Following the destruction of Sadam's regime in Iraq, the United States became a contender for the Iraqi oil-for-food program, an institution that allowed food and other humanitarian aid to be shipped into Iraq in exchange for oil. For a while now, Australia has been a major benefactor of this program, exporting a 3/8thsof it's total wheat production to Iraq (2.5 million tons).
However, Iraq recently announced it was canceling it's long standing business arrangement with Australia and is now shopping around for new suppliers. I'm sure that the steady and reliable arrangement with Iraq had been factored into Australia's economic models and has influenced their production of wheat over the years (average annual average 16 million, this year 24). Now that their usual market has been sharply cut off, what will Australia due without the trade benefits? Is it that big of a deal? How much where they counting on that oil? Questions, questions, questions.
1 comment:
I believe that this will severely effect the market of Australia. What I think is the main issue here is that Australia had a system of trade setup so that they could focus their energy on production of wheat. In exchange for this specialization and produtivity they were receiving oil, a resource that is somewhat scarce, expensive, and highly demanded. Now that Australia is not going to be in a trade agreement with Iraq they have to find another country who's people want wheat (and a lot of it) and in return be willing and able to send Australia oil. FInding a willing partner and setting up this system is not going to happen overnight. What Australia should probablly do is start trying to use their agricultlure to convert the products into some kind of fuel (much like the proposed Bush plan during the State of The Union.) Only time will tell...
Post a Comment