) was established in 1995 to manage the registration of agricultural and veterinary chemicals. Under the National Registration Scheme, companies supply the APVMA with extensive information about a chemical to enable APVMA to undertake pre-registration assessment and evaluation. The APVMA aims to ensure that chemical use is safe for consumers, agricultural chemical users, the environment, crops and animals - and does not pose unacceptable risks to trade. If a product meets APVMA standards, it can be registered for use in Australia. The APVMA is fully funded by registration fees from manufacturers and industry.

2.2 State Responsibilities

The regulation of agriculture and veterinary chemicals is a multi-faceted risk management issue at State level. Misuse of chemicals can have negative impacts on the environment, human health and trade. These ‘external costs' are a form of market failure. Market failure occurs when social preferences are not aligned with those of the firm or individual. The situations when markets may fail are described in Appendix 1. Where this occurs there may be a role for government, providing the benefits of the proposed action exceeds the costs.

The implications of the trade, environmental and health external costs are partly managed by DPI’s Chemical Standards Branch (which administers the Agricultural and Veterinary Chemicals (Control of Use) Act 1992) with the Department of Human Services (health issues), the Victorian Environmental Protection Authority (environmental issues) and WorkSafe (occupational health and safety issues). The Department of Human Services (DHS) assists in regulating the use of some specific chemicals by controlling their supply, i.e. access, under the Drugs, Poisons and Controlled Substances Act.

Nationally, the Therapeutic Goods Agency in the Commonwealth Department of Health and Aged Care assists the APVMA in assessing toxicology at the pre- registration stage. At State level, Chemical Standards Branch is primarily concerned with the impact of chemicals on trade in agricultural produce (see Sections 2.2.1 and 2.3.3). WorkSafe is responsible for health impacts on operators, such as those that may arise through spray drift, for example. Adverse impacts on the public are a DHS responsibility. Although the Chemical Standards Branch is primarily concerned with trade implications, the extremely sensitive requirements of domestic and international markets mean that there are large health benefits to consumers from government monitoring activity in this area. In addition, by ensuring good agricultural practice in chemical use, the government is helping to protect the environment from adverse impacts.

2.2.1 Chemical Standards Branch

The major responsibilities of the DPI Chemical Standards Branch are to: 

  • Ensure that the use of agricultural and veterinary chemicals complies with the Agricultural and Veterinary Chemicals (Control of Use) Act 1992. This involves survey, audit and monitoring activities, responding to complaints and investigating incidents. Chemical Standards Branch also provides technical advice to the APVMA. 
  • Provide policy advice with regard to legislation and national arrangements. 
  • Provide information and services to promote industry development. For example, the Branch contributes to the development of quality assurance systems and training programs that promote the goals of the legislation.

In undertaking these responsibilities, Chemical Standards Branch assists Victorian industry to produce food that meets domestic and export market requirements for chemical residue limits and conducts an annual produce monitoring survey to assess the occurrence of residues in produce. The Branch works with industry to assist in improving chemical use practices by encouraging the adoption of quality assurance practices by users. Chemical Standards Branch staff also conduct audits of permit holders and licensed commercial spray operators.

The Victorian Agricultural Chemicals Advisory Committee (VACAC) was established under the Agricultural and Veterinary Chemicals (Control of Use) Act 1992 to advise the Minister on agricultural chemical use issues. The Committee represents a wide range of stakeholders and advises on emerging issues with respect to chemicals legislation and regulations and helps to develop strategies aimed at improving the standard of agricultural chemical use in Victoria.

2.3 Market Failure

The characteristics of chemicals and their use mean that external costs, a type of market failure (explained in Appendix 1), can arise where there are negative impacts on workers, negative impacts on consumers,  and negative impacts on the environment.  Chisholm (2002), and Zilberman and Millock (1997) discuss these issues and the design of public policy.

Governments may have a role in these areas where the benefits of involvement exceed the costs. In addition three other areas are discussed in this section, namely the promotion of trade, changing consumer preferences, and water.

2.3.1 Negative Impact on Workers (Worker Safety Problems)

Amongst other things, the national registration process is designed to ensure that chemical products are safe to use. (Agricultural and Veterinary Chemicals (Victoria) Act 1994). The APVMA contracts the National Occupational Health and Safety Commission (NOHSC) to evaluate the occupational health and safety hazards of agricultural chemicals. NOHSC provides advice to the APVMA on labelling requirements for agricultural chemicals. Through the APVMA, NOHSC can also require additional experimental work to be performed by chemical companies to assist in evaluating worker exposure for registration purposes. Work safety at State level is the responsibility of WorkSafe Victoria.

