Howard cautious on pact with US

By GREG ANSLEY

New Zealand's trade prospects have had two boosts - one decidedly unexpected - courtesy of John Howard's triumphant progress through Washington.

First, the Australian Prime Minister's visit seems to have strengthened prospects for a free trade agreement on which New Zealand could later piggyback.

Second, the United States has emerged as an unlikely ally for New Zealand applegrowers in their battle to get Australia to lift its 80-year-old ban on apple imports.

Howard himself was at pains on his return to cool any overheated expectations of a free trade pact.

"Let there be no false illusion," he said. "It's going to be very hard and it may not come off."

That measured caution is in sharp contrast to the mood of his visit to Washington two weeks ago, where he was pronounced one of America's best friends by President George W. Bush, received by the most senior members of the Administration, and feted by Congress.

Bush said that if he was granted fast-track negotiating authority by Congress - now almost a certainty - he would instruct Trade Representative Robert Zoellick to open talks with Canberra.

In a reflection of American appreciation for Australian support in Afghanistan and for other key US security policies, similar promises were made by Bush's economic adviser, Larry Lindsay, and Assistant Secretary of State for East Asia and the Pacific James Kelly.

Kelly told the Australian that while there was a long queue for free trade agreements, "the case of allies, valued old friends, are bound to get better attention".

Australian progress towards a US free trade agreement has important implications for New Zealand, which, because of Canberra's insistence of separate negotiations - despite CER - is seeking its own deal with Washington.

Canberra has its own priorities in steel, cotton, sugar and beef, and with privileged access granted by its close defence alliance does not want to be weighed down by Wellington's preoccupation with dairying and its lesser status as "friend", not ally.

But because the transtasman economies are so closely bound by CER and given Washington's recognition of New Zealand's military and political contribution to the war on terror, Wellington appears likely to be able to coast to an agreement in Australia's wake.

In Canberra, Bush's commitment to open discussions once fast-track authority is granted has been seen as a major step forward.

Fast track, more properly known as trade promotion authority, enables a President to negotiate trade deals without interference or modification by Congress, and has been a priority for Bush.

But even with fast track, he will face massive opposition to a free trade agreement with Australia - and by extension New Zealand - from industry, farmers and unions, which through the powerful AFL-CIO continue to lobby vulnerable congressmen against open markets.

The Administration makes the right noises about free trade - proposing the elimination through the World Trade Organisation of farm export subsidies over five years - but has lifted its own steel protection, passed the US$170 billion Farm Bill and last week approved a further US$12.6 billion in export subsidies through the Export-Import Bank.

The influential American Farm Bureau has already warned that it will not accept a free trade deal with Canberra unless Australia makes major concessions in such sensitive areas as quarantine.

And Washington has a long, difficult list of demands for Canberra, some of which would find considerable sympathy in New Zealand.

For a start, there is the ban on apple imports - Wellington's case remains trapped in red tape in Canberra - based on scientifically dubious worries about fireblight.

Then there are bans affecting pork and pig semen - another area of concern to New Zealand - poultry, Florida citrus, stone fruit and corn.

Even where imports are technically permitted, Washington claims the rules are often "so extreme as to effectively prohibit imports".

Washington also has problems with Canberra's export market development grants, parallel import policies, copyright piracy issues, local content rules in broadcasting, foreign investment rules, and single-desk selling of wheat, rice and sugar.

Australian farmers have in return warned Howard that they will not accept any deal that does not from the start insist on greater US access for their products.

"Unless any free trade agreement is complete and comprehensive including agriculture, [farmers] will simply not support them," National Farmers president Peter Corish said. "In fact, we will actively oppose such approaches."

The Labor Opposition has also warned that it is not inclined to support a deal in the wake of the Farm Bill and has said it will not accept any erosion of quarantine standards for the sake of an agreement.

Howard yesterday gave new assurances that Australia's interests would not be traded away and warned that a tight rein needed to be kept on expectations of success.

"But if you don't try," he said, "you'll never know."