COLE INQUIRY: by Patrick J. ByrneNews Weekly
Single desk and farmers the victims of AWB fall-out
, December 9, 2006
Prime Minister John Howard has signalled his intention to effectively dismantle the wheat single selling-desk, reports Pat Byrne, even though the merits or otherwise of the single-desk arrangements deserve to be treated quite separately from the AWB-Iraq saga.The Cole Inquiry has become an excuse for free-market ideologues to dismantle the single desk, which has given Australian farmers a competitive edge on world wheat markets. The AWB estimates that, on average, this arrangement delivers a premium of about $13 per tonne, worth about $200 million annually to wheat-growers.
This premium gives some respite to Australian farmers when competing with U.S. wheat farmers who receive half their gross income from subsidies. Across the developed world, the average wheat farmer receives 35 per cent of his gross income from subsidies.
The overriding principle should be that Australia's single selling-desk should remain until world subsidies for wheat are abolished.
Unfortunately, even though about three-quarters of Australia's 36,000 grain-growers support the continuation of the single desk, the Government appears bent on capitulating to a minority of farmers, Washington and major world grain-trading multinationals.Mr Howard's proposal
According to press reports, Mr Howard is about to propose removing the single selling-desk from AWB and giving it to a revamped Wheat Export Authority. The WEA would have the authority to grant export licences to the AWB and other competing grain-traders.
This means that, instead of a single agency delivering a premium price for export wheat, various grain-traders will bid each other down to gain export markets.
The big losers will be Australian wheat farmers. Already in Western Australia, the Grain Licensing Authority has granted licences to multiple traders for the export of barley, canola and lupins. These traders, competing against each other, have depressed returns to growers.
The very fact that the U.S. is mounting pressure to terminate the single desk, claiming it gives Australian farmers an "unfair advantage", should be evidence of the benefits that this arrangement brings to Australian farmers.
How is supplying quality grains to niche market customers an unfair advantage, especially when compared to U.S. wheat farmers who receive half their gross farm incomes from subsidies?
Some Australian commentators have tried the hoary old argument, put earlier this year by the World Trade Organisation's Pascal Lamy, that Australia could not expect the U.S. to cut its subsidies until the single selling-desk was abolished.
It is rather cheeky to suggest that Australia needs to make the single desk the first sacrificial offering to agricultural free trade, when, across the developed world, governments have signalled they have no intention of abolishing subsidies - hence, the failure of the current round of trade talks aimed at cutting farm subsidies.
The Cole Inquiry has cleared all government ministers and foreign affairs officials of involvement in the AWB-Iraq wheat kickback saga, while recommending criminal proceedings against 11 former AWB staffers, and one other.
However, those cleared by Commissioner Cole are not yet off the hook. Former AWB chairman, Trevor Flugge, no doubt reflecting the views of the other accused, said that if he is prosecuted there will be a lot more revealed and he would not be going to jail alone.
Given the media frenzy over the issue, the Federal Government is going to find it hard not to proceed with charges, even though the accused may be far more forthcoming in their own defence when fighting criminal prosecution.
Given the history of wheat exports to Iraq, it is also difficult to believe the Government's claim to ignorance.
AWB developed a lucrative market in Iraq in the 1980s, until the Australian Government announced its intention to join the U.S. in overthrowing Saddam Hussein. The contract cancellation was going to cost Australian wheat-growers dearly, with political consequences for the Federal Government.
Since the Government couldn't fix the problem, it was left to the AWB to find a way to secure ongoing contracts with Iraq. Not only did the AWB win back the contract, it was won back with a price increase worth about $20,000 per wheat farmer.
It's hard to believe that nobody in the Federal Government asked how this amazing about-turn in the AWB's fortune was achieved.
While some restructuring of the single desk may be needed in the wake of the Cole Inquiry, the principle of one selling-desk onto world markets should remain a cornerstone of wheat policy.
If the Government ignores this principle and effectively abolishes single-desk trading, it will mark the greatest triumph of national competition policy in agriculture and inflict yet another deregulation disaster on Australian farmers.
Finally, it will raise questions about the ability of Australia's government to make decisions in the national interest when faced with pressure from countries like the U.S. and huge multinationals like Cargill, ConAgra, ADM, Bunge and Louis Dreyfus - the world's leading grain-traders.