EU agrees to start trade talks with Australia, New Zealand

BRUSSELS, May 22 (Reuters) - European Union countries cleared the way on Tuesday for the bloc to begin free trade talks with Australia and New Zealand in a drive to forge new alliances as trade tensions with the United States increase.

The European Commission, which negotiates on behalf of the 28 EU members, will seek ambitious and comprehensive agreements with both countries, although with caveats about opening up EU markets to farm produce such as butter and beef.

The EU forecasts that its exports to the two countries could increase by a third if trade agreements were struck.

Since its plans for a trade alliance with the United States were frozen after Donald Trump's presidential election victory, the EU has focused instead on trying to champion open markets and seal accords with other like-minded countries.

The EU is also facing the prospect of U.S. import tariffs on its steel and aluminium and possible U.S. sanctions on Iran that could restrict its companies doing business there.

The bloc has struck trade accords struck with Japan, Mexico and Singapore and is in negotiations with the Mercosur bloc of Argentina, Brazil, Paraguay and Uruguay.

European Commission President Jean-Claude Juncker said in September month that the EU should launch and conclude free trade agreements with Australia and New Zealand in the next two years.

If Juncker's time frame is achieved, the EU would get in ahead of Britain, which is also courting its two former colonies but cannot negotiate independent trade deals until it leaves the EU in March 2019.

Still, that timetable seems stretched, given talks themselves will only start later this year.

Both deals would touch on "sensitive" agricultural products.

New Zealand is the world's top sheep meat and dairy exporter, while Australia is a exporter of beef and wheat.

EU countries are struggling to agree how much beef they should let in, with France, Ireland and others saying their cattle farmers are under threat. Beef is also a key export demand of Mercosur.

The EU mandates, which are very similar, say that for such sensitive products longer transition periods or "other arrangements", which could include limited quotas, should be considered. (Reporting by Philip Blenkinsop Editing by Raissa Kasolowsky)