They said the US sugar and dairy industry lobbies were set to fight hard against opening their market to Australian imports.

An all-day conference on the proposed agreement, convened by the Australian APEC Study Centre based at Monash University, heard that removing all trade barriers would raise living standards in both countries.

A new study estimated the long-term benefits at almost $US2 billion ($A3.9 billion) a year for each country.

But Trade Minister Mark Vaile also warned the conference that such an outcome was unlikely.

"A free trade agreement (FTA) is not going to see the complete overturn of the Jones Act protecting the American shipbuilding industry," he said. "Nor is it going to lead to the overnight demise of the US sugar program.

"But that does not mean there is no prospect of change in these areas.

"For its part, the US knows that an FTA is not going to see us compromise the scientific integrity of our quarantine arrangements, nor the well-established policy guidelines in areas like local content for Australian TV."

A Centre for International Economics study estimated the biggest changes from removing tariffs would come in US sugar and dairy markets, which remain highly protected - with tariffs equivalent to 85 per cent on butter and 80 per cent on sugar - because powerful industry lobbies have blocked trade openings. The study estimated the biggest winners from free trade would be the Australian sugar and dairy industries, with output likely to jump between 7.5 and 8 per cent, and domestic prices soaring.

The other main winner would be the textile, clothing and footwear industries as the US removes quotas for internationally competitive firms like boot makers.

The biggest losers would be the Australian car parts industry, and the US sugar and dairy industries.

Overall, the study estimated that free trade would raise long-term GDP 0.4 per cent in Australia, but just 0.01 per cent in the United States.

Even New Zealand would get three times more benefit than the US, thanks to Australia quitting other dairy markets, and no US industry would enjoy more than a marginal 0.1 per cent rise in output.

Respected Washington farm analyst Paul Drazek warned that American farmers had turned against trade liberalisation in general, and there was only a 50/50 chance that Congress will give President Bush authority this year to negotiate trade agreements without Congress being able to amend them.

While some speakers argued that Australia could still negotiate an agreement subject to congressional amendment, Australia's most senior trade official, David Spencer, said: "We don't want to negotiate first with the Administration, and then negotiate again with Congress."

Despite widespread scepticism, conference speakers agreed the deal was worth trying for.