(Adds court ruling on protest, backing for trade compromise) By Rob Taylor SYDNEY, Sept 5 (Reuters) - U.S. President George W. Bush said on Wednesday he saw signs of progress in Iraq and the possibility of a troop reduction as staunch ally Australia pledged not to withdraw its soldiers. At a joint news conference, Bush and Australian Prime Minister John Howard vigorously defended the war, talked about climate change, trade and China, as the annual meetings of the Asia Pacific Economic Cooperation forum got under way in Sydney. "Our commitment to Iraq remains. This is not the time for any proposals of a scaling down of Australian forces," Howard told a joint news conference with Bush, pointing to next week's progress report to the U.S. Congress on the American troop surge in Iraq. Bush said his top Iraq commanders told him if "security conditions still improve the way they have been improving ... we may be able to provide the same security with fewer troops". The two men then clambered aboard a luxury yacht, and accompanied by a dozen zodiac boats packed with heavily armed, black-clad security personnel, sped across Sydney harbour to join several hundred Australian troops and sailors for a barbeque lunch at the Garden Island naval base. "I"m looking forward to you buying me lunch today. I'm a meat guy," Bush joked to Howard, who has been prime minister for 11 years and faces an uphill re-election battle within weeks. It was genuine camaraderie between two old friends whose popularity has suffered over the four-year Iraq war. Australia has about 1,500 troops in and around Iraq, while the United States has 160,000 soldiers in the country. Bush rewarded Howard for his loyalty by signing a treaty with him on Wednesday giving Canberra improved access to top-secret U.S. military technology and intelligence. Australia had long complained of U.S. restrictions on weapons technology and information because of Washington's concerns about espionage. BIGGEST SECURITY OPERATION Bush arrived early for the APEC summit this weekend in order to prepare for next week's report to Congress on progress in the Iraq war. Australia has launched the country's biggest ever security operation for the meetings, including erecting a 2.8 metre (9 feet) security fence that has virtually cut Sydney centre in two, and which has put residents in a grumpy mood. Australia has never experienced a terrorist attack at home. Anti-war activists plan mass weekend protests, expected to draw thousands of people onto the streets against Bush's visit and the Iraq war. "I have absolutely no doubt that minority groups will engage in a level of violence not previously experienced in Sydney," police chief superintendent Steve Cullen said. Protesters on Wednesday lost a court challenge to a police order barring them from holding an anti-war march through central Sydney on Saturday on the first day of the APEC leaders' summit. The judge said it would be "Pollyanna-ish" to assume everyone at the march would have peaceful intentions. Trade liberalisation and climate change top the agenda at the APEC meetings, and Bush wants the group's 21 economies to agree to a strong ledge to reinvigorate the Doha round of world trade talks. APEC trade and foreign ministers on Wednesday backed a compromise text on the basic contours of a global trade deal after a briefing by World Trade Organisation chief Pascal Lamy, a Japanese government spokesman said. About 40 trade and foreign ministers, including U.S. Secretary of State Condoleezza Rice, gathered at Sydney's main convention centre on Darling Harbour to hammer out a declaration for their leaders to consider at a weekend summit. A draft of that declaration, seen by Reuters, says the 21 APEC members will try to develop a more robust approach to strengthening food and product safety standards in the region. APEC has begun work on a recovery programme to revive trade in the event of a terrorist attack and a set of principles "to help protect the food supply against deliberate contamination", the draft declaration said. The draft declaration, however, gives short shrift to a U.S.-backed Free Trade Area of the Asia-Pacific, and instead calls for harmonising standards and measures across the dozens of free trade agreements now in force or under negotiation. Asia-Pacific business executives, holding a parallel meeting in Sydney, called on APEC to put a price on carbon emissions as soon as possible to combat climate change. "At the moment, you can pollute for nothing ... so we are asking leaders to put in place a market structure which will put a price on pollution and motivate companies to change their behaviour," Mark Johnson, head of the APEC Business Advisory Council, told reporters.
