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Wednesday, 10 October 1956

Mr McMAHON (Lowe) (Minister for Primary Industry) . - by leave - I move -

That the bill be now read a second time.

The purpose of this bill is to seek the approval of Parliament for the ratification by Australia of the International Wheat Agreement 1 956. Honorable members will recall that the first post-war International Wheat Agreement came into force in 1949, and covered a four-year period up to 31st July, 1953. That agreement was renewed, with certain modifications, by the three-year International Wheat Agreement of 1953, which expired on 31st July of this year. The 1956 agreement, to which this bill relates, provides for a further three-year extension, with some amendments, of the arrangements covered by the two earlier agreements. Copies of the new agreement have been distributed to honorable members for their information and reference.

The text of this agreement was negotiated at a special United Nations Wheat Conference, which met in October-November, 1955, and again during February-April, 1956. The entry into force of the agreement was made conditional upon it being signed and ratified by governments of countries responsible for a prescribed proportion of the volume of wheat covered by its provisions concerning guaranteed purchases and sales. Following the negotiations, Australia became a signatory to the new agreement, as did also 39 other countries. However, signature did not in any final manner commit Australia or any other country to adherence to the agreement, which is dependent upon the deposit before 1st December, 1 956, of a formal instrument of acceptance, or ratification, in accordance with the constitutional or legislative requirements of each individual country. In conformity with the practice followed in respect of the two earlier agreements, the Government is now seeking parliamentary approval for the lodgment of an instrument of acceptance to permit Australia's participation in the agreement.

In principle, the new agreement is identical with its predecessors, which have operated for seven years. As the arrangement is well known to honorable members. and to Australian wheat-growers, it is, I believe, unnecessary for me to elaborateon the general nature of the agreement and its historical background. The basic objectives are defined in article 1. as being " to assure supplies of wheat to importing countries and markets for wheat to exporting countries at equitable and stable prices ". They must be regarded as very worthy objectives in relation to a commodity which, in times when no international scheme operated, was notorious for the violent manner in which its prices fluctuated. The agreement attempts to achieve its objectives by provisions governing both prices and quantities. Maximum and minimum prices are stated, and transactions under the agreement must be within the prescribed price range. For each importing member country there is a quota, or " guaranteed quantity ", which it may be required to purchase at the minimum price, or which exporting countries may be required to sell to it at the maximum price. Similarly, for each exporting member country there is a quota which it may be required to sell at the maximum price, or which importing countries may be required to purchase from it at the minimum price. The experience of the last seven years demonstrates that these arrangements work satisfactorily in practice, and go a long way towards providing a reasonable degree of stability in the international wheat trade.

Although similar to the 1953 agreement in principle, the new agreement differs from is in two important points of detail. The first concerns the basic maximum and minimum prices which, in the new agreement, are 2 dollars and 1.50 dollars respectively, on the basis of No. 1 Manitoba Northern wheat in bulk in store Fort William/ Port Arthur, the main shipping points for Canadian wheat. These basic prices are 5 cents lower, in each case, than the prices specified in the 1953 agreement, reflecting to some extent, but by no means wholly, the decline which has occurred in wheat prices since the last agreement was negotiated. The new agreement includes the same formulas as did the 1953 International Wheat Agreement for determining the equivalent maximum and minimum prices for wheat shipped from other exporting countries. These formulas take into account differences in transportation costs, the relative qualities of various types of wheat, and different currencies. The underlying principle is that wheat sold at the maximum or minimum prices in the different exporting countries should be competitive, one with another, in the various markets, thereby conforming to commercial practice. In the case of Australian f.a.q. wheat, the new maximum price is equivalent to 18s. a bushel, f.o.b. Australian ports. The equivalent minimum price for Australian wheat will vary from time to time in accordance with movements in transportation costs, but on the basis of current freights is about 12s. a bushel, f.o.b. eastern Australian ports. The figures I have quoted as the equivalent maximum and minimum prices for Australian wheat are, in each case, subject to such allowance as may be agreed between Australia and the importing country concerned to take account of differences in wheat quality.

