January 20th 2007

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Articles from this issue:

EDITORIAL: Bushfire crisis: a state of denial

AUSTRALIAN CONSTITUTION: High Court strikes blow against states' rights

CANBERRA OBSERVED: Kevin Rudd - a more formidable Opposition leader?

NATIONAL AFFAIRS: Government's challenges over AWB-Iraq saga

QUARANTINE: Government to permit NZ apples into Australia

SCHOOLS: Trojan horse in Classical Studies curriculum

STRAWS IN THE WIND: South Pacific blues / Diamonds are an African's worst friend / Modern Madama Melbas / Putin's gambit / The Balibo Five and all that

FILM CLASSIFICATION: Australia's pornography industry suffers setback

ABORTION: Suffering in silence no more

CINEMA: Faithful re-telling of the Christmas story

Pope's back-flip on Turkey (letter)

Lack of Darfur coverage (letter)

Discarding safeguards to pursue human cloning (letter)

BOOKS: GENOCIDE: A History, by William D. Rubinstein


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Government's challenges over AWB-Iraq saga

by Colin Teese

News Weekly, January 20, 2007
The Coalition parties still seem to be in a state of confusion over the concept of the single selling-desk, writes Colin Teese.

The Royal Commission inquiry conducted into the behaviour of the AWB in relation to wheat sales to Iraq has now concluded, and its chairman Mr Terence Cole QC has brought down his findings. Importantly, the Foreign Minister, the Minister for Trade and their various officials have been exonerated from any wrongdoing arising from the behaviour of AWB Ltd.

That outcome is hardly surprising. The terms of reference given to Mr Cole allowed him only to enquire into whether the activities of the AWB had broken any Australian laws.

Superficially, it would seem that the Government is off the hook on this most sensitive issue - indeed, it has been exonerated by Mr Cole.

But the public's perception is quite different. A recent newspaper poll among those who have followed the progress of Mr Cole's inquiry revealed that a whopping 74 per cent indicated that they don't accept the findings in respect of the Government's role in the affair, and believe it to have been implicated.

Standing harmed

That reality may already have harmed the Government's standing in the electorate, because it coincides with a fall of two percentage points in the Government's primary vote, according to the most recent polls.

Mr Cole has found, as he and the Government expected, that officials of the AWB have a case to answer with respect to Australian law for what has been done. Presumably, the Government is now examining whether or not prosecutions will be launched.

If prosecutions seem justified, it will have no option but to proceed, no matter how tempting the alternatives may be. Imagine what is likely to be the public reaction if, in light of Mr Cole's findings, the Government decided not to proceed against those implicated by it own appointed commissioner!

Of course, if some AWB officials face criminal charges and the prospect of prison terms, they may be expected to defend themselves vigorously. In the process the detail of any dealings they may have had with Government ministers and/or officials will surely be exposed.

It is worth emphasising that Mr Cole's findings did not exonerate the Government. He merely observed that the Government could not necessarily have been expected to probe deeply into the manner in which the AWB conducted its affairs.

As already mentioned, whatever the merits of Mr Cole's view, three-quarters of those interested in the subject, according to a straw poll, believe otherwise.

We can confidently assume that any publicly conducted legal proceedings will likely revisit all of these issues - and not necessarily to the Government's advantage.

There is a further consideration not yet touched upon in any of the mainstream discussions.

Technically, the AWB is a privately-owned business which, incidentally, has had conferred upon it by the Government the right to control the export sale of Australia's wheat.

At first sight, it is plausible to assert that the AWB should be left to its own devices - like any other company chasing exports.

Like all other enterprises and individuals, it is required to abide by Australian law. Surely, it will be argued, it is not the job of the government and the bureaucracy to act as watchdog over exporting companies to ensure that laws are not broken.

If laws are broken then, presumably, the transgressors will be tracked down and dealt with in the usual way. This, perhaps, is what Mr Cole was trying to make us understand in his report.

But this is no ordinary circumstance - and the AWB is no ordinary commercial organisation trading offshore and presumably aware of the Australian laws applicable to its operation.

This was a commercial entity empowered by the Government to oversee the sale of export wheat. And second, the deals were being made in Iraq, and an international agreement was in place in the context of the United Nations, which set conditions on the way wheat was to be sold in Iraq. We were signatory to that agreement.

As emerged during the course of Mr Cole's inquiry, another government complained to us about the AWB's behaviour. This complaint was the subject of only the most cursory examination before being dismissed.

The AWB was no ordinary company routinely engaged in chasing export business. Its special status had been the subject of discussion in parliament.

