Prime Minister Helen Clark has hailed a United States decision to enter multilateral free trade negotiations with New Zealand as a "major step forward" that could benefit the local economy by a billion dollars a year.
Officials today said the US had agreed to join New Zealand, Singapore, Chile and Brunei in the "Comprehensive Trans-Pacific Strategic Economic Partnership Agreement".
The agreement, commonly known as the "P4", was signed between Singapore, Chile and New Zealand in 2005. Brunei joined it a year later.
It aims to tear down trade barriers among participants within a decade.
Trade Minister Phil Goff is in Washington for an official announcement of the US decision to enter negotiations tomorrow, but news of the deal, which would be the biggest trade deal for New Zealand since CER in the 1980s, seeped out today.
As soon as that had occurred Miss Clark confirmed the "major step forward".
She told reporters if a deal was successfully signed up, it could eventually be worth as much as a billion dollars a year.
"It's very very big news. It has to be remembered the US accounts for close to 10 per cent of our total trade. It's a huge economy. It's a growth engine of the world economy even in its slow times, and very important to us."
A bilateral free trade deal with the US has eluded New Zealand. That has been mainly put down to New Zealand's anti-nuclear policy and its refusal to join the US in military action in Iraq.
But Miss Clark said a P4 deal including the US could be just as a good as a bilateral agreement.
She put the agreement to enter negotiations down to continuing improved relations with the US.
Those relations had been on an upswing since both countries decided to focus on what they had in common rather than their differences.
Miss Clark said New Zealand's negotiation with China took three years, but she hoped the negotiation with the US would be "much swifter".
She believed that even a democratic US administration took over after US elections in November it would see few problems in doing a deal with New Zealand.
Miss Clark said the agreement to enter negotiations capped off a year in which New Zealand had also concluded trade deals with China and the Association of South East Asian Nations.
The US decision to join the agreement will give impetus to a long term initiative within the 21-member Asia-Pacific Economic Co-operation (Apec) forum to forge a Free Trade Agreement of the Asia Pacific.
Apec, comprising such nations as the United States, China, Russia, Chile, Japan, Canada, Australia and key Southeast Asian economies, accounts for nearly half of world trade.
US trade representative Susan Schwab and Mr Goff will announce the "launch of negotiations" tomorrow.
Washington in March decided to hold talks with the P4 on freeing up just investment and financial services, but since then had decided to join the whole deal.
"The terms of the US accession to the broad agreement is to be discussed later among the five parties," a diplomat told AFP. "The investment and financial services talks will be folded into the larger agreement."
Mr Goff has said the P4 group has a "benchmark matched by few preferential trade agreements".
The US has bilateral free trade agreements with Singapore and Chile but not with New Zealand or Brunei.
But its free trade pacts with South Korea, Columbia and Panama have not been ratified by the Democratic-led Congress as President George W Bush's administration nears the end of its term.
Last year, the United States exported a record $US1.6 trillion ($NZ2.34 trillion) in goods and services to countries around the world, and in the past four quarters, trade has accounted for more than half of the growth in the US economy, the White House said at the weekend.
For the first half of 2008, the United States exported $US926 billion worth of goods and services, 18 per cent higher than the same period in 2007, it said. "The growth in exports has helped to strengthen the American economy."
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