Unveiling the study by the Center of International Economics, Vaile said although it was important not to raise expectations, discussions had been positive so far into the Free Trade Agreement.

" This has included my visit to Washington in April, and ongoing contract with U.S. Trade Representative Bob Zoellick, since then. We have established contact with key members of the U.S. Congress where there is also considerable support for an FTA, " he said.

According to the study, removal of all trade barriers between the two countries would give a $2 billion a year boost to the Australian economy, equal to 0.4 percent of gross domestic product (GDP).

It would provide a similar $2.1 billion boost to the U.S. economy. The U.S. GDP is nearly $10 trillion.

However, Vaile said that any free trade agreement would be certain to exempt a number of sensitive areas.

" An FTA is not going to see the complete overturn of the United States' Jones Act protecting the American shipbuilding industry. Nor is it going to lead to the overnight demise of the U.S. sugar program, " he said.

Similarly, Australia would not dismantle its tough quarantine arrangements or rules governing the amount of locally produced programming shown on Australian television.