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Tuesday, 4 May 1971


Senator COTTON (New South WalesMinister for Civil Aviation) - I move:

That the Bill be now read a second time.

I seek leave of the Senate to incorporate the second reading speech in Hansard. The Bill is quite long and technical.

The ACTING DEPUTY PRESIDENT (Senator Davidson)- Is leave granted for the speech, to be incorporated in Hansard? There being no objection, leave is granted.


Senator Cant - How many pages are there?

The ACTING DEPUTY PRESIDENT -

Leave is granted.


Senator COTTON - I am happy to read it if honourable senators wish me to do so.


Senator Cant - I object to its incorporation. The motion has not been passed.


Senator COTTON - In that case we shall have no problem because I will read it.


Senator Willesee - Mr Acting Deputy President, I suggest that you put the question, passed it and then you answered a question in relation to it afterwards.

The ACTING DEPUTY PRESIDENT -

The Minister sought leave to have it incorporated and I asked whether there was any objection. Thereupon the question arose as to how many pages were in it. I was not aware at that time that there was to be an objection raised. I propose at this stage to rule that, there being no objection, leave is granted for the text of the speech to be incorporated in Hansard.


Senator COTTON - With the concurrence of honourable senators I incorporate the speech in Hansard.

The purpose of this Bill is to seek the approval of the Parliament for the ratification of the Wheat Trade Convention and the Food Aid Convention of the International Wheat Agreement 1971. This new agreement was negotiated at a conference held in Geneva in January and February of this year under the auspices of the United Nations Conference on Trade and Development (UNCTAD). Fifty-three countries participated fully in the negotiations and a further 17 countries were represented as observers. The agreement is scheduled to enter into force on 1st July 1971 on the expiry of the International Grains Arrangement.

The new International Wheat Agreement is the seventh in a series of agreements since 1949 designed to stabilise the international trade in wheat. The form of the present International Grains Arrangement has been continued and the new agreement comprises 2 separate legal instruments, namely the Wheat Trade Convention and the Food Aid Convention; the 2 conventions are linked together by a preamble. Copies of the new agreement have been distributed to honourable senators.

The primary objective of the Wheat Trade Convention is the furtherance of international co-operation in connection with world wheat problems. A very important element of any international commodity agreement is the opportunity it provides for close and continuing consultation and co-operation between those countries with a major importing or exporting interest in the product concerned. The new Wheat Trade Convention ensures that the machinery for consultation and cooperation on wheat marketing which has been developed over the past 20 years will be maintained for the next 3 years.

The International Wheat Council, which has been the forum for international cooperation since 1949, will continue in existence. The agreement provides for the full reporting and recording of all commercial and concessional transactions in wheat and flour. The world wheat market will be kept under continuous review and the Wheat Council will co-ordinate appropriate action to deal with any situation of market instability which may develop in the life of the agreement. All participants at the recent conference pledged their support for orderly marketing and recognised the need for international cooperation in order to achieve stability of the international wheat market.

The new Wheat Trade Convention differs from earlier agreements in that it contains no specific pricing provisions. It is unfortunate perhaps that acceptable pricing arrangements could not be negotiated in Geneva but this outcome needs to be assessed against the nature of the pricing provisions in earlier agreements and the background of events in recent years. The pricing provisions of successive wheat agreements between 1949 and 1967 were related to agreed minimum and maximum prices for the highest quality wheat traded internationally. This reference wheat was the , top Canadian wheat - No. 1 Manitoba Northern. The minimum and maximum prices established for this grade of wheat were in the nature of a benchmark to which price levels of all other wheats were related. It is important to understand that there were no specific price levels established (or the other wheats traded internationally, including Australian wheats, in these earlier argeements. Various- formulae were used to determine equivalent minimum and maximum prices f.o.b. at ports of origin for other wheats while quality, differentials were determined by market, forces. Thus actual market prices had considerable freedom of movement according to quality, market conditions and changes in freight and exchange rates.

Honourable senators will be familiar with the terms of the present International Grains Arrangement which the new agreement will replace. Under the IGA, minimum and maximum prices were established for 14 major wheats traded internationally. These prices were expressed f.o.b. at US Gulf ports and for the first time reflected agreed quality differentials as between the wheats specified in the agreement. The International Grains Arrangement represented a considerable step forward in that it made a real attempt to determine price relativities or differentials as between different grades of wheat and thereby held out the prospect of more effective pricing arrangements over the whole regimen of wheats traded internationally. Unfortunately, the entry into force of the IGA in mid-1968 coincided with a sharp and unexpected decline in the available world wheat market. Most major wheat exporting and importing countries enjoyed very favourable climatic conditions in 1968-69 with the result that production expanded and the world market contracted by nearly 6 million tons or some 11 per cent on the previous year.

