US to negotiate pact with NZ

The United States has agreed to negotiate a free-trade pact with New Zealand and three other Pacific Rim nations a deal that could be worth $1 billion a year to the Kiwi economy.

Prime Minister Helen Clark said yesterday she was "blown away by the news" and the value of the final free-trade agreement (FTA) would be about the same as that of the bilateral pact that has eluded her Government for years.

That failure has been partly put down to New Zealand's anti-nuclear policy and its refusal to join the US in military action in Iraq.

"It is very, very big news. It has to be remembered that the US accounts for about 10 per cent of our total trade," Clark told reporters.

"It is a huge economy, an engine of the world economy, even in its slow times. This is huge news for New Zealand."

Trade Minister Phil Goff was in Washington for an official announcement of the US decision to enter negotiations today.

However, news of the deal, which would be the biggest trade pact for New Zealand since closer economic relations with Australia in the 1980s, seeped out early.

In February, the US indicated it was interested in joining only the investment and financial services part of FTA negotiations between Singapore, Chile, Brunei and New Zealand.

"Now they have agreed to start negotiations to come into the deal generally and comprehensively," Clark said.

Commonly known as the P4, because it involves Pacific Rim nations, the pact was signed in 2005 with a broad objective of removing trade barriers among participants within a decade.

The announcement caps off a big year for trade policy, which has seen New Zealand sign an FTA with China and complete negotiations with the 10 countries of South-east Asia.

Clark said she would expect the negotiations with the US to proceed faster than the China talks, which took three years.

She said a possible change in the US Administration in November would be unlikely to dampen enthusiasm in Washington for a deal.

The US is New Zealand's second-largest individual export destination and third-largest source of imports.

Last year, the value of New Zealand exports to the US was $4.21b, representing 11% of total exports, mostly frozen beef, sheep meat, dairy products, wood and seafood.

New Zealand imported goods to the value of $4.08b.

- © Fairfax NZ News