The Coalition, Family First and Independent Nick Xenophon have voted to disallow the cost recovery of AQIS inspection fees and changes.
The vote in the Senate comes despite a deal reached between the Government and The Greens for an extra $20m to continue the export inspection fee rebate at the same time promised reforms are being implemented.
Shadow Minister for Agriculture, John Cobb, said the deal between Labor and the Greens did "nothing to retain jobs and markets if the Rudd Government's new export tax is introduced".
"The Coalition believes Austrade is right - the axing of the 40 percent AQIS Export Certification rebate would have an adverse effect on regional exports and business development and will have wider undesirable economic impacts," Mr Cobb said.
Liberal Senator Richard Colbeck said the promised reforms to AQIS inspection processes should have been "properly resourced from the start".
He accused the Government of having no time-frame or costings for the reforms.
He said the Coalition could not vote to support the removal of the rebate and recoupling of inspection fees and charges when there was no confidence among agricultural exporters that the reforms would be in place within 12 months.
"The whole process is a shambles," Senator Colbeck said.
"The Government won't work with the Opposition.
"The way the government is treating agriculture is absurd.
"This is a sector that exports $30b (worth of produce) a year.
"The Government wets themselves whenever a gas deal is signed with China ...
"But here's an industry doing this every year, and the Government won't even properly fund a reform process."
Senator Colbeck said the Government needs to put in place a time-frame and more detailed costings for the reforms, and then fund it with a real reform package before it removes the rebate for exporters.
Minister for Agriculture, Tony Burke, said if the Senate supported a disallowance motion against new export certification fees, the reforms would also be blocked.
"If the new export certification fees are disallowed, we will be left with a $103 million black hole in our biosecurity budget over the next two years," Mr Burke said.
"This would put an end to the vital reform program, because that money would be needed to help fill the funding hole instead.
"We made this $40 million package available to industry to help ensure our export sectors can compete on the world stage.
"Each industry then has control over the extent to which it continues to subsidise certification and the extent to which it delivers efficiencies and reform."
Mr Burke said over the eight years of the 40 per cent subsidy being in place, there was "no major reform".
"Instead, red tape and inefficiencies were simply tolerated, undermining Australia’s global competitiveness," he said.
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