KEY POINTS:
Trade Minister Phil Goff will have to play a deft hand to ensure that New Zealand is invited to join emerging Asia-Pacific trade blocs if world trade talks finally collapse.
An ambitious Free Trade Area of the Asia Pacific, covering the 21 economies that make up the Apec group (of which New Zealand is a member) has already been mooted as a Plan B option.
Sceptics are right to question why a giant Asia-Pacific deal would get off the ground when global negotiations have failed, particularly as the underlying problems over market access and agricultural protectionism exist at both global and Asia-Pacific levels.
But US Trade Representative Susan Schwab has upped the ante by floating the prospect of opening the North American Free Trade Area (Nafta) to Australia and other Asia-Pacific countries. This could position Nafta (the US, Canada and Mexico) as either a counterweight to the emerging Asean-led trade bloc on the other side of the Pacific (Asean has not put the US on its own invitation list) or as the nucleus of an alternative "Apec-style" free-trade deal.
Schwab's wild card seems rather surreal given the situation in Washington, where the Bush Administration's ability to stitch up any international trade agreement - let alone a deal worthy of free-trade pretensions - has just become highly questionable.
At the weekend the President's fast-track authority expired. This means George Bush has lost his ability to negotiate international trade deals that Congress can either accept or reject but not amend.
His Democratic opponents have also signalled they will not grant a new fast-track authority any time soon - even to help get a conclusion to the World Trade Organisation's Doha talks - which must undercut Schwab's ability to forge deals her negotiating partners can be confident of.
Before a limited fast-track authority is granted, the Democrats want debate over how the "benefits of globalisation can be expanded to all Americans".
In fact, Schwab's position has already been undermined. The Democrats have indicated they will reject two free-trade agreements which the US Trade Representative has negotiated (South Korea and Colombia), opening the way to substantial political changes if they are to proceed.
The Administration is still determined to be seen as an international trade player irrespective of growing domestic difficulties over free trade.
But New Zealand will need to do all it can to avoid being manoeuvred into having to choose between Asia or the US - particularly if a phoney trade war erupts as the presidential primaries sharpen US political rhetoric.
Goff says Schwab did not float the prospect of New Zealand joining Nafta during their most recent telephone call. That call, which took place just after the WTO's big four" (US, European Union, Brazil and India) failed to agree on a break-through in Potsdam a fortnight ago, focused on how Apec could be used to create political momentum to finish the WTO round.
Unlike Australia, New Zealand does not have a free-trade agreement with the US. But it has lobbied successive US Administrations to join the queue - so far without success. Irrespective of the bilateral track record, Goff will still press the Nafta option with Schwab during talks at the Apec trade ministers meeting that begins in Cairns tomorrow, which will focus on the WTO.
It's long been understood that New Zealand - as a major agricultural exporting nation - will get its biggest dividends when the US and the EU reduce their agricultural tariffs and subsidies.
WTO director-general Pascal Lamy has warned that without a breakthrough, the round could fail, or be put on hold for many years until sufficient momentum builds for negotiations to start again.
Considerable weight will be placed on the "texts" to be released by the WTO's agricultural negotiations chair (NZ's Crawford Falconer) and non-agricultural market access negotiations chair (Canada's Don Stephenson).
It's not clear yet to what extent the two trade ambassadors will fill in the detail of their parts of the prospective Doha agreement.
Goff - and his political opponent, National's Tim Groser - believe there's a fair bit of water to pass under the negotiating bridge. Groser - a former diplomat who previously chaired the WTO agricultural committee - expects Lamy to try to force a compromise by introducing his own "wild card" first, rather than declare the round prematurely dead.
The National trade spokesman does not expect a WTO failure to unleash an immediate international trading crisis. Rather an "elegant diplomatic formula" would be developed to put the negotiated results in the political freezer to be thawed at some indeterminate point.
Both Goff and Groser agree that is unlikely much before 2010.
If the WTO negotiations do go into hibernation, expect all countries to step up the process of competitive trade liberalisation by forging more bilateral and regional deals. The Labour-led Government has already signed deals with Singapore, Chile, Brunei and Thailand and is negotiating with Asean, China and Malaysia.
If National wins the election next year it will continue with bilateral deals. But its top priorities will be Japan, India, the EU, United States and China.
Groser contends that if the Doha round is put to one side, a core activity would be to identify a small list of indispensable allies to build support for a future WTO round.
The prospective Asia-Pacific free trade area is on the agenda for September's Apec summit in Sydney, when leaders of 23 Asia-Pacific nations gather to talk trade liberalisation, climate change initiatives and economic development. But climate change is likely to be the major talking point.
