US-Australia Free Trade Talks Enter Make-or-Break Stage

By Patrick Goodenough | July 7, 2008 | 8:14 PM EDT

Pacific Rim Bureau ( - With a weekend deadline looming, prospects of a breakthrough in negotiations on a free trade agreement (FTA) between the United States and Australia were looking slim Friday, despite calls by U.S. business leaders for President Bush to prevent interest groups from thwarting a deal.

Prime Minister John Howard looked set Friday to decide either to press on with the effort after a fortnight of exhaustive negotiations in Washington, or to suspend it for the meantime.

On Thursday, Howard conceded the talks, led by his trade minister, Mark Vaile, were difficult and said he did not want to "unduly raise people's expectations" about the chances of success.

The man across the table from Vaile, U.S. trade representative Robert Zoellick, is due to leave at the weekend for a two-week trip to China and Japan.

Failure to reach an agreement by week's end and the resulting lapse in negotiations means an FTA would not be put before Congress before mid-year, raising the risk a deal could cause political problems for the Administration approaching election-time.

Howard also stands for re-election late this year, and will also not want to give his opponents ammunition over any deal that is not seen to be in the interests of Australian industries and consumers.

Howard and Bush are close allies as well as free-trade proponents, and both have spoken favorably about the benefits of an FTA. Both are under pressure from interest groups, particularly in the agricultural and pharmaceutical sectors.

The Australian Broadcasting Corp. Friday cited sources in Washington as saying the president and prime minister may have to talk directly if a deal is to be salvaged.

A spokeswoman for Howard said from Canberra there had been no indication yet that the prime minister would intervene in the negotiations.

Vaile's communications director, Brad Williams, said Friday talks were "very much in the final stages," but he could not say whether the weekend deadline would hold.

He said Vaile had parliamentary commitments back in Australia on Monday, but when he might leave Washington remained uncertain.

"We remain hopeful that we can work through the issues," Williams said, but declined to comment on the progress or "what the conclusion's going to be."

'Jobs at risk'

Unresolved issues at the talks reportedly include tariff-free access to markets for dairy products, sugar, beef and pharmaceuticals.

The U.S. dairy industry is among those opposed to the U.S. opening its markets to Australian goods, mainly cheese, butter and dry milk products.

The National Milk Producers Federation said in a recent statement that more than one in four American dairy farmers could be forced out of business if an FTA resulted in a "surge" of Australian imports, while additional jobs in veterinary and other fields would also be lost.

"Australia's products would swamp our markets and wipe out thousands of small- and medium-sized family farms in the process," federation president Jerry Kozak said.

He said American consumers would not benefit, "because lower milk prices will not be passed on to the public."

Last month some 30 Senators wrote to the White House, calling on the president to ensure New York dairy farmers did not suffer as a result of an FTA with Australia.

Sugar is another sensitive issue, especially in a U.S. election year. Florida, the decisive state in the 2000 election, is the nation's largest producer of raw sugar from sugarcane.

Australia is the world's fourth largest sugar exporter (after Brazil, the EU and Thailand), and the elimination of tariffs on Australian sugar would have a major effect on the U.S. industry, according to the American Sugar Alliance.

The organization told a trade commission hearing last year such a move would result in "sharply reduced producer prices and income, great loss of jobs, and major budgetary outlays by the U.S. government."

Like the dairy lobby, the alliance also doubted whether consumers would see any benefit in the form of lower prices.

'Best FTA ever'

This week, however, the U.S. Chamber of Commerce threw its weight behind an FTA, urging the Administration not to be sidetracked by the demands of "special interest groups."

U.S. negotiators should not lose sight of the significant and "tangible benefits to American workers, businesses and consumers" an agreement with Australia would bring, chamber head Thomas Donohue said in a statement.

Also supporting the FTA is the National Association of Manufacturers (NAM), the largest industrial trade association in the U.S., which estimated the deal would boost U.S. manufactured goods exports by nearly $2 billion a year.

A comprehensive agreement, covering all sectors, "promises to be the best free trade pact ever entered into by the United States," NAM president Jerry Jasinowski said, urging negotiators to wrap up a deal this week.

"It's time to stop listening to small but very vocal special interests and focus on the overall benefit to the U.S. economy," he said.

Pointing out that more than 80 percent of all U.S. exports are manufactured goods, Jasinowski said an FTA which removed almost all Australian tariffs on U.S. manufactured goods would be "a gold-plated achievement unrivaled in the history of trade agreements."

In Australia, the prospect of an historic FTA with the world's largest economy is widely seen as a reward for Canberra's firm support for the U.S. in the war against terror and the Iraqi campaign.

Bilateral trade between the U.S. and Australia exceeded $28 billion last year.

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Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow