While business between the giants of the wine world's emerging super powers, Australia and the US, draw ever closer, the politics of the two countries continues to frustrate the development of free trade and closer ties. David Robertson reports.

John Howard PM of Australia
George Bush US President

Australia's wine industry is becoming a political football in a high stakes game of international free trade being played with the US.

Australian prime minister John Howard is to meet President Bush in September to iron out proposals for a free trade agreement between the two countries.

The right-wing Aussie government is pushing for full blown free trade while lobbying interests in the US are demanding the exclusion of the agricultural areas that would really make an agreement useful to the Aussies.

In retaliation the Australians have banned the importation of Californian grapes citing fears over the spread of Pearce's disease, the grape rotting infestation carried by the glassy-winged sharpshooter that has devastated some Californian vineyards.

But while the two countries are playing national-interest politics wine companies on both sides of the Pacific are expressing frustration that they can't take advantage of the benefits of free trade. And ties between the US and Australia are becoming ever closer with BRL Hardy announcing a joint venture with Constellation last week, following hard on the heels of Southcorp's Rosemount deal and Foster's Beringer acquisition.

"We would like to explore the feasibility of a free trade agreement"

In a bid to escape the political games wine makers in Australia, New Zealand, Canada and the US have struck out on their own establishing an arrangement that will, they expect boost trade between them.

In April the New World Wine Group agreed that each member country would accept the standards of the other. This effectively overcomes half of the barriers to free trade as government's often cite a lack of quality as a reason to impose high tariffs and quotas on imported goods - the Japanese have been playing this game with cars for decades.

Having established the New World Wine Group it will be up to the politicians to overcome the final barriers - namely taxes.

Howard this week said: "We would like to explore the feasibility of a free trade agreement. It's a big ask and we're not going to enter into it unless there's something in it for Australia."

The diplomatic noises coming out of the US have been confused. Bush is pro-free trade and some sources have suggested he is keen to develop more bilateral trade agreements, particularly as global negotiations on furthering free trade seems to have broken down.

Glassy-Winged Sharpshooter
The result of 'Pierce's Disease'

But the president will have to listen to the powerful farm lobbies which don't want Aussie beef, lamb and other crops imported. .

The Pierce's disease barrier thrown up by Australia has infuriated the Americans who claim it isn't an issue. The US points to an Australian study that showed no risk but the Aussies are not about to risk their entire grape crop (and free trade bargaining chip) without further research.

"Any decision we make on importing US grapes must be made on a scientific basis," said Sam Tolley, general manager of the Australian Wine and Spirits Corporation. "It's something we need to be very careful of because of the severity of the potential problems."

Pierce's disease is a serious issue for the Americans and the Australians are right to be worried about its importation but most wine companies seem happy to drop the ban if they can gain greater access to the US market.

"We have been working on that [free trade] here and in Washington," said a Southcorp-Rosemount spokesman. "We are totally supportive of that and think it will be good for Australian wine. We think it will assist and don't think we will get Pierce's disease here."

Pierce's disease is serious but not, it seems, as serious as a free trade agreement.