The second point on which the new agreement differs from the last is in respect of membership and guaranteed quantities. In the 1953 International Wheat Agreement, 44 importing countries participated, and the volume of wheat covered by the importers' quotas amounted to 395,000,000 bushels. In the new agreement, as negotiated, 44 importing countries again submitted figures for inclusion, but, in many cases, the quotas which they were willing to subscribe were substantially less than their commitments under the 1953 agreement. In consequence, the total quantity covered by the importers' side of the agreement has been reduced by almost a quarter, to 303,000,000 bushels. To some extent, those reductions reflect a growing dependence upon domestic production, often stimulated by high support prices. In some cases, too, the quantities for which particular countries were prepared to subscribe were undoubtedly influenced by their hopes or expectations of securing wheat outside the agreement under one or another of the United States programmes for the disposal of accumulated wheat stocks.

On the exporting side, the new agreement is significantly different. In the first two International Wheat Agreements, the main exporting member countries were the United States, Canada, and Australia, whilst France, though a member, had only a nominal quota. On this occasion, Argentina and Sweden have joined as exporting members, and France, which since 1953 has emerged as a substantial wheat exporter in normal seasons, is included with a significant quota. The effect of these two changes - the reduction in a total quantity subscribed by importing countries and the participation of France, Argentina and Sweden - has been a steep reduction in the quotas available for Australia, Canada and the United States. In Australia's case, our quota has been reduced from 45,000,000 bushels under the 1953 agreement to 30,000,000 bushels in the new agreement.

The figures I have just quoted are those which appear in the text of the agreement which was negotiated, copies of which have been distributed. I should add that some minor variations from those figures are possible when the agreement is fully in force. I mentioned earlier that each country which has signed the agreement has until 1st December, 1956, to declare its adherence to the agreement by the deposit of a formal instrument of acceptance. Accordingly, the final position regarding membership will not be known until that date, but on the information currently available it is likely that the changes, if any. which will be necessary will be relatively small. Although Australia and a number of other countries which have indicated that they intend adhering to the agreement have not yet formally ratified it. the operative provisions concerning prices and quantities came into force on 1st August, 1956, and transactions are now taking place within the terms of the new agreement.

The Government regards the existence of an effective International Wheat Agreement as being of very great value to the Australian wheat industry, and to the economy generally. This is particularly the case in times like the present, when stocks of unsold wheat are at record levels and anything in the nature of " panic selling " could bring widespread distress to wheat-growers and sharply reduced export earnings for Australia. The Government, therefore, through its delegation to the recent conference, pursued every means of obtaining the best possible agreement under which some measure of stability might be given to the export marketing of Australian wheat. The Government is convinced that, in the present circumstances, the new agreement is the best obtainable. The new price range cannot be regarded as other than satisfactory, in the light of current price levels. The quantity of wheat covered by the new agreement is, admittedly, disappointing, as it represents only about onethird of the wheat entering world trade. The Government would have liked to have seen an agreement with a very much wider coverage, as the effectiveness of an arrangement of this type is, to some extent at least, influenced by the relationship it bears to total world trade in the particular commodity.

But in considering the alternatives of having no agreement at all, or of staying out of an agreement which other countries - our competitors and our markets - were prepared to implement, the new agreement undoubtedly offers advantages to Australia which far outweigh any reservations associated with the reduction in quantities. For example, the formal adherence by such a large and representative group of countries to the basic objective of the agreement offers some prospects that fundamental wheat problems, such as the stimulation of uneconomic production, will be kept within limits. Again, with accumulated wheat stocks so great it is imperative that some degree of orderliness in export marketing should prevail. An international wheat agreement provides the only convenient and effective way of introducing any degree of orderliness. In connexion with this point, I attach considerable importance to the entry into the agreement of Argentina and Sweden, and the participation of France on a substantial basis. And finally, whilst the agreement is kept in existence, particularly with Argentina, France and Sweden participating, there is always the possibility that a more satisfactory agreement, embracing wider membership and large quotas, might be negotiated. A complete breakdown now would put back the clock by twenty years, to the time of the chaotic marketing conditions of the early 1930's, when efforts to find a solution to international wheat marketing problems had their origin.

It is for these reasons that the Government is convinced that participation in the new agreement, which is sought by this bill, would be of undoubted benefit to Australian wheat-growers and to the economy of this country. T wish to make it clear that in reaching its decision in regard to ratification of the agreement, the Government has had the advice and the views of the wheat industry. Indeed, the chairman of the Australian Wheat Board, and the general president and general secretary of the Australian Wheat Growers Federation, served as members of the Australian delegation to the negotiating conference. Those gentlemen are in full accord with the Government's views on the desirability of ratification by Australia. I commend the bill to the House.

Debate (on motion by Mr. Calwell) adjourned.

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