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Minister discusses trade and business opportunities in post-war Iraq.

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Wednesday, 16 April 2003



PETER THOMPSON: When the Prime Minister dons his Akubra to visit George Bush at the so-called western White House next month, one of his challenges will be lassoing a greater role for Australia in the cash cow that will be the rebuilding of Iraq. During his stay at the President’s Texas ranch, Mr Howard can expect summer barbeques US style, and a pick-up tour of the attractions of the dusty property—all reminders that Australian farmers are expecting a significant role in the interim administration of Iraq’s agricultural sector.


But with Australia’s share of the wheat market already under challenge from the US, and no shortage of other countries bidding for a piece of the post-war action in Iraq, what kind of trade and business opportunities can Australia expect? The federal Trade Minister, Mark Vaile, joins us now. Mr Vaile, good morning to you.


MARK VAILE: Good morning, Peter.


PETER THOMPSON: How important will this visit to the US be in terms of trade?


MARK VAILE: Obviously in the overall relationship it’s going to be very, very significant, given recent events as you just referred to with regard to the conflict in Iraq. But certainly and importantly we are in the midst of our negotiations with the United States on a free trade agreement bilaterally, which presents probably the greatest opportunity Australia has had in terms of integrating our economy more deeply with the largest economy in the world.


PETER THOMPSON: What about the wheat contract with Iraq? Where does it stand today?


MARK VAILE: Currently it stands that the United Nations Security Council has voted to resume the oil for food program through which AWB was exporting Australian wheat into Iraq. They had standing contracts at the time of the outbreak of the conflict of around about, I think 1.2 million tonnes. Now, that program is going to continue. AWB are dealing directly with the UN to have those contracts honoured and we are also representing their interests in that regard. We expect that they will be.


Beyond that, and beyond the food aid that is currently going into Iraq, all we ask, and all the AWB asks, is that a fair market operate and they’re prepared to compete the way they do in other markets across the world.


PETER THOMPSON: So while the oil for food program continues then things are safe as far as Australia’s exports are concerned there, of wheat?


MARK VAILE: It means that we expect the majority of those contracts to be honoured. Then, obviously, there is going to be some form of an interim administration, ultimately an Iraqi administration, and they’ll make their own decisions in terms of where they sell their oil and where they buy their imports, and particularly their wheat. And in that regard I think the relationship that exists between Iraq and Australia—and has done for the last 50 years, predating Saddam’s regime, and then of course during the course of the last 10 or 11 years where AWB has been the prime supplier of wheat—will stand us in good stead in that market place.


PETER THOMPSON: Can I just pick up ... you said the majority of those contracts on oil for food would be honoured. Did you mean majority? Did you mean there is a minority that wouldn’t be?


MARK VAILE: It’s going to be contingent on the cash reserves still available in that fund. Just remember that when conflict broke out the supply and the sale of oil ceased, and so I’m not sure on the size of the cash reserves that existed in that fund in the United Nations. But that’s what they’re using at the moment and presumably once that runs out then it’s going to be difficult for them to run that program, but hopefully they’ll be able to flick over to an Iraqi administration then that will have control of selling their oil and buying imports, as I indicated. And at that point, then provided that there aren’t distortions in the market, excessive levels of subsidy, then AWB is quite happy to compete.


PETER THOMPSON: So no one knows who the AWB would be dealing with yet, once that UN program ceases, or comes to an end?


MARK VAILE: No. Obviously we’ve seen the reports that initially the Americans are setting up their Office of Reconstruction and Humanitarian Assistance which is going to be running at the moment, but it’s been quite plainly stated that the objective is to get an Iraqi administration up and running as quickly as is practicable so that they take control of running their country and they take control of these issues.


At that point, I will make the suggestion that there would be any number of Iraqis who have a good working relationship with the operatives, the people from AWB, who may well be back in those same positions that they had with the Iraqi Grains Board, and those relationships go back over a decade, and they will be very valuable relationships in terms of future trade.


