TOPICS > Economy

U.S. and Australia Agree to Free Trade Pact

BY Admin  February 9, 2004 at 1:19 PM EDT

Australia is the United States’ 13th largest export market and buys more goods from America than from any other country. Total trade between the two countries topped $28 billion in 2002, with the United States running a $9 billion trade surplus.

More than 99 percent of U.S. manufactured goods will become duty-free when the agreement goes into effect. Such goods account for 93 percent of total U.S. goods exported to Australia.

U.S. Trade Representative Robert Zoellick called the deal “the most significant immediate cut in industrial tariffs ever achieved in a U.S. free-trade agreement,” when he spoke to reporters at a joint news conference Sunday with Australian Trade Minister Mark Vaile.

In a victory for the United States, Australia did not gain any market access for its sugar farmers. American sugar producers had lobbied hard against opening U.S. markets to more Australian sugar.

Australian Prime Minister John Howard said sugar was sacrificed to get a wide-ranging deal, noting that the agreement could boost his nation’s economy by up to $3 billion a year.

“If we’d walked away from this because of sugar, that would not have advantaged the sugar people at all and it would have, I believe, robbed many other Australian industries of advantages that they are entitled to have,” Howard told reporters.

Responding to pressure from U.S. dairy farmers and cattle ranchers who feared a flood of cheaper Australian products, the agreement also calls for lengthy phase-in periods to increase Australian beef and dairy exports.

Quotas for Australian beef will remain in place, but tariffs on exports above the quota limits will be phased out over 18 years. Initial increases of Australian beef exports will amount to about 0.17 percent of U.S. beef production, and 1.6 percent of all U.S. beef imports, officials reported.

Initial increases in dairy imports from Australia will amount to about 0.17 percent of annual U.S. dairy production, and 2 percent of all U.S. dairy imports.

Australia is set to benefit from the removal of tariffs on more than 97 percent of manufacturing exports to the United States, including a 25 percent tariff on light commercial vehicles that had hampered Australian imports to the United States.

Despite pressure from the United States, Australia’s system of price controls for pharmaceuticals remained intact. However, Australia did agree to increase the “transparency and accountability” of its prescription drug program, negotiators reported.

Both the U.S. Congress and the Australian cabinet must approve the agreement before it can take effect.

The trade deal is in part seen in part as a way for the Bush administration to reward Australia for its support of the Iraq war.

“We consider Australia an extremely strong ally. Clearly there’s a security basis” to that, Zoellick said. “But we also want to strengthen the economic relationship.”

The pact is the first free trade agreement between the United States and a developed country since the U.S.-Canada deal in 1988.