Australia-US talks turn tense

By GREG ANSLEY in CANBERRA

Australian and US negotiators confirmed a rising sense of urgency yesterday as the two sides began their fourth round of talks on a free-trade agreement in Canberra.

Amid increasing signs of tension, the chief negotiators, Stephen Deady of Australia and America's Ralph Ives, referred to significant differences that stand in the way of a deal by the end of the year.

These include agriculture, Australia's pharmaceutical benefits scheme and market access for a wide range of Australian goods into the US.

"It is going to be a real challenge," Ives said.

Although George W. Bush and Prime Minister John Howard have said they want a pact by year's end, the American President gave a free-trade agreement only passing reference in his speech to the Australian Parliament last week.

With only one more session in Washington in early December, time is running out for negotiators entering what both sides have said is the most difficult and complex stage.

The deal needs to be set by the end of the year to enable its passage through the US Congress before it gets bogged down in an election year.

With the kinds of concessions both sides will have to make, the final details will need to be hammered out by politicians, one of the reasons Australian Trade Minister Mark Vaile and US Trade Representative Robert Zoellick will meet again in the next few weeks.

"The highly sensitive issues on both sides can probably only be resolved at the political level," Ives said.

US opposition to a free-trade agreement has been strong among farmers, drug companies and the entertainment industry - all areas of critical importance to Australia.

As negotiations began yesterday, unionists protested outside Parliament House against a deal they said would destroy Australian jobs.

"Thousands of jobs will be lost in our manufacturing industries if we go ahead with this agreement," said Australian Manufacturing Workers Union national secretary Doug Cameron. "Our Government is trading away our future capacity to be part of the knowledge economy by destroying our capacity to manufacture."

The Labor Party and the Democrats are also concerned at the direction of negotiations, especially over foreign investment controls and the inability of Parliament to undertake the same kind of scrutiny carried out by the US Congress.

There are fears, too, that Australia will win the right to retain existing local content rules for its film and TV industry, but allow open slather for new media, especially on internet-based services.

But the two most critical areas remain agriculture and the pharmaceutical benefits scheme, which provides subsidised prescription drugs.

Canberra has always said it will not accept anything but a comprehensive, across-the-board agreement that includes farm produce, and especially beef, sugar and dairy.

Two weeks ago the US made an "incremental" offer on agriculture that proposed a phasing-in of a free market in agricultural trade.

The length of the phase-in period has not been disclosed, but in agreements with other countries this has extended up to 15 years.

Mr Deady said Australia was not against the phasing-in of free farm markets, but said the proposed period was a key item on this week's agenda.

Finding a compromise will be critical for Mr Howard, with farmers warning early access to the US market was the only acceptable outcome.

Farm anger, and broader concerns about a free-trade deal with the US, could seriously damage the Government as it heads to an election year, with polls now showing a small Labor lead.

Any damage to the pharmaceutical benefits scheme would be even more politically explosive, although Ives said the US had not yet developed a position and would not try to make substantial changes.

Key issues

Talks on an Australia-US free-trade agreement resumed yesterday with the hardest issues yet to be negotiated and opposition rising among union, consumer, film and TV industry groups.

Key issues remain agriculture, Australia's pharmaceutical benefits scheme, local content rules for film and TV, and services and investment arrangements.

A deal must be finalised by the end of the year to meet the deadline set by President George W. Bush and Prime Minister John Howard, and to enable ratification by the US Congress before next year's American elections.