EU, US fire starting gun for landmark free trade talks

The United States and the European Union agreed on Wednesday to push for the launch by the end of June of talks to create the world’s biggest free trade alliance, which could be a benchmark for global competitors to follow.

Such a deal would be most ambitious attempted since the founding of the World Trade Organisation (WTO) in 1995, encompassing half the world’s economic output and a third of global trade flows.

“These negotiations will set a standard, not only for our future bilateral trade and investment, including regulatory issues, but also for the development of global trade rules,” European Commission President Jose Manuel Barroso told a news conference.

Speaking after the release of a joint US/EU report recommending the start of talks, Barroso said the two were expected to launch negotiations in the first half of the year.

The report sees a deal boosting the EU’s economy by around 0.5 per cent and the US economy by around 0.4 per cent by 2027, with 86 billion euros (US$115.80 billion) of added annual income for the former and 65 billion euros for the latter.

The report’s release comes a day after US President Barack Obama threw his weight behind a potential deal in his state of the union address, saying it would support millions of good-paying American jobs.

Jobs and growth provide the rationale for an alliance, given both economies are struggling to break free from almost five years of downturns and stunted recovery as well as rising competition from China and other emerging economies.

EU Trade Commissioner Karel De Gucht has warned that the talks will be tough, with no “low-hanging fruit”. Import tariffs between the two are already low – at an average of 4 per cent.