AWB's monopoly may end
Inquiry in Australia prompts move to curb wheat-export powers

By Ray Brindal 
February 2, 2006
The Wall Street Journal
Original Source: http://online.wsj.com/article/SB113884815204562907.html

CANBERRA, Australia -- AWB Ltd. is set to lose its exclusive control of Australian wheat exports following bribery allegations raised at a government inquiry into Iraqi sales.
Australian ministers are now debating how best to dismantle the export powers held by AWB, a listed company that for many years was known as the Australian Wheat Board and has been on the radar of U.S. trade negotiators for some time.
At stake is A$4.5 billion (US$3.4 billion) in annual wheat exports, which along with U.S. grains are a major supplier to global markets. AWB's monopoly has been a key sticking point in various trade talks, with Washington viewing the restrictive sales process in Australia as a market distortion.
Treasurer Peter Costello said yesterday that he favors a relaxation of the monopoly, while Agriculture Minister Peter McGauran also acknowledged that it is time to change current export arrangements.
You're not going to have exactly the same situation that existed before the Cole Inquiry commenced to what will exist after it, Mr. McGauran said, referring to the inquiry established by Canberra to delve into allegations linking the AWB and the fallen regime of Saddam Hussein during the United Nations' oil-for-food program.
Currently, AWB can veto any application for bulk overseas wheat sales by other companies, despite provisions existing for others to be licensed for exports.
AWB used its veto late last year when it twice rejected an application by Western Australian grain company Cooperative Bulk Handling Ltd. to export 100,000 metric tons of wheat to its mills in Asia.
Headed by a former state judge, Terrence Cole, the inquiry began hearings Jan. 16. It has heard a slew of damaging allegations about US$221.7 million in kickbacks paid to the former Iraqi regime.
Mr. Cole is due to hand down his report at the end of March, with the inquiry providing regular front-page news and daily admissions from AWB executives, wiping A$600 million off the company's market value.
AWB shares ended yesterday at A$4.89 each, off 3.2% from Tuesday and well below the A$6.26 opening price when the inquiry began.
Australian Foreign Affairs Minister Alexander Downer yesterday confirmed that Washington lawmakers were pressured to drop a proposed U.S. Senate inquiry into bribery allegations against AWB. The United States is our principal competitor in the international wheat trade, so we were deeply concerned that the Wheat Board would be very unfairly treated by what is in effect a commercial competitor, Mr. Downer told Australian Broadcasting Corp. radio.
According to the ABC Web site, U.S. Republican Sen. Norm Coleman said he is now deeply troubled by the Australian government's representations to him two years ago in the wake of the revelations from the Cole inquiry.
Sen. Coleman said he is concerned that Australian government officials appeared to know about the payments, and is seeking a meeting with the new Australian ambassador, Dennis Richardson.
Paul Volcker, a former U.S. Federal Reserve Board chairman, said in a report last year on the U.N. oil-for-food program that AWB paid hundreds of millions of dollars to Jordan-based Alia Transportation to move wheat through Iraq. But the funds were channeled to the regime as Alia was a front company, the report concluded.
While the Volcker report didn't claim outright that AWB knew it was paying kickbacks, it maintained AWB should have known what was happening.