Canberra flies solo over free trade with the US

By GREG ANSLEY in CANBERRA

The gratitude of senior American politicians for Australia's enthusiastic enlistment in the war on terrorism is encouraging Canberra in its solo bid for a free-trade pact with the United States.

Despite the spirit of the closer economic relations agreement and the expressed preference of a number of US officials for a transtasman arrangement - if one emerges at all - Canberra believes its best chance is to go it alone.

"There is nothing in CER that obliges either country to pursue international agreements on a joint basis," Prime Minister John Howard said after Friday's annual summit with Helen Clark in Sydney.

The two Prime Ministers have, however, agreed to liaise closely and exchange information about their separate moves in Washington.

Both countries already have separate trade deals with Singapore, and others are being pursued by one or both in Thailand, Hong Kong, Latin America, Korea and Japan, largely as insurance against exclusion from emerging trade blocs.

But a free-trade pact with the US remains top of the wish list.

New Zealand ministers and officials have been plugging away in Washington, cheered by the Bush Administration's appreciation of Wellington's political support for the war on terror and the diversion of SAS troops, transport aircraft and intelligence assets to the Afghan campaign.

In January, Mr Howard met President George W. Bush in Washington with high hopes of pushing the case for a free-trade deal.



In reality, at the present pace of negotiations, both he and Helen Clark seem unlikely to sign a pact in their political lifetimes, given the US preoccupation with its own affairs, the wall of protectionism in Congress and American focus on World Trade Organisation negotiations.

The Bush Administration has been a strong advocate of new WTO rules and last week gave a small glimmer of hope when it signed its new farm bill for five years rather than the traditional 10.

On the other hand, the farm bill remains heavily protectionist and trade distorting, especially for sectors important to Australia and New Zealand such as dairy and sugar.

Washington is also working hard to create the proposed new top-to-bottom Free Trade Area of the Americas, a nightmarish task with debatable chances of success.

In this climate, Canberra believes its best chance lies in taking advantage of good will in Washington without the encumbrance of New Zealand's distinct set of large problems and the nagging worry that someone in Washington may still carry a grudge over the Anzus split.

There is a belief in Wellington, and among at least some officials in Canberra, that in the end any deal with Australia will be widened to include New Zealand - or a less likely vice versa - but for the moment we will go our separate ways.

"Getting a free-trade agreement with the US is going to be difficult," Mr Howard said after his talks with Helen Clark on Friday.

"We discussed this issue today and we've agreed to collaborate very closely in the exchange of information, keeping each other in the picture, but of necessity in the time ahead we will pursue separate negotiations."



Helen Clark said strong US protectionist tendencies in key sectors - dairy and lamb for New Zealand, beef, wheat and steel for Australia - were both powerful inhibitors and reasons for separate approaches.

"We are liaising very, very closely and it may be that at some time down the track the approaches may come together. But I don't think either of us are under any illusions that negotiations are about to begin."

Australian Trade Minister Mark Vaile had this perception reinforced last month, when he returned from Washington with an empty bag, four months after Mr Howard and President Bush initially directed their respective officials to prepare the way for negotiations.

There are hopes that if the US Senate follows the House of Representatives and hands President Bush the power to negotiate new agreements under the Trade Promotion Authority Bill, Canberra will gain at least an agreement in principle to start negotiations.

On the other hand, America's powerful farm lobby remains implacably opposed to the sort of concessions Australia needs if a free- trade agreement is to succeed, and the US International Trade Commission is seeking tariffs and quotas on Australian steel.

If Canberra manages to leap these hurdles and sign an agreement without New Zealand, the biggest blow would fall not on trade in goods, but through investment and the diversion of potential US funds to Australia in such key sectors as dairying.

American officials have told Australian journalists that any agreement would specifically include an agreement on liberalising investment, and Mr Vaile said a strong focus was being placed on longer-term, two-way investment strategies.

Helen Clark told the Business Herald that her talks with Mr Howard had not included potential investment diversion, but confirmed it was on her mind.

'We didn't address that, although it's fair to say that if there was such an [Australian-US] agreement with New Zealand permanently excluded, it probably would have such implications.

"But I feel that some time down the track, if and when the Americans are prepared to talk with us, the two approaches will probably come together."