Recommendations relating to toxicity or occupational health are reflected on the product label, which gives instructions on safe use of the product. However, if label information is long, complex and couched in legalistic terms, this can discourage primary producers from using the chemical in the recommended manner. The current trend towards ‘plain English’ labelling should help to overcome this problem. Industry, education providers such as TAFE, and the DPI Chemical Standards Branch promote or carry out education and training on safe and responsible use of chemicals. Licences are required for some occupations that use chemicals. Commercial pest control operators, and ground and aerial spray operators are audited to ensure they meet the required regulatory standards. Investigation of complaints and monitoring of chemical residues are also undertaken to assess the performance of chemical users and ensure chemicals do not cause any adverse effects. When residue violations or adverse chemical effects are detected by the States, this information is provided to the APVMA, which can lead to revised standards for chemical usage. The APVMA also reviews chemicals that are demonstrated to be problematic in their use; Chemical Standards Branch contributes to these reviews.

Agricultural chemical spray drift is a sensitive issue with many ramifications including work safety. DPI Chemical Standards Branch employs regional chemical standards officers to investigate spray drift incidents, and can prosecute where crops, animals or agricultural businesses have been damaged. DPI Chemical Standards Branch works with industry, EPA, WorkSafe and local authorities to avoid such incidents. DPI and all other relevant State authorities work cooperatively to follow up complaints, taking the lead on a case-by-case basis as the situation dictates. For example, issues relating to water contamination are led by the EPA.

2.3.2 Negative Impact on Food Safety

The APVMA examines data provided by companies to support registration. The APVMA sub-contracts work on efficacy to experts in Commonwealth and State agencies.

The APVMA undertakes toxicological evaluations in collaboration with technical experts from the Therapeutic Goods Agency (TGA) in the Commonwealth Department of Health and Aged Care. This is to ensure proper evaluation of the toxicological profiles of chemicals and their metabolites. The TGA examines data provided by companies, which can include short-, medium- and long-term research studies as well as the TGA determining the potential for carcinogenicity (cancer), teratogenicity (birth defects), acute (short-term) and chronic (long-term) effects. The TGA determines the ‘no observable effect level’ (NOEL) and the ‘acceptable daily intake’ (ADI), which is the amount of chemical that may be consumed each day for a lifetime without causing an appreciable risk to health.

The national monitoring of residue risks in food for public health purposes is done through the Australian Total Diet Survey (previously known as the Australian Market Basket Survey). Food is prepared as it would be for a meal and then analysed for potential residues. This project is a cooperative effort by Commonwealth, State and Territory departments of health and is coordinated through the Australia and New Zealand Food Authority1 (ANZFA). These agencies use the Australian Total Diet Survey results as an important management tool for monitoring national health.

2.3.3 Promotion of Trade

Under World Trade Organisation (WTO) trade rules, countries must have an official government trace-back system (i.e. one that is independent of industry) to allow chemical violations to be traced. In addition, the WTO Agreement on Sanitary and Phytosanitary Measures requires that there be no discrimination in trade between member countries and that imported goods be treated in the same way as domestically-produced goods.  In cases of international trade disputes, the WTO specifies the use of standards set by the Codex Alimentarius Commission, the international body that establishes maximum residue limits for trade. (Roberts 2002). Codex was set up by the Food & Agriculture Organisation of the United Nations (FAO) and the World Heath Organisation (WHO) in 1962.

The Commonwealth Department of Agriculture, Fisheries and Forestry (DAFF) manages the National Residue Survey (NRS), which examines raw and fresh produce. The purpose of the survey is: “To underpin export and domestic marketing initiatives of participating industries and thus to enhance the value of Australian agricultural industries, and to safeguard the health of the general population by:  

  1. providing an independent, authoritative and scientifically rigorous audit of the chemical residue status of products of participating industries.
  2. providing scientific advice on residues and contributing to the management of residue-related issues.” (Radcliffe 2002)

The NRS is Australia’s major mechanism to assure trading partners that our export produce meets Codex standards. Unfortunately, however, the NRS does not have comprehensive coverage of all primary industries. Industry participation is voluntary with the Commonwealth recovering its costs. This has led to some areas of the vegetable industry and other parts of horticulture declining to cooperate and pay the costs involved.

