Australia and United States sign free trade deal

10.30am UPDATE - By DOUG PALMER

WASHINGTON - The United States and Australia say they have reached a comprehensive free trade agreement that will leave politically sensitive US protection for sugar in place.

Negotiators struck the agreement after a final three weeks of intense negotiations, including a conversation between President Bush and Australian Prime Minister John Howard on Saturday that helped seal the deal.

With Bush facing a potentially tough re-election race this year, and sugar producers firmly opposed to any cuts in their import protection, US negotiators rebuffed Australia's demand for more market access for one of its main farm exports.

US sugar producers fear opening the US market to more Australian sugar would send US prices tumbling and set a bad precedent for other expected free trade agreements with sugar-exporting countries.

Nonetheless, Australian Trade Minister Mark Vaile said the agreement was a "historic achievement" that would benefit Australia by linking it to the world's largest economy.

"We had to take a balanced judgment in terms of the overall benefit," Vaile said.

In other controversial farm trade areas, the agreement phases out tariffs on Australia beef over 18 years and provides some increased access for Australian dairy products, but leaves many import barriers in that sector in place.

US dairy and beef producers have lobbied hard against the agreement, which they argued would open the US market to more competition without providing any new US exports opportunities.

However, the still-struggling US manufacturing sector has been one of the biggest supporters of the pact.

US Trade Representative Robert Zoellick said the agreement would give US factories a boost by eliminating tariffs on more than 99 per cent of US manufactured exports to Australia the first day the pact takes effect.

Both the US Congress and Australian parliament have to approve the deal. Zoellick told reporters he would consult with lawmakers on when to send the deal to Congress.

"This superb agreement can result in close to $2 billion in new US manufactured goods exports," said Jerry Jasinowski, president of the National Association of Manufacturers.

- REUTERS