A free trade agreement being pursued between Australia, New Zealand and Southeast Asia would boost regional trade but could also help Australia cement its sometimes uncertain friendships in Asia, analysts say. Leaders from the 10-member Association of Southeast Asian Nations (Asean), Australia and New Zealand, will consider on Monday a plan by economic and trade ministers to conclude a free trade deal by 2007 after starting formal talks next year.
But while most analysts and economists believe the deal would eventually benefit the economies of all 12 nations, it would also allow Australia, which already has a free trade deal with close ally the United States, to shore up often uneasy ties with Asia.
"There's no question that Australia has a strategic interest. Especially in the context of having done a formal agreement with the United States, which in effect discriminates against our East Asian trading partners," international trade expert, Peter Drysdale, told Reuters.
"A next step must urgently be the negotiation of arrangements that compensate for that and extend interaction between Australia and our East Asian partners," he said.
Two-way merchandise trade between Australia and Asean was worth A$32.8 billion ($25.6 billion) in the year to June 30, 2004, while two-way trade between New Zealand and Asean was NZ$5.5 billion ($3.9 billion) in the year to September 30, 2004.
Asean consists of Thailand, Singapore, Indonesia, Vietnam, the Philippines, Brunei, Laos, Myanmar, Malaysia and Cambodia and has total annual trade worth more than $720 billion.
"Given that we have already got the Closer Economic Relationship agreement (signed in 1981) with New Zealand, (a free trade deal with Asean) seems like it's just filling in a gap," said Westpac's Senior International Economist Huw McKay.
"Two heavyweights, Malaysia's Mahathir Mohamad and Singapore's Lee Kuan Yew - both vigorous opponents of Australia getting into the Asean - have left and we have a pragmatic next generation who are probably willing to wipe the slate clean."
Conservative Australian Prime Minister John Howard, returned for a fourth straight term at an October 9 election, has at times tested the country's relationship with Asia, alarming neighbours with election policy announcements that reinforced his 1999 description of Australia as a US "deputy sheriff" in Asia.
ASEAN RADAR: Australia has adopted an interventionist policy in the South Pacific following the September 11, 2001, attacks on the United States, fearing instability in its small island neighbours could create havens for drug traffickers, smugglers and terror groups.
Howard caused more alarm when he recently reiterated his view that pre-emptive strikes in another country were a legitimate response to terrorist threats, and announced plans for a regional spy school and for counter-terrorism teams in Asia.
International trade expert, Alan Oxley, said a free trade deal with Asean would keep Australia and New Zealand on the Southeast Asian radar screen.
"In the short term it ensures we are in the mix if Asean is going to build on relationships with other economies," he said.
"I think its economic returns will be in the medium to long term where we ought to be able to use the agreement to get better access for what are today called the advanced trade liberalising areas - investment and services."
Following the trade and economic ministers meeting in Jakarta in September, Australia's Trade Minister Mark Vaile said studies showed that a pact could bring an estimated total economic gain to the 12 countries involved of some A$48 billion annually.
"Close engagement and practical co-operation with Asean countries, both regionally and at the bilateral level, is an important priority in Australian foreign and trade policy," a spokesman for Vaile said in a statement on Tuesday.
Australia has already signed free trade deals with Singapore, Thailand and the United States and has agreed to carry out studies into the possibility of deals with Malaysia and China. New Zealand's Trade Minister Jim Sutton has said a trade deal with Asean would be a step towards historic regional economic integration. New Zealand already has an agreement with Singapore and is seeking to expand that to include Chile. It is also negotiating or preparing for free trade talks with eight countries, including China, Malaysia, and Thailand.
"Economic integration within our region - and we are of course geographically part of Southeast Asia - is very desirable, both in the long term view for reasons of security and stability as well as for trade," Sutton said.
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