In these circumstances, adherence to the agreed price relativities as between different wheats traded internationally led to a distortion of traditional trade patterns. In particular, the relative shares of the market previously enjoyed by the major exporters, Canada and the United States, declined sharply. The situation became so serious that prices were reduced below the specified minimum levels only 9 months after entry into force of the International Grains Arrangement. The pricing provisions of the present agreement have, in effect, been inoperative since that time. Nevertheless co-operation on wheat marketing issues has prevailed over the intervening period. An understanding was reached at a Ministerial meeting of exporters in Washington in July 1969 on corrective action to bring prices into a more competitive relationship at around the reduced levels in the interests of orderly marketing and price stability. The action taken at this and subsequent meetings avoided the threat of chaos. Since that time there has been an improvement in the market outlook. Prices have recovered and currently are generally at or about the minimum levels specified in the present agreement.

It was against this background that the recent negotiating conference was held in Geneva. Those exporting countries which considered they had been disadvantaged by the operation of the International Grains Arrangement were reluctant to accept new commitments with respect to prices under any new agreement. The negotiations in Geneva were further complicated by the fact that Canada - the world's largest commercial exporter - is undertaking a comprehensive review of its wheat grading system. Entirely new wheat classifications will be progressively introduced from the beginning of the new Canadian crop year in August. Under the new system, traditional Canadian grades such as No. 1 Manitoba Northern will disappear and it will be some time pre sumably before the relative values of iris new Canadian wheats will have been established on world markets. It is necessary lo stress that despite lack of agreement in Geneva on price objectives, all the major exporting countries are agreed on the need to obtain stable and remunerative prices fur their sales of wheat. In fact, the agreement specifically provides that when it is judged that prices and related rights and obligations are capable of successful negotiation, the International Wheat Council shall arrange a further conference with the objective of bringing them into effect within the life of the agreement.

There are quite good prospects of achieving market stability with prices at reasonably satisfactory levels. It is estimated that world trade has increased by some 20 per cent since 1968-69. Moreover, a number of important producers, including the United States, Canada and Australia, are operating restraints over production in one form or another in an effort to achieve a better balance between the supply and demand for wheat. The Government believes that market stability can be realised provided effective co-operation is maintained within the International Wheat Council.

The new agreement will ensure that the machinery for consultation and co-operation will be maintained. In this respect the possibility that the membership of the new agreement will be somewhat wider than was the cast with the IGA, which did not include major exporters and importers such as the USSR and Brazil, is encouraging. I am assured that the Australian Wheat Board and the Australian Wheatgrowers' Federation endorse the terms of the Wheat Trade Convention. The Chairman and the General Manager of the Wheat Board and the President of the Wheatgrowers' Federation attended the Geneva conference and participated fully in the negotitaions. Honourable senators will recall that the International Grains Arrangement contained a Food Aid Convention. This was the first time that such a provision had been included in an international agreement on wheat. This worthwile innovation has been continued under the new agreement. The new Food Air Convention is basically unchanged on the present arrangement. A number of developed countries, importers and exporters alike, will continue to provide developing countries with food aid in the form of grains or flour for human consumption. The individual contributions under the new programme are spelt out in the Convention. Australia's contribution will remain unchanged at 225,00 metric tons. As was the case with the earlier Convention, Japan will enter a reservation entitling it to provide aid in the form of rice and a limited quantity of agricultural materials.

The new Convention has fewer members than its predecessor. The UK, Denmark and Norway have declined to join the new Convention. In addition, Sweden has decided to reduce its contribution from 54,000 metric tons to 35,000 tons. However, the overall effect of these changes is only marginal with the total annual contributions being reduced by 6.7 per cent (285,000 tons) from 4,259,000 metric tons to 3,974,000 tons. Several minor changes have also been incorporated in the new Convention. A new clause provides that in exceptional cases, and on request, limited quantities of rice may be included in the programme. Also, sales on credit terms of 20 years or more will be eligible to be counted against aid commitments provided that maximum use is made of the other eligible forms of aid such as grants and sales for non-transferable local currency. There is no doubt that the need for food aid will continue well into the present decade, particularly in those parts of Asia adjacent to Australia. In these circumstances, the re-negotiation of this aid programme is a timely development emphasising as it does the common responsibility of affluent countries to share the burden of food aid. The new agreement provides for continued international co-operation in the commercial marketing of wheat and for a continued high level of food aid to developing countries. I am advised that it is the most satisfactory agreement that is capable of negotiation at this point of time. I commend the Bill to the Senate.

Debate (on motion by Senator Willesee) adjourned.







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