HELEN CLARK, NEW ZEALAND PRIME MINISTER: Thank you.

MARK DAVIS: When this free trade agreement was first floated, New Zealand was going to be part of it. It seems that you've since been dumped from that. Do you regret that this deal has gone ahead without you?

HELEN CLARK: Firstly, if we go back to the late 1990s, there was discussion when president Clinton came down to APEC in New Zealand that there might be possibility of doing a three way agreement with New Zealand and Australia and even a five way with Chile and Singapore. In the event each of the other countries have successfully prosecuted their own free trade agreement with the United States and New Zealand seeks to follow in the wake of the other three.

MARK DAVIS: Are you disappointed you've been pretty much left out in the cold when this was looking on track?

HELEN CLARK: The understanding we've had from the Australian Government is that at the appropriate time they would do what they could to keep the door open for us and we've always accepted that in good faith. We've got on and built our own constituency in Washington. We have a lot of people batting for us in Congress and in the corporate community and it's my view that at some point where Australia, Singapore and Chile have gone, New Zealand will be able to follow.

MARK DAVIS: Where does it leave you though? What's the consequence of this? Australia is a very major trading partner. Presumably there will be disadvantages. Australian producers will have a disincentive to include any New Zealand componentary in its product, you also have a tariff disincentive in the States. What's the wash up?

HELEN CLARK: There's a couple of ways of looking at it. Firstly, if the Australian economy grows as a result with the agreement with the United States, that will be good for New Zealand and that's because we have very closely integrated economies. Growth in one is good for another, creates more opportunities for our exporters into Australia. The downside though over the longer term can be that if Australia has preferential entry into the US market over New Zealand it could lead to produce being sourced from Australia rather than New Zealand and it could lead to a diversion of investment away from and out of New Zealand into Australia. Those are not consequences we'd be happy with in the long term which is why we'll continue to prosecute our own cause with the United States.

MARK DAVIS: It does seem though there is a continuing drift between our two countries, when historically we were very close. Over the past 20 years Australia has very firmly meshed itself diplomatically and militarily with the US, New Zealand's taken a very independent stance. Has there been a price to pay for that stance?

HELEN CLARK: I don't believe so. Certainly going back 20 years there was a difference of opinion with the United States over New Zealand's nuclear policy, but by and large we've managed to put a ring around that and get on and maintain a very strong relationship with the United States.

MARK DAVIS: But it's not just the nuclear ships issue, is it? I mean, more recently you very vocally opposed the war in Iraq. Just last week you voted against Australia and America in its - at the UN vote on Israel. There is a pretty consistent pattern here now?

HELEN CLARK: Well, there are things that we take a different view on but what I think is important to stress is that the view that New Zealand's taken has been a view that most countries have taken. Australia and United States have been very much in the minority on the two cases that you've mentioned. Now, you know, of course it's unfortunate when very old friends don't always see things eye to eye and Iraq was a classic case where you had among our closest friends, Britain, Australia, US going one way, Canada and New Zealand going the other way. But because the relationship's strong, you put a ring around that and say "Look, we have so much in common, as English speaking democracies valuing human rights doing so many things together, we can't let this put a sour taste on a relationship."

MARK DAVIS: Across automatic parties and across all governments in recent years, there seems to be actions taken by your government that are quite out of the mould diplomatically. The most recent example probably being, the arrest of - very public arrest of Israeli intelligence agents in your country. What response did Australia have when you did that and did they offer you any assistance in that criminal investigation?

HELEN CLARK: I think Australia, like New Zealand, will do everything it can to maintain the integrity of its passport system. In New Zealand we take the view we don't care who it is who sets out to defraud our passport system. They can expect if they try, to have the full force of the law applied to them. That's a very powerful message to send, that New Zealand will detect fraud and it will act on it.

MARK DAVIS: OK, well, presumably there are some benefits to your, or perhaps many benefits to your neutral stance, one of them may well be China's renewed interest in New Zealand. They're fast tracking you into a trade deal, well ahead of Australia. Why do you think that's occurring? Is China embracing you as America rejects you, to put it crudely?

HELEN CLARK: We haven't been rejected by the United States. We're very close working friend of theirs. With respect to China I think there are very important trade policy considerations which weighed heavily in their minds and it's because of the significance of our trade policy initiatives that we have been successful in getting China's agreement to negotiate a free trade agreement with us, the first to be negotiated with any Western country.

MARK DAVIS: In a broader sense, China is very much an emerging power in the Pacific. America has some concerns about that trend. Are they concerns that you share?

HELEN CLARK: The history of great powers emerging in previous centuries has been of considerable instability in world affairs. The big issue for the China watchers is are we seeing something different here and I think that in our diplomacy right around the Pacific rim, we're all looking to engage China constructively in the affairs of our region.

MARK DAVIS: New Zealand has always had great influence and interests in the Pacific, Australia is more recently jumped on board as has a number of other countries. It's now a region of some intense focus. Why do you think this change has occurred?

HELEN CLARK: I'm really pleased that Australia has got a renewed focus on the Pacific. Why the renewed focus? I think it's a lot to do with the fact that we're all very conscious of what failed states mean in a region. If their financial systems can be penetrated, if their borders are loose, that ends up having implications for the rest of us. And we're finding a lot of willingness in the Pacific to work with us in resolving those issues.

MARK DAVIS: Is there any anxiety in your country that Australia is trying to nudge New Zealand out of its field of influence?

HELEN CLARK: Not at all. In a way the interests in the past have been a bit more segments in that New Zealand has the significant history in Polynesia and perhaps Australia more in Melanesia. What's happening now is we're both playing, I think, a significant role in supporting countries across that Melanesian/Polynesian divide. So I think the stepped up activity of both New Zealand and Australia in the Pacific is to be welcomed.

MARK DAVIS: Helen Clark, thanks again for joining us.

HELEN CLARK: Thank you.