Agence France Presse | By Stephen Collinson | Feb. 9, 2004
The United States and Australia Sunday unveiled a "historic" multibillion-dollar free trade pact after an Australian climbdown in a row over access to US sugar markets which almost scuppered a deal.
Australian Prime Minister John Howard signed off on the tariff-busting pact during a telephone call Saturday with President George W. Bush, aware that his decision would spark a domestic political backlash.
"This is the most significant immediate cut in industrial tariffs ever achieved in a US free trade agreement, and manufactuers are the big winners," said US Trade Representative Robert Zoellick.
It is the first free trade deal negotiated between the United States and a developed country since a US-Canada pact in 1988.
Australian Trade Minister Mark Vaile said the deal, clinched after two weeks of gruelling talks here, would give a leg up to Australian firms keen to reap the benefits of the world's most dynamic economy.
Howard was already being battered early Monday in Australia by a political storm, as critics charged the United States got the best of the bargain after keeping Australian sugar out of its jealously guarded markets.
Howard's government had repeatedly warned there could be no deal unless it included all trade sectors.
"What I faced over the weekend was a decision as to whether we were going to scupper a deal that gave enormous benefits to the rest of the economy because we couldn't get additional access for the Australian sugar industry," Howard told Australian commercial television here.
But opposition spokesman Wayne Swan said Howard could expect a backlash.
"This is a huge kick in the guts for the cane-growing industry in Queensland and will have significant political ramifications," he said.
Zoellick had earlier made the US position crystal clear: "before we started these negotiations, I spoke to both the Prime Minister and Mark about our inability to include sugar.
"The Australian side pressed very hard, as is their right to do," he said, arguing that Australian producers already had a "sizable" quota on exports to the United States.
The powerful US farm lobby had exerted intense pressure on Bush for no concessions on sugar in key agricultural states which could be crucial to his reelection effort in November.
The United States and Australia will grant one another immediate duty-free market access to most manufactured goods and services when the deal is signed and ratified.
Australia will get improved access for agriculture with above quota duties on beef being phased out over 18 years.
Sixty-six percent of Australian agricultural goods will see tariffs reduced to zero on day one of the deal.
US farmers in turn will get duty-free access on 400 million dollars of exports to Australia, and US telecommunications, computer, energy, tourism, express delivery and other service orientated firms will win substantial market access.
Australia also agreed to make adjustments to is Pharmaceutical Benefits Scheme, which subsidises the cost of medicines and promotes the use of generic drugs.
US drugs giants say the system unfairly rigs the market price for their product and does not allow them to recoup the cost of research and development.
The US Chamber of Commerce says the deal could boost US gross domestic product by more than two billion a year by 2006 and hike US exports by 1.8 billion dollars.
Australia estimates a free trade agreement minus the sugar sector, could boost the Australian economy by more than 1.5 billion US dollars a year.
Negotiators were working in a decreasing window of opportunity, as it is questionable whether the Bush administration would revisited such a politically sensitive issue during the run-up to the president's re-election battle in November.
Some in Australia see the trade deal as a payoff for Howard, who supported Bush in the Iraq war, despite stiff domestic opposition.
Trade between Australia and the United States hit more than 28 billion dollars last year.Agence France Presse:
