More than meets the eye

The Australian Inquiry into AWB’s involvement in the UN’s Oil for food scandal is riveting, but it is unlikely to reveal the best story of all; that is the offset trade deal between the two countries which neither will want to see the light of day.
So we are into the ‘theoretical physics’ here, but the fact is, the scandal could not get to this stage unless there was some as yet unknown factor existed. Let’s call it the ‘dark matter’ of international trade.
The theory goes something like this:
There is now hard evidence of some five instances which would have rang alarm bells for US, Australian and UN trade officials and administrations. Let us enumerate them:

1. December 1999 Canada raised concerns with the UN that the AWB was using Jordanian front companies to fund interests associated with the Iraqi regime.


2. 2000, PM Howard, Vaile, who was trade minister and Foreign Minister Alexander Downer received a copy of a cable from the Australian mission to the United Nations, in January of 2000, which contained a formal warning to the Australian government from the United Nations about what the wheat board was up to.


3. March 2000, Austrade commissioner Alistair Nicholas called Trevor Flugge AWB Chairman) and other AWB executives to a "briefing" in Washington DC. Nicholas asked whether there was any truth to rumours circulating at the UN that Australia was paying kickbacks to Saddam's regime, in exchange for wheat contracts.


4. June 2003 AWB’s Peter Long ‘passed information about the kickbacks to DFAT (Australia’s Department of Foreign Affairs and Trade) - 10 weeks after the war started. Long said, he received a report, while in Baghdad, from the ruling Coalition Provisional Authority, made up of Americans and Britons, that clearly stated Saddam had been stealing from the UN's oil-for-food program, by adding a "kickback or surcharge, often 10per cent" to the price of contracts.


5. November 2003 US Wheat Associates (USWA), representing American growers lobbied then Secretary of State, Powell, claiming Australian exporters overcharged for sales to Iraq. October 2004 Australia's former US ambassador, Michael Thawley, allegedly misled a powerful Republican senator in the US in that the Government had no knowledge of the kickbacks scheme.

To make the theory work we must make a wild assumption here. We must assume that the political leadership and senior public servants of three substantial countries (USA, Australia and Canada) and those of the UN, are not naïve, blind or stupid.
None of these incidents were simply odd notes among a pile of notes, passing over desks. Each incident was raised and dealt with to the apparent satisfaction of all involved. Yet each incident was a clear signal that something was seriously amiss.

Into this equation we must add comments on the seriousness with which this trade game is played.

“You have to bear in mind that the United States is a trade competitor for the Iraqi wheat trade. They might be a good friend, but they are also a bitter commercial rival. Let’s not kid ourselves. The American were doing everything…the American wheat industry has done everything it possibly can to criticise the Australian wheat industry in order to take the Iraqi wheat market from us. And in fact, in both 2002, 2003 the complaint by a lot of people was that the Americans were trying to steal our market.” Australian Prime Minister John Howard 31 January 2006

Discussing the charges by U.S. Wheat Associates, the U.S. trade marketing group, that AWB may have been involved in kickbacks to the former Iraqi regime, Australian Trade Minister Mark Vaile said, "This is just a little bit of commercial rivalry, I think, between the two industries and two very strong exporting industries. We have answered all these questions, as has AWB, in the past.

“We were concerned an American congressional or senate inquiry would be an inquiry driven substantially by American commercial interests. The U.S. is our principal competitor on the international wheat trade. I'm much more in favor of an independent inquiry that is unlikely to be driven by U.S. commercial interests,'' Australian Foreign Minister, Alexander Downer.

So we have a high stakes game, but laced with endless rhetoric. If the US were so completely and aggressively competitive we should have seen the hammer come down on these crooked Australian deal as early as December 1999.
USWA were certainly ready to use the rumours and allegations, which were floating around from ‘99, to advance their claim on the Iraq wheat market. A number of US senators picked up the ball and started to run with it.
It beggars belief that a few lame ‘explanations’ out of DFAT and AWB could be enough to head off, even bury, rising concern over the AWB wheat cheat’s obvious signs of malpractice. If nothing else, the exorbitantly inflated prices charged back to the UN signalled a serious problem.
True, there are other ‘domestic’ political issues at play in all this. For example, the governing Australian Liberal’s were in a run up to election when US Senator Coleman started stirring the muck. Doubtless Bush fully supported returning the Liberals in Australia. But that is only one point in a long saga, and doesn’t really answer the rest of the issues.
Leaving Canada aside, (they had made their point and backed off,) Australia, the US and UN clearly chose to ignore, bury, dismiss the mounting stream of evidence of corruption. Complaints were quickly silenced, even from powerful interests like USWA and the US Senate. There is clearly something else at play here.

My assertion is that the ‘dark matter’ in this saga involves some kind of secret trade off between the USA and Australia. The simple fact that the US went ahead with the Australian - USA Free Trade agreement despite Australia not conceding the US’s principle demand; the dismantling of Australia’s monopoly wheat marketing, supports the assertion of ‘another factor’.
I rather fear, in the arcane world of international trade and diplomacy, we will probably never know exactly what is behind all of this. In the end, the hapless stooges of AWB will carry the can and the governments will simply get on with ‘business as usual’. Not a very satisfying result, but one we are becoming well accustomed to.Meanwhile, seven US senators have joined calls to reimpose a ban on AWB's US subsidiary from export credit programs.
The seven senators are all from major farm states - six from major wheat states.
Agriculture Committee spokesman, top Democrat Tom Harkin, argued last month it was premature for the US to again sanction the AWB through its US subsidiary, for alleged bribes to Iraq under the former oil-for-food program.
But not anymore, according to aide David Townsend.
"At the time, he wasn't fully aware of exactly what the Cole inquiry had uncovered over in Australia but, since that time, it seems like the prudent thing to do to, at least for the time being, not give AWB access to these USDA [US Department of Agriculture] programs," Mr Townsend said.
US Wheat Associates, which is also a critic of the AWB, is also calling for Congress to look at whether the US can suspend AWB from futures trading.