WASHINGTON, Aug 12 (AFP) - A US-Australia free trade deal appeared to be in jeopardy Thursday as the United States warned it had the right to reject new Australian legal amendments.
In Canberra, Australian Prime Minister John Howard reluctantly backed opposition Labor Party changes to the deal. The amendments guarantee Australians access to cheap prescription medicines.
The prime minister supported the changes so as to get the trade deal through parliament, but he warned that the United States might decide the enabling legislation flouts the terms of the agreement.
"If that were to occur, then it would be entirely the fault of the Labor Party," he said.
US Trade Representative Robert Zoellick's spokesman, Richard Mills, warned that Washington had the right to ensure that the enabling legislation abided by the terms of the free trade agreement (FTA).
"We understand that the FTA implementing legislation and amendments pose important issues in Australia, just as they did in the United States," Mills said in a statement.
The United States had chosen not to intervene in Australia "at this point," he said.
"We have stated that it is Australia's obligation to implement the FTA in a manner consistent with both the terms of the FTA and international intellectual property agreements," Mills warned.
"We've made clear that the United States must certify that the implementation language fulfills the obligations under the FTA before the FTA can come into force. We reserve all our rights in this process."
Washington had given no support to the Australian legal amendments, Mills said.
"At no point have we expressed acceptance of the proposed legislation and/or amendments," he said.
US President George W. Bush last week signed the agreement into law, describing the deal as "a milestone in the history of our alliance."
The agreement, seen by some politicians in Washington as a payoff for Canberra's strong support for the US-led Iraq war, is scheduled to come into force next year.
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.
The stumbling block had been the opposition demand for an amendment to prevent US drug companies from abusing Australian patent provisions in order to stop cheap generic drugs reaching the market.
Australia's subsidised medicines system, known as the Pharmaceutical Benefits Scheme (PBS), is regarded as the "gold standard" of its type in the world.
Under the PBS, the price of selected prescription medicines is kept down and subsidised so that Australians can buy them at a fraction of the price paid by Americans.
However, the Washington-based Pharmaceutical Research and Manufacturers Association said during the free trade negotiations that Australia had "anti-competitive prices" under the PBS and it saw the FTA as a means to dismantle that.
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.