Prime Minister John Howard reluctantly backed opposition changes to an Australia-United States free trade deal Thursday in order to save his government's trade policy centrepiece ahead of national elections.
Howard warned the agreement could still fail if Washington refuses to accept Labour Party amendments which guarantee Australians' ongoing access to cheap prescription medicines.
The prime minister had previously rejected the amendments as unnecessary and said they would result in "bad law", while Labour threatened to scuttle the deal without them.
Announcing a backdown to end the pre-election stand-off, Howard maintained the amendments were against the spirit of the agreement but said he did not want the issue to ruin a once-in-a-generation chance to link up with the world's biggest economy.
"The government has decided that the common sense thing to do is support the amendments but warn that the enabling legislation could be construed by the Americans as inconsistent with the free trade agreement," Howard told reporters.
"If that were to occur then it would be entirely the fault of the Labour Party," he added.
Howard said Washington had told his government overnight that it reserved the right to reject the free trade deal if the amendments were unacceptable.
The prime minister's concession means the free trade agreement can immediately clear its last administrative hurdle in the opposition-dominated Senate.
The agreement, seen by some politicians in Washington as a pay-off for Canberra's strong support for the US-led Iraq war, is scheduled to come into force next year.
Labour leader Mark Latham said Howard had vindicated his party's position of reserving judgement on the merits of the agreement until it had been thoroughly reviewed by a parliamentary committee.
He accused Howard of "having a bet each way" by backing Labour's amendments while also suggesting the Americans might find them unacceptable.
"It's a good result for the Australian people and the prime minister should have the decency of facing up to the truth of that matter instead of trying to walk both sides of the street," he told reporters.
With an election imminent, political point-scoring has bogged down the free trade agreement for months, even though both sides in Canberra support the deal and it sailed through the legislative process in Washington.
Howard said securing the deal was "more important than a transient political victory for either myself or Mr Latham".
Government-commissioned analysis estimates the free trade agreement will eventually boost the Australian economy by up to six billion dollars (4.2 billion US) a year, although Latham said he expected only a mild benefit.
Two-way trade in goods and services between the United States and Australia amounts to about 28 billion US dollars a year, with the United States enjoying a surplus of nine billion dollars.
US President George W. Bush last week signed the agreement into US legislation, calling it "a milestone in the history of our alliance".
The US free trade agreements is the largest signed by Canberra. Australia has similar arrangements with Thailand Singapore and New Zealand and is examining the possibility of deals with Malaysia, China, the Gulf states and the Asean regional grouping.