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Australia, US work on FTA

Pros and cons * A free trade agreement (FTA) could be worth A$4 billion (US$2.4 billion) a year to the Austrialians. * The Australian Fair Trade and Investment Network fears that important social policies could be harmed by the deal. * Labor claims that Australia wants a free trade pact as a reward for its strong support of the US push to disarm Iraq.

Australia and the US launched negotiations yesterday aimed at securing a free-trade pact which critics say will cost Australia more than it will gain.

Formal talks between officials of both countries started in Canberra as economists, opposition politicians and community groups weighed into the government over its claims a free trade agreement (FTA) could be worth A$4 billion (US$2.4 billion) a year.

The talks began in an atmosphere of crisis over looming conflict in Iraq which prompted opposition Labor claims that Australia wants a free trade pact as a reward for its strong support of the US push to disarm Iraq.

Labor opposes such a pact, arguing it would alienate Australia's Asian trading partners and ending up with far more economic negatives than positives for the country.

Prime Minister John Howard said he was not even sure if Australia's support for a US-led invasion of Iraq would even help when it came to securing a positive deal for exporters.

"The American economy in the long term will be tremendously important to Australia ... and that's the reason I am going for a free trade agreement," he said.

Two leading trade experts warned in an open letter that an FTA would fail to deliver the benefits the government claims.

The letter, by former Industries Assistance Committee chairman Bill Carmichael and Australian National University professor Ross Garnaut, was published to coincide with the start of the talks in which 40 US trade officials are participating.

Any gains from such an agreement would be undermined by powerful protected industries in the US, the two experts warned.

They also maintained that the power of protected producers such as farmers over decisions on trade barriers has been institutionalized in the US and other major industrialized countries.

The Australian Fair Trade and Investment Network fears that important social policies such as a pharmaceutical benefits scheme, labelling of genetically modified food and television content rules to prevent damage to Australia's small but successful film industry could be threatened.

The network, which includes charity groups and trade unions say these issues should be decided by parliaments in Australia, not secretly signed away in a trade agreement with minimal, if any, benefits to Australia.

Australia hopes to finalise an FTA in the first half of next year prior to US presidential elections.

Agriculture, which has long been the principal obstacle to an FTA with the US, has also been one of the key Australian objectives.

Australia's chief negotiator Stephen Deady said Monday he expects agriculture will continue to be the main sticking point given restrictions on the sale of beef, sugar and dairy products to the US.

But Trade Minister Vaile, who has previously said a free-trade pact with the US would not be worthwhile without agriculture said Monday that Australian agricultural exports to the US totalled between two and three percent, so an agreement was possible.

"It's a very small percentage of the market and it's an area that is significantly protected," he said.
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