Fresh impetus for free trade pact with Japan

By GREG ANSLEY

CANBERRA - America's looming US$100 billion ($223.32 billion) Farm Bill has given new incentives to Australian officials hoping for a commitment to a free-trade deal from Japanese Prime Minister Junichiro Koizumi in Canberra today.

Koizumi, who flies to New Zealand for similar talks tomorrow, has indicated his desire for a new pact with Australia, and to include the transtasman economies in a proposed East Asian trade group.

Although it appeared yesterday that a commitment to a free-trade deal may not be included in the communique to be issued at the end of talks between Koizumi and Australian Prime Minister John Howard, substantial progress is expected.

Trade Minister Mark Vaile has conceded that while no full agreement could be reached without the inclusion of agriculture - a big sticking point for both countries - a phased accord may be possible.

Vaile said agriculture was a difficult, but not insurmountable problem.

Canberra is close to signing a free-trade agreement with Singapore and has opened negotiations with Thailand.

Japan is a key target in a new drive for bilateral deals as hopes dim for significant progress in the World Trade Organisation.

Australia has been outraged by the new US Farm Bill, expected to be submitted to President George Bush for signing into law within two weeks.

The bill will increase subsidies to American farmers by US$7.4 billion ($16.51 billion) a year.

New measures in the bill are expected to include higher crop support rates and provision for more subsidies to institutionalise emergency support packages made available to American farmers.

Despite efforts to negotiate a bilateral free-trade agreement with Washington, Agriculture Minister Warren Truss described the new six-year bill as a black day for fair trade. He warned that Canberra would start WTO action if the bill's provisions contravened global trading rules.

"The bill sends an appalling message to agricultural trade negotiators seeking a freer and fairer international trading regime [and] provides a bad example to the rest of the world because the US has in effect abrogated its leadership on agriculture in the Dohar [WTO] round," he said.

A free-trade agreement with Japan would boost the Australian economy. Tokyo is Australia's biggest export market with merchandise trade worth more than A$23 billion ($27.7 billion) and its third-largest investor.

Koizumi is pushing hard for an East Asian trading bloc that would include Australia and New Zealand. Last week, he said Tokyo should aim for a bilateral pact with Canberra.

He will discuss similar prospects with Prime Minister Helen Clark in Wellington.

The big hurdle remaining is resistance in Japan to opening its agricultural markets which - even with massive Australian sales of coal, iron ore and liquefied natural gas - remains central to Canberra's negotiating position.

Vaile's rejection of a free-trade agreement that excludes agriculture has the support of the Labor Opposition, which believes that bilateral pacts send strong messages to multilateral trade talks.

Labor trade spokesman Dr Stephen Martin said: "The new round of WTO negotiations holds the best chance of striking down agricultural protectionism around the world, but Australia's clout in the WTO depends on holding the line in our bilateral negotiations with Japan, the US, Singapore and Thailand."