Throwing Out the Wheat With the Chaff


For weeks now, the nation has been in thrall to the daily revelations by the Cole Inquiry of bribery, corruption and other possible illegalities perpetrated by AWB officials in Iraq under the UN’s Oil for Food program.

Yes, it’s all very diverting. The bad guys at the AWB are getting their comeuppance. The Howard Government is running for cover. The Labor Opposition feels some wind in their sails at last. And the press is having a field day.

Thanks to Bill Leak at The Australian

But there is a very real danger that we are about to throw out the wheat with the chaff. At the end of this legal and political process, we want to be able to separate the institution of AWB Ltd (and its predecessor the Australian Wheat Board) and its very real economic and commercial rationale, from the actions of a few officials in Iraq.

The muted rage with which the AWB’s misdemeanours have been met is understandable. There are three strands to the scandal. The first is common or garden variety bribery and corruption something that is routine in the far from clean world of international business but, usually, senior managers cover their tracks better than the people at the AWB.

Second, there is the fact that these AWB people apparently secured wheat contracts in Iraq by rorting a UN supervised Oil for Food program. Not a very smart thing to do, and then, even worse, to lie about afterwards.

And third, the bribes paid to Saddam Hussein and his cronies could well have been used to buy arms to use against Australian troops the ‘blood for wheat’ argument. It is this last strand of the scandal that resonates most strongly with the justice-hungry Australian public.

But now let’s step back from the particularities of the Iraqi story, and ask: what is to be gained by punishing the AWB as an institution, and who would benefit from such an outcome?

Australian wheat farmers are the most efficient in the world, and our exports of wheat, without any government subsidies at all, account for around 16 per cent of the world market behind only the US, and on a par with Canada. And US farmers are heavily state-subsidised in 2004, US farmers received $46.5 billion from the American government, or 18% of total US farm income!

One of the key competitive advantages enjoyed by Australian wheat is our institutional innovation of introducing a single export agency or ‘desk’ (the AWB), which dates back to 1939, and which allows Australian growers to punch above their weight in international markets.

Rival wheat growers, such as those in the US, never tire of condemning the AWB. Why? Because it enhances our sales of wheat abroad, and returns a better profit to the farmers than they could secure if they competed as small individuals against US agribusiness giants like Cargill and Louis Dreyfus.

In the recent negotiations over the Free Trade Agreement between Australia and the US, it was all the Australian side could do to keep the AWB off the negotiating table in the face of strident calls from US grain lobbies, such as US Wheat Associates, to dismantle the agency as a ‘barrier to trade’ because of its government-sanctioned control over exports.

But control over exports is precisely the point of setting up a commodity board like the AWB. It was introduced as a means of redressing the unfair imbalance between wheat growers in Australia and wheat buyers in Europe, the US, and around the world, and to even out income flows to farmers, thus ending the ‘feast or famine’ character of the industry. And it has been highly effective in achieving these goals.

The Howard Government stood up to US pressure and kept the AWB out of the FTA negotiations, but it may have since caved in. At the recent WTO Ministerial Conference on Trade, held in December in Hong Kong, the final statement of the conference addressed illegal subsidies paid to growers in the US and Europe but ended up calling only for the dismantling of commodity boards like the AWB!

So it seems that the AWB is already on life-support, its days numbered. If and when it is dismantled, the US lobbies led by US Wheat Associates will be crowing over their victory. The Australian Government will be scrambling to put a good face on its capitulation. And Australian wheat farmers will be rudely awakened to the realities of global corporate pressures in heavily subsidised wheat markets.

So, before we all get carried away and rush to do the bidding of US Congressional leaders by crucifying the AWB officials, banishing the Australian Ambassador to Washington, and dismantling AWB, let us pause and ask just where Australia’s interests might lie in all this.

Don’t make our wheat farmers end up carrying the bill for the unsavoury actions of a few officials at the AWB.

Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.