OVERSEAS TRADE: by Colin TeeseNews Weekly
Wheat's single selling-desk under threat
, March 17, 2007
Australia's single selling-desk for wheat has, over many years, secured a profitable market for Australia's wheat exports. Ending this arrangement will damage the livelihoods of thousands of Australian wheat-growers, warns Colin Teese, a former deputy secretary of the Department of Trade.
It is a matter of record that the political debacle which has developed in Iraq coincided with the scandal relating to wheat sales by Australia's AWB. Not that the two events are in any way related.
The bribery instigated by the AWB would, in all likelihood, have happened whether or not Iraq had been invaded. But the fact that the AWB scandal took place while Australian troops were on active service in Iraq no doubt compounded the felony.
But that wasn't the worst of it. The AWB's folly presented long-standing critics of the single selling-desk with an important - though totally unjustified - reason to press anew for the abolition of the present arrangement.
Undoubtedly, to many within the ranks of the parliamentary Liberal Party - and much of Labor - the AWB's actions must have come as an unanticipated windfall. For the sake of the interests of the nation, and of most wheat-growers, we must hope that they are denied the opportunity of exploiting it.Debacle
But, having said that, if the single selling-desk arrangement does not survive, we should look upon the AWB debacle as providing no more than a convenient pretext. And successive Australian governments, beginning with those of Labor's Bob Hawke and Paul Keating, and ending with today's Coalition, will be required to carry blame in equal measure.
In reshaping policies relating to the growing and selling of wheat, both sides of politics chose to defend ideology rather than the national interest and commonsense. In large part, the AWB debacle can be seen as a consequence of such actions.
Labor took the first big backward step when it deregulated the domestic wheat market and discontinued the government underwriting of wheat prices. This deregulation was part of the then government's overall plan to subject agriculture, as well as manufacturing industry, to the rigours of National Competition Policy (NCP).
So far as wheat was concerned - as with many other industries - deregulating the domestic market was the first necessary step.
The Coalition, including the Nationals, was no less committed to the ideology and virtues of NCP than was Labor. After 1996, it took over the reins from Labor.
Presumably, its wish would have been to go as far as Labor would certainly have gone, and totally deregulate the entire industry, leaving wheat-growers at the more or less tender mercies of world wheat market prices, both at home and in export markets, for the first time in 60 years.Cavalier
But a Liberal/National Coalition Government, however disposed, could not afford to be so cavalier in its attitude to wheat-farmers as Labor, had it continued in office, undoubtedly would have been. It was far too dependent on the wheat-grower vote to react in that way.
Nevertheless, the Coalition was determined to pursue the fundamentals of the free market/deregulationist agenda that it shared - and still shares - with Labor. It decided to keep the single selling-desk, but within the framework of a privatised Wheat Board. Thus was created AWB Ltd.
Opposition to the single selling-desk comes not only from what seems to be a relatively small proportion of wheat-growers within Australia, but also from governments in the largest wheat-growing countries - most notably those of the United States and the European Union.
And, it should be noted that, in objecting to Australia's selling arrangements, these governments can hardly claim to be voicing the concerns of wheat-growers in their respective countries. US and EU wheat-growers are not really interested in how Australia sells its wheat. If they have a concern, it is about that fact that Australia actually grows wheat at all, and competes with them for export markets.
This has never been, nor can it be, a legitimate concern of their governments. No, the US and EU are looking to serve the interests, not of their farmers, but of their international wheat-traders.
Quite simply, while we hold the sale of our export wheat in exclusively Australian hands, European and US trading interests cannot muscle in on the Australian business. This they would dearly love to do.
But we need to remind ourselves of the following facts. Whatever else might be said about a properly set-up Australian-controlled single selling-desk, it will always be primarily concerned with the best price for the Australian export crop. The longer it remains in business and develops both its marketing skills and experience, the better it will become at its job.
Over many years, the Australian Wheat Board proved just that. In particular, it built confidence with customers, based on an understanding of their needs, which has led to profitable relationships with overseas customers continuing to the present day.
International grain-traders have neither the capacity nor the intention to develop or match these skills. Importantly, their purpose is not to maximise the returns on the Australian export wheat crop - and certainly not to protect even the position of individual wheat-growers: their aim is to maximise commission on wheat sales.
To them, volume is more important than price - which is especially disadvantageous for Australian wheat-growers, whose reputation in export markets, based upon many years of careful marketing by the single selling-agency, is built around the idea of selling a differentiated product.
Australia is selling not merely wheat but a quality product which is able to command a price premium. This situation has been carefully cultivated - even created - by the Australian single-seller, and there is absolutely no reason to expect that the same circumstance will continue if we allow international wheat-traders to usurp the role of the Australian single-seller.
Of course, you won't hear the US and the EU bringing any of these considerations into the debate. They dress up their objections to what we do in the garb of so-called "free trade" and privatisation.
They claim: (1) that it is immoral for a government to be involved in wheat-trading, and (2) that, even if the agency is a public company, it is improper in a free-trade system for our government to confer upon any Australian agency exclusive export marketing rights over Australian wheat.Hypocrisy
These positions are noteworthy as much for their hypocrisy as for their audacity. If the Europeans and the US are noted for anything, it is for their dedication to both the subsidisation and the protection of their respective agricultural sectors.
In round after round of international trade negotiations, neither the United States nor the European Union has demonstrated the slightest interest in freeing up the world market for any temperate agricultural products. Quite the reverse. They take every opportunity to increase the subsidies that they maintain on both production and export of agricultural commodities which they produce - including wheat.
Their protestations to us should be taken for what they are - breathtakingly self-serving.
That they seem to have found a sympathetic ear with both Labor and Coalition governments is not altogether surprising, given the ideological commitment of both sides of Australian politics to the "free trade"/deregulationist agenda.
More surprising is the fact that the US/EU campaign has found some support among certain wheat-growers. While it is possible that a few growers might gain from private selling - at least in the short term - overall, and especially in the longer term, the benefits of a single seller for the export crop are overwhelming.
Incidentally, there is a view being put about that if wheat-growers give up the idea of the single selling-desk, then the US and EU will be prepared to negotiate on subsidies and on access to their markets. Don't believe a word of it. They won't.
At the very least, before we take them at their word, we should insist that they concede access and give up on subsidies before
we abandon our single selling-desk.
That said, the recent AWB debacle has pointed up some weaknesses in the privatised single-seller which merit attention. Being a company with a responsibility to shareholders, not all of whom may be wheat-growers, tends to blunt the purpose of the AWB, and to draw it into activities other than the marketing of the export wheat crop.
It is also possible that paying attention to these wider purposes may have helped the AWB to get into trouble in Iraq.
What the present inquiry should be looking into is not whether to abandon the single selling-desk, but how to recreate an agency which could once again deliver the gains to the industry which were delivered by the old Australian Wheat Board.National interest
The single-selling arrangement for wheat is one of those rare issues where the self-interest of a majority of wheat-growers coincides precisely with the national interest.
Whether something like this emerges from the inquiry is entirely in the hands of Australian wheat-growers. If they are firm enough, and with the right advice, they are powerful enough to force whatever government is in office to create for them the right kind of single-selling arrangement.
For the sake of the industry, and the nation, let us hope that happens.- Colin Teese.