The relationship between New Zealand and the US dived in 1985 when an incoming centre-left Labour government said it would ban nuclear-armed and propelled warships from its waters. The nuclear-free policy has been enshrined in legislation for nearly 20 years.

The US refused to confirm or deny whether its ships were nuclear armed or propelled and the impasse led to US ship visits ending and New Zealand being suspended from the ANZUS tripartite defence agreement which also included Australia.

Although most US naval ships are conventionally powered and surface ships no longer carry nuclear arms, the dispute has never been resolved.

Swindells, who will soon return to the US, told Independence Day celebrations at the US embassy in Wellington that the effects of the dispute were lingering.

"Successive governments in both countries have been unwilling or unable to deal comprehensively with the strains that have accumulated in the bilateral relationship since the mid-80s," he said.

Open and honest dialogue was needed to build a mature and trusting relationship between New Zealand and the US, he said.

"The past 20 years have witnessed, unfortunately, a somewhat stifled dialogue. We keep disagreeing about the past. But the world moves on and we need to move on."

He said leaving the US-New Zealand relationship in its current state would see it slide backwards, a situation the US was keen to avoid.

"It needn't happen if both countries open the door to comprehensive dialogue about the issues that have adversely affected the relationship over the last 20 years."

Prime Minister Helen Clark told reporters the two countries were talking but any dialogue would still have to remain within the boundaries of New Zealand's anti-nuclear legislation.

"There's no way that this government is going to sell out on that," Clark said.

Polls show there is still strong support for the anti-nuclear legislation and the major political parties have not challenged the policy.

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