Tuesday, November 28, 2006

The battle to free Australian wheat.

Incomprehensibly in the 21st century, Australian wheat farmers are denied the right to sell what they grow to whoever they want.

Egg boards, grain marketing boards and the old Wool Corporation have all lost the monopoly powers that they once had. But the old Australian Wheat Board, the AWB, has continued to argue that only it can obtain the highest returns for growers on their overseas sales and that it needs a monopoly in order to do it.

In support of this, it has produced figures demonstrating that it earns Australian farmers a much higher gross price for wheat than anyone else could.

Commissioner Terence Cole has found those figures to be fraudulent. The gross prices are indeed (suspiciously) high but after costs, the net prices are not. The gross prices have been inflated by the payment of costly kickbacks.

Among the sad implications of the Cole report is that the AWB misled not only the United Nations, but also the growers compelled to sell through it.

Last week, Canberra economic consultancy ACIL Tasman released the results of an examination of the AWB commissioned by wheat traders wanting to end the AWB's export monopoly...

It found that the revelations made to the Cole inquiry were the ''inevitable outcome'' of the AWB's monopoly culture. The report said that the AWB faced the incentives ''characteristic of monopolies protection from competition, lack of accountability, ability to shift and pad costs, high levels of personal remuneration unrelated to performance, and opportunities to live the 'high life' at [wheat growers'] expense.''

ACIL found that the AWB obtained no net price premium for growers as a result of corrupt payments and other expenses and that there was no reason to believe that it could ever have done so. It didn't control much of the world's wheat supply and had no special knowledge about the behaviour of its competitors.

When the AWB broke the law, it believed it could ''avoid scrutiny and preserve political support for its monopoly status with a public relations campaign based on untested assertions and fear of change''. ACIL recommended that wheat growers be free to sell their wheat to whoever they wanted, subject to a transitional licensing system that would last for two years.

Many members of the Liberal Party support a free market for wheat, among them the outspoken Western Australian MP Wilson Tuckey who describes himself as ''the member for the biggest export wheat growing electorate in the country''.

But many of their Coalition partners in the National Party will vehemently resist free trade, not only because they have been swayed by the AWB's arguments but also because of what, even now, the AWB represents orderly socialised marketing, and a sign that the National Party still has influence.

The Prime Minister yesterday headed off talk of an embarrassing Liberal private member's Bill that would end the AWB's monopoly by saying he would soon announce a proposal of his own. But he didn't say what it was or whether it would be a free-market proposal. Asked how he would reconcile the conflicting interests in the Coalition, he replied: ''Reconciliation on these issues is my, you know, other name.''