'Discussions to begin early next year'

SYDNEY: Australia and the United States announced yesterday the launch of negotiations on a controversial free trade agreement that would revolutionise their often testy trade relationship.

After two years of Australian lobbying, Prime Minister John Howard and US Trade Representative Bob Zoellick said after a meeting in Canberra that the talks would begin early next year and aim to conclude in 18 months.

Zoellick said he had formally advised the US Congress of the deal yesterday and Australian Trade Minister Mark Vaile said the first round of talks was likely to be held in March.

Zoellick said the free trade agreement (FTA) would hopefully span the full range of services, manufacturing and, most contentiously, agriculture.

"We, and I believe Australia, are looking for a comprehensive agreement," he said. "We believe this can do a lot for both economies."

Howard estimated a free trade agreement would be worth more than 4.0 billion dollars (2.2 billion US) a year to the Australian economy.

"A free trade agreement between Australia and the largest economy in the world will be of enormous long-term benefit and long-term strengthening of the economic fabric of this country," he said.

"If we achieve this, it will mean an enormous amount to both countries, it will be a further strengthening element in an already very strong relationship. "

Despite their close political and security ties, Australia and the United States have a history of trade spats, usually centred on Australian criticism of US farm subsidies.

Howard acknowledged there would be "challenging" negotiations before a deal could be reached. "It will be challenging, it won't be easy, but we do it in a very upbeat mood," he said. The United States is Australia's largest trading partner and Australia ranks eighth among US trade partners, with a bilateral relationship worth about 45 billion dollars (25.2 billion US dollars) annually, according to the Australian trade department.

A department spokesman said an agreement with Australia would be the largest free trade agreement signed by the United States since the North American Free Trade Agreement (NAFTA).

Zoellick denied any link between the trade deal and Australia's support for a possible US-led military strike on Iraq. - AFP