Aust-US deal good for NZ

By GREG ANSLEY

CANBERRA - New Zealand stands to gain significantly from a free trade agreement between Australia and the United States, regardless of the outcome of Wellington's efforts to negotiate a similar pact.

Also, the US is apparently close to bowing to the World Trade Organisation's ruling that it must dismantle barriers to imports of NZ and Australian lamb.

Both prospects were advanced in Canberra last week during talks between US Secretary of State Colin Powell and Australian leaders, including Prime Minister John Howard, Foreign Minister Alexander Downer and Trade Minister Mark Vaile.

Potential spinoffs for New Zealand from a US-Australia pact were identified in a study for the Australian Government by the Canberra-based Centre for International Economics.

It found that such a pact would boost Australia's gross domestic product by almost $US2 billion ($4.8 billion) by 2010, and total gains would be about $US10 billion over 20 years.

The largest Australian gains would be in exports of dairy products and sugar, allowing rival New Zealand exports more room in key Asian markets.

New Zealand is one of the main third-party beneficiaries, since its trade with Australia is relatively important and so it benefits from Australia's expansion, the study said.

New Zealand would pick up some of the trade diversion in dairy products as Australia moved product from Asian markets to the US.

Both Australia and New Zealand face considerable Congressional opposition to bilateral free-trade agreements, bolstered by tough lobbying from powerful US farm interests that also played a large role in the implementation of lamb import barriers and delays in obeying the WTO order to dismantle them.

But Australia is using its close military alliance with Washington as a lever, backed by the Bush Administration's determination to forge new pacts and a coalition of US businesses formed to push a deal with Canberra.

In Canberra, Mr Powell was handed a letter from 16 Australian industry associations and 10 major corporations supporting the Government's bid for a free-trade deal with the US.

He alluded to the Administration's difficulty in convincing Congress to give President George Bush fast-track authority.

Fast-track authority lets officials negotiate trade agreements with rubber-stamp Congressional approval.

At the head of the list was the proposed deal embracing all of the Americas, but Mr Powell said the Administration was giving serious consideration to a US-Australia pact.

Mr Powell's talks in Canberra also included the fraught issue of lamb imports.

Mr Downer said later that the dispute could be solved in the next few weeks, after discussions between Administration officials and the farm lobby.

"We very much hope it will be satisfactory in the light of the fact that we were successful in the WTO," he said.