In the absence of an effective NRS (i.e. a statistically significant survey across all sectors), it is not possible to reliably determine whether violations are one-off events or whether the produce consistently exceeds maximum residue limits (MRLs).

A further complication is that there is no unique identification system for growers in some industries. Such a system could serve several useful functions. A national producer registration system in horticulture would allow efficient traceback for chemical violations. It could also assist levy collection and disease monitoring and surveillance. While trace-back systems have evolved in some industries, and been rigorously supported by those industries, e.g. dairy and beef, this is not the case in most of horticulture.

Between 2000 and 2002, the Chemical Standards Branch conducted large, statistically significant, pesticide residue surveys for each of three key horticultural industries: asparagus, nectarines and navel oranges. Funded by the State Government’s Naturally Victorian initiative, each of the three surveys was designed to be statistically relevant across the particular industry, i.e. to account for factors such as varieties, season of harvest and range of chemicals used.  In all cases, the surveys have led to major changes in chemical use practices for those industries. The surveys have also assisted the Department in the design of programs as Chemical Standards Branch staff gained some insights into exactly how chemicals are being used in these industries.  A high degree of trust has been engendered between all parties and the industries are actively engaged in chemicals risk management. These activities have continued beyond the cessation of the specific residues programs.

The Chemical Standards Branch undertakes an annual Victorian Produce Monitoring Program with the aim of confirming that pesticides are being used according to good agricultural practice and that produce is free from unacceptable levels of agricultural chemicals residues and heavy metal contaminants. In Victoria, the Victorian Produce Monitoring Program is used to test for a wide range of chemicals, including those newly released. This often involves the development of new testing methodologies.  Other states run similar programs but the specific approach varies from state to state. For example, the Sydney Markets runs its own residue survey, but is totally funded by government, which conducts the traceback. The Victorian program uses a risk management approach by focusing on produce and chemical combinations where residues may be a concern and is an important means of demonstrating and promoting improved practices.

2.3.4 Changing Consumer Preferences

An increasing number of consumers want to purchase healthier foods or products that have been produced using environmentally friendlier production methods. However, it is difficult for consumers to verify a producer’s claims that a product meets these criteria, because consumers have no way of cost-effectively assessing such claims themselves. Economists call this an information asymmetry.

When consumers are willing to pay for such attributes, markets generally find a way to reduce the asymmetry. Firms either back up their claims by investing in their own reputation (for example, the Coles brand) or by purchasing the services of a reputable third party (for example, the RSPCA’s 'barn-laid eggs' label or the Australian Ecolabel Association). Factors that reduce the incentive for firms to cheat include monitoring by the Australian Consumer and Competition Commission, competitors, motivated consumers, consumer groups and other interested parties.

However, market solutions to asymmetric information take time to develop, and in the interim may involve an unacceptable rate of fraudulent claims. This is a loss to consumers. For example, the organics industry has struggled to develop its own national standards for organic and biodynamic produce In this case, the Commonwealth Government has provided short-term assistance to accelerate the development of a standard and reduce confusion and thus the potential for fraud in the organic produce industry. Once the standard has been developed, organic producers will benefit from the standard and should fund its ongoing development and implementation.

In summary, there is no case for on-going government support for producer claims of superior standards (above minimum standards) of chemical use. However, as
the above examples show, there may be imperfections from time to time that warrant a temporary role for government; these should be assessed on a case-by- case basis.

2.3.5 Protecting the Environment

At present there is no systematic monitoring of pesticide use in the natural environment. How this might be done is being discussed by the Commonwealth and the States. There are very few clear standards or indicators available for measuring good environmental practice in terms of use of chemicals.

Inappropriate use and storage practices for chemicals can impose external costs on the environment. Examples of poor use include operators applying chemicals at higher rates than recommended by the chemical manufacturer and obsolete or deregistered chemicals being used after they have been withdrawn from the market.

Safe storage is also necessary to limit environmental costs. For example, chemicals stored in rusty containers may contaminate local ground-water aquifers. Leaking chemicals may also pose a health risk to the operator and employees.

In Victoria, there are two government bodies with an interest in management of the environmental costs of chemicals in agriculture: DPI and the EPA.

