The European Union agriculture commissioner has used a visit to Australia to call on the government to change the way it exports wheat.
The EU is not happy with AWB's wheat export monopoly
Mariann Fischer Boel told the trade and agriculture ministers this week that the Australian Wheat Board's export monopoly needed to end.
The AWB is the world's biggest exporter outside the US.
But it has been accused of paying $222m in bribes to Saddam Hussein's Iraq under the UN oil-for-food programme.
The EU has long held the position that state trading enterprises like AWB and the Canadian Wheat Board had trade-distorting powers, because of their monopoly on exports.
Mission to Iraq
Following its agreement to phase out farm export subsidies by 2013, made at the World Trade Organization talks in Hong Kong last December, the EU now feels it is time for others to reciprocate.
The EU is unhappy that AWB has exclusive rights to export Australian wheat and is exempt from Australian competition law.
But the Australian government is reluctant to reform AWB's monopoly - the so-called single desk - because it believes it helps Australia get better prices for its grain.
Australia is hoping to maintain good trade relations with Iraq
"The single desk helps our our farmers compete in the world of unfair trade," Trade Minister Mark Vaile said at an agriculture conference in Canberra.
"It delivers enormous advantages for Australian wheat growers, without distorting trade. I call it an equaliser."
The debate is expected to continue in London later this month when G6 ministers from the EU, US, Brazil, Australia, India and Japan meet to discuss trade issues.
An Australian judge is examining the AWB bribery case, and the government has temporarily eased the board's monopoly on exports until the inquiry reports later this month.
Mr Vaile recently returned from a visit to Iraq to smooth relations with the government, after the Iraqi Grain Board said last month that it would suspend dealings with AWB until the inquiry finished.
He said that the Iraqi government had told him that the AWB bribery scandal would not jeopardise future trade with Australia.
Mr Vaile was told that Iraq needed to import 320,000 tonnes of wheat each month to meet demand.