If the AWB is that good at gainging market premiums, they'll...

If the AWB is that good at gainging market premiums, they'll always have the best price right, hence they won't need the power of compulsory acquisition?

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AWB pushes full deregulation
COMMENT
Matthew Stevens
November 22, 2006
STRIFE-PRONE AWB Limited is pushing for complete deregulation of its controversial single desk, rather than any federal Government plan for punishing partial reforms of its mandated wheat monopoly.

Management of the national wheat pool have delivered the apparently self-defeating position in briefings of federal Government ministers over recent weeks.

The AWB meetings have been in preparation for the near-certain post-Cole-report reforms, with Treasurer Peter Costello and Foreign Minister Alexander Downer understood pushing for an immediate end to AWB International's power to veto bulk wheat exports.

Just incidentally, the AWB's position is that removal of the veto would mean the end of the national pool and single marketing desk anyway. But only in the most damaging way possible.

The politically blighted manager of the national wheat pool argues that partial reform could at best only reconstruct the contorted wheat market system and at worst only damage the wheat growers, shareholders of AWB, and the national interest.

Implicit in the AWB's position is an understanding of its deep public frailty in the wake of the disaster in Iraq.

There is an acute understanding of the Government's delicate position, given the likelihood of aggressively negative findings and recommendations by the Cole commission.

Essentially, while telling government that the national pool and single desk marketing of wheat is probably still the most financially muscular way of selling our wheat, it has privately accepted the system is doomed.

But it says the Government can do something more positive than simply punishing AWB, its shareholders and potentially the national interest.

If reform is necessary, then according to AWB, it should go all the way. With one vital caveat: ensure there is a transition period of maybe three years. The AWB has called in KPMG to help it anticipate the commercial impact of any negative findings and recommendations by commissioner Cole.

At the core of KPMG's work is an effort to redraft the corporate constitution that governs the board of both AWB and its subsidiary, AWB International.

While AWBI is a subsidiary of AWB, it is also, oddly, its employer. AWBI is Australian wheat's global marketing arm and it enforces the bulk export veto. And it is AWBI that employs AWB to run the national buying pool.

AWB reckons that any sustainable change to the nature of the single desk will require constitutional and legislative reform to first allow the demerger of AWBI from AWB and then to allow each to compete in a contested wheat marketplace.

Now, the prospect of a fully deregulated AWB, while it might be currently untenable to his National Party crew members, could offer John Howard a bit of a win-win option.
Not only would the Prime Minister be able to sate the community's deep anger over the betrayal of confidence that was the AWB's dealing with Saddam Hussein's regime, but it would simultaneously deliver an Australian ace in the push to revive the Doha trade talks.

Monopoly marketing agencies such as AWB and Canada's still government-owned Wheat Board have been targets of the World Trade Organisation and, more hypocritically, the US, in trade talks.

As it stands, under a WTO framework agreement forged in 2004, government-mandated monopolies such as the wheat traders are to be eliminated by 2013. Which is one reason why Canada has moved to scr/ap its wheat pool in favour of a contested marketplace - although there is a serious push to slow the process from a target date of mid-2008.

That the staged surrender of the single desk could be a "political bargaining chip in the broader context of negotiations" to kick-start Doha is an idea that will be pushed in a speech to be delivered on Friday in Perth by former ambassador to the General Agreement on Tariffs and Trade and chairman of the Australian APEC Study Centre, Alan Oxley. While his conclusion is the product of starkly different forces, it is in total accord with AWB management.

"Whatever and whenever a result is achieved in the Doha Round, marketing arrangements like the Canadian Wheat Board and the Australian Single Desk system are unlikely to survive.

"In anticipation of this development, the industry should plan now for adjustment to the new environment to ensure growers can compete effectively and hold their market share in world markets," he will say.

One other delicacy to emerge yesterday is that it seems AWB's two heads might well be talking different languages when it comes to reform.

While AWB managing director Gordon Davis has been talking big-ticket reform to cabinet ministers, the chairman of AWBI, Ian Donges, has declared himself the "guardian of the Single Desk".

In the introduction to an AWBI report on conduct of the national pool, released yesterday, Donges wrote:

"... I see the role of the AWBI chairman as being a guardian for the Single Desk, the National Pool and supporting wheat marketing legislation".