Greg Ansley: Howard bows to US terms

By GREG ANSLEY, Australia correspondent

CANBERRA - The Australian Government yesterday began selling its new free-trade agreement with the United States to a nation that remains sceptical over its benefits and suspicious of the details that have yet to be released.

Australian farmers are bitterly disappointed over the exclusion of sugar from the deal and at the extent of American concessions made for Australian beef, dairy and sheepmeat exporters.

Despite Government reassurances, doubts also remain over the ultimate fate of Australia's subsidised medical drug programme and the future for content rules protecting the local film and television production industry.

The deal was signed on Sunday night after frantic last-minute negotiations between Trade Minister Mark Vaile and US Trade Representative Robert Zoellick, and a final telephone call between President George W. Bush and Prime Minister John Howard.

The agreement has yet to be ratified by the US Congress, and will face scrutiny by a parliamentary committee in Canberra, although any Australian bid to derail the pact will be confined to piecemeal blocking in the Senate of those components requiring legislative change.

"Based on what we know at this stage, this deal doesn't appear to be in Australia's national interest," Labor leader Mark Latham said yesterday.

"If we were asked to vote on it today or in the Parliament tomorrow, we would be opposing it."

But Democrats Leader Andrew Bartlett, also worried about the impact the agreement could have on Australian farmers, manufacturing industries and artists, conceded: "Unfortunately, at the end of it all the parliament and the Senate have no power to reject this agreement."

While the deal has triggered anger among farmers it has generally been welcomed by industry, which sees benefits for manufacturing, services, mining and investment.

"While it may not have delivered everything Australia wanted, the agreement will give Australian business substantial new market access opportunities in one of the world's most dynamic and innovative economies," Australian Chamber of Commerce and Industry chief executive Peter Hendy said.

Business Council of Australia president Hugh Morgan said: "The agreement will deepen Australia's economic and investment relationships with the US beyond what we might reasonably expect from World Trade Organisation arrangements to improve access for Australian business in key markets."

Canberra estimates the agreement will be worth A$2 billion ($2.2 billion) a year to the Australian economy, flowing from the dismantling of manufacturing tariffs, gains in access for miners and service industries and improvements for farm and food exports.

The deal hung in the balance over the weekend as Howard conferred with political advisers, Government MPs in sensitive farm seats and farm leaders over blunt refusal to include sugar.

"I came to the conclusion that it would have been against the national interest to give up a deal that is going to be of enormous benefit for the rest of the economy because we couldn't get something on sugar," Howard said.

While 66 per cent of agricultural tariffs will end immediately the agreement comes into force, and a further 9 per cent will be removed over four years, beef exports to the US will wait three years then take 18 years to rise by 70,000 tonnes, and will still be subject to safeguards for US producers.

"The US has not imposed permanent safeguards in FTAs that it has negotiated with any other country," Cattle Council executive director Brett de Hayr said.

"We find it astounding that the US would impose such punitive trade barriers on Australia."

The size of Australia's dairy quota will almost treble when the agreement comes into force, with subsequent growth in the quota averaging 5 per cent a year.

But Washington said that there would be no change in America's above-quota tariff on dairy products subject to quotas, and initial increases in imports from Australia would amount to only about 0.17 per cent of the value of annual US dairy production, and about 2 per cent of the value of total US dairy imports.

Most sheepmeat quotas will end immediately - with the rest being removed over four years - and all tariffs will be removed for horticulture, cereals and seafood.

Tariffs for greasy wool will be phased out over three years and within 10 years for other wool products, and wine tariffs will be reduced to zero over 11 years.

Under the agreement more than 97 per cent of Australian manufactured exports to the US will be immediately free of duty, and Australian manufacturers will be able to tender for the massive US$270 billion Government procurement market.

The existing 25 per cent tariff on light commercial vehicles will be removed - opening the US market to Australian utes for the first time - and all tariffs will be lifted on auto parts.

America's 50 per cent tariff on ship repairs and maintenance also will end.

Further gains were agreed for trade in services, metals and minerals, and intellectual property.

In Washington, Zoellick welcomed what he described as the most significant immediate reduction of industrial tariffs achieved in an American FTA - producing potential gains of US$2 billion a year for US manufacturers - and new access for food products such as pork, citrus, apples and stone fruit previously blocked by food inspection procedures.

Trade pacts

* The first United States free-trade agreement with a developed country was with Canada in 1988, five years before the 1993 North American Free Trade Agreement that linked the US and Canada with Mexico.

* Other countries linked to the US by free-trade pacts are Israel, Jordan, Chile and Singapore.