DPI’s interest arises because managing the risk of adverse environmental impact is part of good agricultural practice. Good environmental credentials also affect the State’s trade image. DPI’s Chemical Standards Branch is responsible for licensing commercial users of agricultural chemicals. This process is designed, in part, to develop safe use practices and promote the fundamentals of quality assurance in the industry. An initial audit of commercial operators was undertaken to set a benchmark for the industry in regard to their compliance with the regulations.

The Victorian Environmental Protection Authority (EPA) has a more direct interest in how chemicals affect environmental quality. The main instrument for this task has been programs such as the national ChemCollect program conducted between April 2000 and June 2002. The aim of the program was to provide free collection and disposal of de-registered agricultural and veterinary chemicals (de-registration of chemicals is the responsibility of the APVMA with advice by the States). The ChemCollect program successfully collected and disposed of 214 598 kilograms of de-registered agricultural and veterinary chemicals (EPA 2000). DPI Chemical Standards Branch assisted EPA in the rural and regional design of this program.

The ChemCollect program had the features of an amnesty. For the purposes of this program, the EPA waived the threat of prosecution provided any old chemicals were safely stored, even though it is illegal to store de-registered chemicals. Because ChemCollect was a one-off program, it would be difficult to determine if its effects are long lasting. However, prior to the program’s inception, Chemical Standards Branch commissioned a small targeted survey of users in areas that had previously had chemical collections (such as the ‘clean up’ programs run by DPI and EPA across some of the State) and compared them with areas that had had no collections. The results clearly demonstrated that properly managed, well-targeted collection programs were effective in encouraging farmers to ‘give up’ obsolete chemicals. (ChemClear is the new program, which is an industry stewardship initiative that follows on from ChemCollect. ChemClear has been launched in Qld & NSW and is being launched in Victoria in Feb 2005).

2.3.6 Water

The National Strategy for Agricultural and Veterinary Chemicals developed in 1998 identified future goals for the effective management of agricultural and veterinary chemicals in Australia. The Strategy indicates areas for activity that are not currently well-serviced across the country. A major gap is the monitoring of environmental impacts of agricultural chemicals. As a result, there are two areas of significant and increasing concern for Victoria. The first is national community expectations that government is caring for the environment and can demonstrate that agriculture is well managed with respect to adverse environmental impacts. The second is pressure from international markets for industry to demonstrate that it is caring for the environment.  Both areas form part of the ‘green’ component of the ‘clean green’ message that government and industry promote to overseas and domestic markets.

The call for better environmental credentials could be addressed by dealing with issues relating to chemical management and standards for water quality. A few State agencies, notably the NSW EPA, conduct ongoing monitoring of chemicals in water. However, to date the Victorian EPA has not considered the presence of agricultural chemicals in water as an issue warranting attention. Water per se is a high priority for the EPA, which has salinity, nutrification and turbidity high on the list for action.

State water authorities do monitor for chemicals in water. The authorities are legally bound to provide water that is fit for purpose.

DPI Chemical Standards Branch undertakes some targeted risk-management activities on a chemical-by-chemical basis when the APVMA identifies a product that has adverse environmental impacts associated with its use. When reviewing such products, the APVMA must rely largely on the chemical manufacturer to provide data to assist in risk assessment. DPI contributes to these risk assessments by evaluating the actual use of the products in the field and determining whether the required agronomic change can actually manage the risks in the manner intended by the APVMA.

3. Fertilisers

The DPI Chemical Standards Branch helps to ensure that purchasers and users of fertilisers receive products of a quality and composition that is in keeping with label claims. This function is in addition to the control-of-use activities explained in Section 2.2.1.

DPI Chemical Standards Branch requires fertilisers to comply with regulations under the Agricultural and Veterinary Chemicals (Control of Use) Act 1992. This function has evolved as a result of earlier national reviews of specific fertiliser legislation that has since been repealed. Since May 1992, fertilisers no long need to be registered in Victoria.

Other Chemical Standards Branch activities include a biennial survey of selected fertiliser categories. The survey is designed to assess the level of compliance with Victorian standards for ingredients, impurities and labelling. Survey questions are selected so that, over time, all major fertiliser categories are included in the survey program. For example, one survey might focus on gypsum and lime. The results are published and any violations (usually of labelling requirements) are drawn to the attention of manufacturers.