As this piece was being written, Kenneth Davidson, in the Melbourne Age newspaper (December 7, 2006), reminded his readers of a comment made by the Western Australian federal Liberal MP, Mr Wilson Tuckey, in 1998 at the time of the creation of AWB Ltd from the old Australian Wheat Board.

He said in a parliamentary debate that the legislation creating AWB Ltd, for the first time in his recollection, actually gave a commercial enterprise monopoly rights over the export of wheat, and that this new enterprise, unlike the Wheat Board which it replaced, was not subject to parliamentary or ministerial control.

In fact, what might have been Mr Tuckey's unexpressed fears came to be realised.

On the other hand, speaking before the Cole Commission, Prime Minister John Howard expressed surprise at the AWB's action in offering bribes to the Iraqi Government.

In offering a defence of why his Government had not closely examined what the AWB was doing, Mr Howard made clear that he had envisaged a seamless transition from Australian Wheat Board to AWB - apparently believing that a company owing its first responsibility to its shareholders, would behave in exactly the same way as an authority set up under Government supervision to serve only the interests of wheat-growers and the national interest.

Exercising a monopoly

What nobody is saying is what Mr Tuckey recognised from the outset: that a single selling-desk for wheat necessarily entailed the selling agency exercising a monopoly over the export selling of the commodity.

By implication he also said that the only legitimate way to protect the national interest in any such arrangement was by means of an agency kept under tight government supervision. Of course, he was right.

The Government's not having followed this course provides us with a perfect example of what disastrous consequences can flow from bad policy choices.

The Government itself may already have suffered politically as a result of this, and more may well follow. One can only hope that the Government has identified those who guided it towards an AWB Ltd type of solution and holds them to account.

Even better, in future similar circumstances, let us hope it examines a good deal more carefully how it approaches privatisation.

Meanwhile, there is a policy mess to clean up. It is, of course, understandable - knowing what we do about the AWB's behaviour - that the AWB in its present form could no longer be trusted with a monopoly power over wheat exports.

The really serious issue is that it may give those who have been waiting for just such an opportunity to work towards the abolition of the single selling-desk concept.

If this group succeeds in its quest, then the AWB experiment may turn out to be not merely an example of bad policy, but a calamity for the wheat industry.

The Coalition parties seem to be in a state of confusion on the policy of the single selling-desk - now more than ever. Ideologically, there are many in the Liberal Party who have always believed that the single selling-desk is incompatible with free-market fundamentalism and deregulation.

Some of their Coalition partners in the National Party agree with them but would never dare say so - certainly not within the hearing of the majority of wheat-growers.

A great many Nationals of less ideological bent, including, it seems, the party leader himself, Mr Mark Vaile, seem strongly to favour the single selling-desk.

The question, for now, is what kind of policy is likely to survive. For the moment, the Government has taken the only sensible short-term solution. It has temporarily vested the monopoly power over wheat exports in the Minister for Agriculture.

In effect, it has recreated for six months, in one man, the old Australian Wheat Board. Meanwhile, growers are to be consulted about the future.

Effectively, the future of single-selling is up to wheat-growers. We know for certain that wheat-growers cannot be pushed around in the manner of, say, dairy farmers, on a matter of what amounts to deregulation of their industry. But it is not clear yet where the weight of opinion lies.

There are some indications that Western Australian growers may prefer deregulation. The expectation is that a majority of eastern states growers want a single selling-desk.

If, as some suggest, most WA growers will fall into line with the eastern states position, then the Government's task will be relatively easy. All it will have to do is develop a decent mechanism to implement single-selling.

If WA stands out against single-selling, then the Government - or at least the Liberal Party - has a problem. WA's National Party has no federal representation and, if the Liberals act against what most WA growers want, they may suffer politically.

Yet, despite this, if the eastern states growers want to keep single-selling, surely the Nationals will insist that their wishes are respected. Politically, it is beginning to look as if it could all turn out to be very messy.

The best outcome for the Coalition politically is for a clear majority of wheat-growers - including those in WA - to come out in support of single-selling. Yet, ideologically, that is precisely what so many Liberals don't want.

If this conflict of interest were not so serious, it would be funny. The trouble is that this is precisely the same situation - where a government was trying to reconcile political reality with ideological purity - which led us into the AWB debacle.

We can only hope that, given a second chance, the Government will keep the ideologues at bay and work towards a cleaner policy outcome. But don't bet on it.

- Colin Teese is a former deputy secretary of the Department of Trade.

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