Kickbacks blow our leverage in trade talks
Cameron Stewart and Geoff Elliott
April 15, 2006
AUSTRALIA'S reputation as an honest broker in trade talks has been badly damaged by the AWB bribery scandal, with powerful US senators threatening to pursue Canberra through the World Trade Organisation.
Local and international trade experts yesterday issued damning assessments of the potential fallout from the controversy, warning that Australia had surrendered the moral high ground in free trade talks by allowing almost $300million to be paid to Saddam Hussein's regime.
They said the scandal would be used as a weapon against Australia by countries wedded to protectionism, which would claim the bribes were effectively an export subsidy to Australia's wheat industry funded by the UN oil-for-food program.
American senators have asked US Trade Representative Rob Portman to mount a WTO case against Australia, saying there is a prima facie case that Australia broke US trade law by failing to stop the kickbacks.
"We think the bribes paid through the oil-for-food program were in effect export subsidies and therefore grounds for a WTO case," said a spokesman for Iowa senator Tom Harkin, who is leading the charge with other wheat-state senators Max Baucus, Kent Conrad, Byron Dorgan and Ken Salazar.
Alan Oxley, Australia's former ambassador to the General Agreement on Tariffs and Trade - the WTO's predecessor - told The Weekend Australian there was "no question (but) that the whole episode had damaged Australia's credibility for negotiating trade liberalisation".
"It will make it difficult for Australia to credibly argue to others that you shouldn't have government interference to manage trade," he said.
Australia has been at the forefront of the movement to end the market "corruption" of farm export subsidies for two decades.
In 1986, the Hawke government was instrumental in founding the Cairns Group, a coalition of 18 "fair trading" agricultural exporting countries that has challenged the world's major blocs, principally the US and the European Union, to meet WTO free-trade objectives.
There is mounting pressure in the US Congress for the Bush administration to use the wheat scandal to force Australia to end its support for the AWB's wheat monopoly during the Doha round of trade talks, due to be concluded this year.
The importance of the negotiations was one of the reasons Trade Minister Mark Vaile gave the Cole inquiry for his failing to read the cables on the scandal.
John Baize, an international trade consultant who has worked in the White House and in Congress as a farm trade specialist, said: "For the Howard Government to continue to support the single desk (AWB monopoly) while pushing hard for the US toeliminate subsidies is a less credible position. It's disappointed me, it's disappointed a lot of people. Corruption in that part of the world (Iraq) is a way of life. I guess what surprised me is that Australians were doing it."
Australia's weakened negotiating position comes at a time when the momentum for global free trade has stalled, with the Doha talks mired in disputes.
In Geneva, trade expert Carin Smaller, from the US think tank the Institute for Agriculture and Trade Policy, said the AWB scandal had exposed Australia as being as self-interested on trade as any other country.
"This exposes the hypocrisy of Australia's policy when it comes to agriculture trade with developing countries," Ms Smaller said. "Its position is not about supporting fairness, it's very much about self-interest and expanding Australia's own markets."
Former Howard government trade minister Tim Fischer also warned that the scandal would bruise Australia's reputation in the short term, but said it would cause no longer-term damage.
"In the short-term there will be eyebrows raised by diplomats and others steeped in the art ofdealing with hypocrisy and double standards," Mr Fischer told The Weekend Australian.
Mr Oxley, one of Australia's most experienced and respected trade negotiators, said the scandal would reduce Canberra's negotiating options in free trade talks later this year.
"One option for Australia in the Doha round would have been to trade off the single desk in return for greater access in foreign markets for Australian wheat exporters, but its credibility to press that case is now very weak."
Mr Oxley said the scandal showed the dangers of allowing diplomatic and political considerations to have an impact on trade deals.
Senator Harkin's spokesman said the Cole inquiry showed the Howard Government was "willing and ready to go into bat for the AWB and that that close relationship between AWB and the Australian Government made it more difficult for US wheat farmers to compete".
"Our farmers should not have to compete with a government," he said.
But Senator Harkin's push, along with criticism from trade experts following the issue, contrasts with silence from the Bush administration. It is minimising any public criticism of Australia's involvement in the Iraq oil-for-food scandal for fear of upsetting a loyal ally that has troops in Iraq and Afghanistan.
The AWB scandal leapt on to the international stage this week as media outlets around the globe began reporting the issue after the testimony of Trade Minister Mark Vaile, Foreign Minister Alexander Downer and John Howard.
Alan Tracy, president of marketing group the US Wheat Associates, said it was "amazing that the Australian Government, despite apparently having been repeatedly lied to and misled, continues to defend the AWB to this day. They seem to treat the AWB like a pet puppy that can do no wrong."
Agriculture counsellors at embassies in Washington said they were following the issue closely.
Labor and Coalition MPs warned that Mr Vaile would face a tough time defending Australian wheat farming interests as world trade talks wound up in coming months.
Their warning came as the Prime Minister launched his strongest attack against the former Australian Wheat Board, accusing it of "systematically" misleading his Government.
Appearing to pre-empt the findings of commissioner Terence Cole, Mr Howard said AWB had misled a range of bodies, including the UN and the Government, and even former High Court chief justice Anthony Mason.
Labor foreign affairs spokesman Kevin Rudd said Australian farmers were likely to suffer as a result of pressure by the US and Europe to prise open regulatory arrangements.
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