The EPA is interested in maximising the use of waste materials, particularly wastewater and biosolids from treatment plants. Biosolids fall under the same legislative requirements as fertilisers if they are to be used in the same manner as other fertilising substances. Competitive pricing could see biosolids could become a highly competitive commodity in the marketplace. It is probable that the quantities of biosolids used in some agricultural applications will greatly exceed current fertiliser application rates.
While it is essential to minimise the environmental impacts of fertilisers, it is also therefore essential to minimise the potential for adverse impacts on agricultural produce from contaminants in biosolids. The EPA is setting standards for biosolids and will be implementing a system of control on supply of biosolids to users.

However, Chemical Standards Branch experience of past detections of such materials in the marketplace, i.e. those containing unacceptable levels of contaminants, suggests this commodity is likely to be very difficult to control effectively. There is, therefore, significant potential for negative impacts on trade arising from residue levels in produce exceeding allowable MRLs.

4. References

Agricultural and Veterinary Chemicals (Victoria) Act 1994, preamble.

Chisholm, A.H. (2002), “Pesticide Use in Australia—A Long Hard Look”, Paper presented to ABARE National Agricultural Outlook Conference, March.

Department of Natural Resources & Environment (2000), “A Guide to Victorian Fertiliser Standards”, Chemical Standards Branch, Knoxfield.

Department of Natural Resources & Environment (2001) "Beneficiaries and Funders of Research & Development in Agriculture: Science Technology and Innovation and Naturally Victorian initiatives 2000/2001", Evaluation Report Series No: 4, December.

Environment Protection Authority (2000), ChemCollect Victoria: Get rid of your unwanted and de-registered farm chemicals at no cost, http://www.chemcollect.vic.gov.au [accessed August 2002]

Knopke, P., Strappazzon, L. and J. Mullen (1995), “Productivity Growth -Total Factor Productivity on Australian Broadacre Farms”, Australian Commodities, Vol 2, No: 4, December, pp 486-497.

Radcliffe, J. C. (2002), “Pesticide Use in Australia”, A Review Undertaken by the Australian Academy of Technological Sciences and Engineering, Parkville, Victoria.

Roberts, G.S. (2002) “Codex Committee on Pesticide Residues”, Report of 34th Session, 13-18 May 2002.

Stiglitz, J. E. (1988), “Economics of the Public Sector”, 2nd edition. W.W. Norton & Co, 2nd edition, New York.

Zilberman, D. and K. Millock (1997), “Pesticide Use and Regulation: Making Economic Sense Out of an Externality and Regulation Nightmare”, Journal of Agricultural and Resource Economics, 22 (2): 321-332.

Footnote

1 Now known as Food Standards Australia New Zealand (FSANZ).

2 Further reading on asymmetric information: Akerlof, G. (1974), The market for “lemons’: quality uncertainty and the market mechanism, Quarterly Journal of Economics, p 488-500. On failure of competition: Stiglitz. J. E (1988).

Appendix 1: Types of Market Failure

Market failure in R&D and extension activities is generally due to the existence of what is called `public goods' or `externalities'.

Public Goods

Some goods such as knowledge (for example, information about specific agricultural chemicals being dangerous to human health or the environment or how clearing native vegetation affects native biodiversity) are not efficiently provided by the market because they are ‘non-rival’ and ‘non-excludable’. Knowledge is generally non-rival because consumption by one individual does not diminish the amount available for others.  Knowledge is also non-excludable if it is hard to exclude people from obtaining it. If private sector agents are unable to appropriate the benefits of an investment because they cannot restrict their competitors’ access to the results, there is little incentive for them to invest. However, knowledge that is relatively difficult to comprehend is relatively excludable, a trait more closely associated with private goods.

Externalities

Externalities occur when individuals or groups undertake activities that impose costs (a negative externality) or confer benefits (a positive externality) on others
and no compensation or payment is made. For example, a negative externality is generated if pollution discharged into a river affects production downstream. When a negative externality exists, an individual or group does not face the full cost of their actions. When a positive externality is generated, as would be the case if neighbouring farms benefited from one farmer’s weed control program, this means that the individual or group (in this case the farmer who undertook the weed control program) is not rewarded for their actions.

Other reasons for market failure

Markets can also fail in cases where it is more efficient to have one monopoly supplier (failure of competition) or where parties do not share the same information (asymmetric information)2

Source: Re printed from DNRE (2001), p 4.