Signs of unfair actions in the wheat export market 2/7/2006
Jim Wiesemeyer
via a special arrangement with Informa Economics, Inc.
Wheat farmer organizations meeting in San Antonio this week are calling for U.S. government and regulatory officials to take a number of actions against AWB Ltd. in retaliation for allegations of bribery and other illegal activity by the company.
AWB, formerly the Australian Wheat Board, is Australia's designated monopoly wheat exporter and a major rival of companies that sell U.S. wheat in overseas markets. A UN investigation last year headed by former Federal Reserve Board Chairman Paul Volcker concluded that AWB had made illicit payments of nearly $222 million that benefited the deposed regime of Saddam Hussein. Volcker's report in fact said the kickbacks paid by AWB made the company the most egregious violator of provisions of the UN's oil-for-food humanitarian program.
U.S. Wheat Associates (USW), a market development organization funded by the federal government and state wheat commissions, is urging that AWB Ltd. be denied the ability to participate in U.S. futures markets, disbarred from access to USDA export credit programs, and prohibited from using any U.S. Export-Import Bank programs.
In a report to his board of directors, USW President Alan Tracy points out that U.S. companies are denied access to Australian wheat and cannot participate in export credit programs operated by the Australian government. "Up until now, the United States has not restricted the access of the AWB to U.S. markets in any way," says Tracy. "They trade in our cash and futures markets and participate in USDA export credit programs. This is despite the fact that the Australian wheat market is essentially closed to U.S. companies."
Tracy also raised the question of whether the company's subsidiary, AWB (USA) Ltd., of Portland, Ore., is subject to U.S. laws and regulations, in particular, the U.S. Foreign Corrupt Practices Act. And, he recommends that the U.S. Senate conduct an investigation to determine whether AWB activities violated U.S. law or any applicable international conventions.
Following release of the Volcker investigation, Australia established a Royal Commission to conduct an inquiry into the AWB scandal. Public hearings started last month and are continuing. According to Tracy, the Australian inquiry also uncovered "what appear to be AWB bribes for wheat sales to Pakistan, Yemen, Indonesia and South Africa."
AWB may lose Australian wheat monopoly on Iraq probe. Bloomberg News reports that AWB Ltd. may lose its monopoly to export Australian wheat over allegations the company paid kickbacks to Saddam Hussein's regime, opening the $2.7 billion market to global traders. Australian Prime Minister John Howard last month said the monopoly may be reviewed after a United Nations report that $221.7 million in transport fees by AWB between 1999 and 2003 were channeled to Hussein.
But Australian Trade Minister Mark Vaile has ruled out making changes to Australia's wheat export system before the oil-for-food inquiry hands its findings to the government. Vaile will not rule out making changes to the wheat export system after the Cole inquiry but wants to see its findings before deciding if AWB should continue to manage the single desk. "What we will do is what we believe is in the best interests of Australian wheat growers," he said.
This story has legs. Importantly, the New York Times reported that former AWB executive Mark Emons testified last Friday at the inquiry that when the Iraqis demanded under-the-table payments disguised as transportation costs, AWB executives, including the company chairman, Trevor Flugge, complied with the request. Flugge is scheduled this week to testify before the inquiry.
The article reported that Emons said Friday that when the company was competing with the United States in Pakistan, AWB paid millions of dollars to agents there, one of whom also worked for the Americans, to tip off the Australians to the American bids.
