May 18, 2007

Australia's change in wheat marketing system could affect US trade deal

Australia's plan to change its wheat marketing system could breach its existing free trade agreement (FTA) with the US.

Institute of Public Affairs research fellow Tim Wilson said Australia Wheat Board's (AWB) status as a monopoly wheat exporter is protected under the FTA, which came into force in January 2005 and any new arrangements, which would likely strip AWB of its monopoly, should be approved by Washington. 

The US is against Australia's "single desk" for wheat exports, stating it distorts trade.

The Howard Government has already removed AWB's right to ban rival applications to export wheat in the wake of fallout from the Iraq kickbacks scandal and under interim measures, Agriculture Minister Peter McGauran can approve applications by rival traders.

McGauran has by far approved few licences, including a wheat exporter to Iraq that has never been filled.

Wilson said the interim measures were ''contrary to relevant sections of the FTA''. Any new measures would require an exemption from the agreement.

The principle of the FTA is to establish a free trade area between Australia and the US. A national pool, single desk and prohibition rights on exporting a specific commodity are contrary to the principle, but the Australian government had wheat exports excluded from its obligations.

McGauran confirmed yesterday that a planned demerger of AWB, creating two companies, was now a "key option".