PETER THOMPSON: I’ve heard the US wheat lobby, heard the words coming out of the spokesperson’s mouth, that they want the wheat action in Iraq after they lost those contracts. Now, if they succeed that would be obviously in the face of opposition from Australia, but it would be, one presumes, it’s a zero sum game, what they gain Australia would lose.


MARK VAILE: Not necessarily absolutely a zero sum game. The Iraqi people were still going very, very hungry under Saddam’s regime, and that was with a limited importation of wheat product from Australia because of the oil for food program and the sanctions. If the market opens up completely the market will more than likely be much larger, therefore it’s not necessarily a zero sum game. If the Americans pick up some of that market, not just from Australia’s opposition, but it will also be in competition against Australian exports. This is the point I’m making in the discussions I’ve had with AWB and in fact I spoke with Andrew Lindberg, the CEO, here in Melbourne last night about this issue, and they’re quite confident that provided there’s not beyond food aid excessive levels of export subsidy or domestic support underpinning the American product they will be able to compete.


PETER THOMPSON: In other words, you’re assuming the cake will expand?


MARK VAILE: I’m assuming the cake will expand and I’m also assuming, as are AWB, that their track record, the quality of their product, the consistency of supply and their relationships with individuals in Iraq will put them in a strong position to maintain a significant market share. I don’t doubt that other countries are going to get product into the market, nor does AWB, but at the same time we need to also recognise that we’re working with them in developing new markets in the region so we’re growing the slice of cake, I suppose, right across the region as well as in Iraq.


PETER THOMPSON: Let me pick up another point and that is the role of the World Trade Organisation. I know you’ve expressed concerns that food aid programs can be used as a way of distorting trade, by which I presume you mean that by producing aid of one sort or another that that’s another way of buying, one presumes, American wheat into the region.


MARK VAILE: That can be true in some circumstances. We’re looking at a fairly extreme humanitarian circumstance at the moment. We made a decision about 100,000 tonnes of wheat, getting food to the Iraqi people, The Americans made a decision I think initially about 200,000 tonnes of grains—not necessarily all wheat—which is a longer term because their product is still domiciled in the United States and they have to get to Iraq: ours was on ships in the Gulf.


But on the broader issue, yes. Within the WTO a part of the discussions and negotiations are about greater transparency as far as food aid is concerned so that it’s not just dumped into the market place when there’s an excess of supply because of production subsidies and primarily that exist in the European Union and in America.


PETER THOMPSON: Let’s turn to what’s happening on another front, and that is this afternoon you’re attending EU Australian ministerial talks in Melbourne. There’s been argy-bargy going on in recent days about Australia’s quarantine laws which the Europeans are basically saying are a tactic used by Australia to impede trade. How do you answer those claims?


MARK VAILE: Over the years we’ve continued to answer any concerns raised about our quarantine system by saying that if any country that’s a major trading partner of ours that is not comfortable with the way we apply a scientific process of assessment to imported product or produce that is being applied for, then let’s go and test it out under the rules of the WTO, because it’s in that forum that we can and we did, you’ll recall with Canadian salmon, and we won on 10 out of 11 points that were raised when we were applying some fairly stringent controls on the importation of Canadian salmon into Australia.


We’re currently having discussions in Geneva with the Philippines about some product that they want to export to Australia, and so it’s quite within the rights of any individual country to first seek consultations—and that’s where we’re up to at the moment with the European Union—and ultimately if they want to call for a panel to assess whether we are complying with the rules, that’s up to them.


We will certainly vigorously defend what we do in Australia, because just remember Australia is one of the more unique countries in the world in terms of its quarantine because we don’t have a land border with any other country. We are an island continent and we don’t have a lot of the exotic pests and diseases that exist in other parts of the world. And under the sanitary and phyto-sanitary protocols of the WTO we have a right to maintain that environment.


PETER THOMPSON: Mark Vaile, thanks very much for talking to us this morning.


MARK VAILE: A pleasure, thank you very much Peter.


PETER THOMPSON: Mark Vaile, who is the federal Trade Minister.