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U.S., Australia agree to free trade talks

By Geoff Hiscock
CNN Asia Business Editor

U.S. cattle groups are expected to oppose a free trade agreement between Australia and the U.S.
U.S. cattle groups are expected to oppose a free trade agreement between Australia and the U.S.

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SYDNEY, Australia (CNN) -- Australia and the United States are to begin negotiations on a free trade agreement early next year, U.S. special trade representative Bob Zoellick confirmed Thursday.

Zoellick, in Australia for World Trade Organization talks, said he told Australian Prime Minister John Howard Thursday morning that President Bush had committed to starting the talks.

At a joint press conference in the Australian capital, Canberra, Howard said he was "delighted" at the announcement and said a free trade agreement would deliver "enormous benefit".

He said that by some estimates, an agreement would add Aust. $4 billion ($2.24 billion) a year to Australia's gross domestic product.

The agreement would further link trade and investment ties between the world's biggest economy with the 14th largest.

Key trade partner

The U.S. is already Australia's second-largest trade partner after Japan, with two-way merchandise trade valued at Aust. $33 billion ($18 billion) in 2001-02.

Latest government figures show it is both the biggest destination for Australian investment (A$177 billion) and the largest investment source (A$235 billion), as at June 2001.

Zoellick said the U.S. wanted a comprehensive agreement that included agriculture, manufacturing and services, noting that the two countries had occasional differences over agricultural access.

Australian farmers, particularly meat, dairy and sugar producers, have long complained about barriers to their exports to the United States.

Likewise, Australia's strict quarantine rules are often cited as a barrier by U.S. fruit growers.

Sensitive issue

Australian police prepare to meet anti-WTO demonstrators in Sydney Thursday
Australian police prepare to meet anti-WTO demonstrators in Sydney Thursday

Australian Trade Minister Mark Vaile cautioned on Wednesday that agriculture would be the most sensitive issue in any talks.

Zoellick rejected a suggestion that starting the free trade talks was linked to U.S. efforts to further involve Australia in action against Iraq.

"The best evidence I can give you of this is that, some of you know, I was interested in this idea in 1992 when Iraq was in a slightly different situation," he said.

"Our goal is to strengthen our economic ties bilaterally," he said, noting this would be "in our mutual interest".

Zoellick said a letter about the free trade proposal was being sent to the U.S. Congress. Talks would begin after a 90-day notification period had passed.

This suggests the earliest the talks can begin is mid-February.

Some farm groups onside

Zoellick said 10 American farm groups, represented by the American Farm Bureau, had agreed to the talks. But others, including the U.S. sugar and cattle groups, want worldwide liberalization of trade barriers rather than a bilateral deal.

Howard said Australia and the U.S. had been talking about the possibility of a free trade agreement for "a couple of years" and the two were committed to doing everything they could to make the relationship stronger.

But analysts note that President Bush is likely to face strong opposition to an agreement from cattle groups aligned to his Republican Party.

An economic model prepared recently for the Australian government said that the net benefit in consumption and production for Australia over the next 20 years could be about $25.5 billion, and about $27.2 billion for the United States.

Zoellick is one of about 25 trade ministers attending a mini-summit in Sydney on Thursday and Friday, following on from the WTO talks in Doha last year. ( Full story)

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