BRUSSELS — The European Union and the United States announced Wednesday that they have agreed to pursue talks aimed at achieving an overarching trans-Atlantic free-trade deal.
The 27-country European Union said such an agreement, first announced in Tuesday’s State of the Union address by President Barack Obama, would be the biggest bilateral trade deal ever negotiated.
An agreement could increase the European Union’s economic output by 0.5 percentage point and the U.S.’ by 0.7 percentage point, according to some estimates. That would be a highly desirable outcome when the European Union and the U.S. are both struggling with slow growth, high unemployment and high levels of debt.
“Both of us need growth,”Jose Manuel Barroso, president of the European Commission, the European Union’s executive arm, said Wednesday. “And both of us have budgetary problems.”
In a joint statement released simultaneously in Washington and Brussels, Obama, European Council President Herman Van Rompuy and Barroso said they were “committed to making this relationship an even stronger driver of our prosperity.”
“Through this negotiation, the United States and the European Union will have the opportunity not only to expand trade and investment across the Atlantic, but also to contribute to the development of global rules that can strengthen the multilateral trading system,” they said.
Trade between the U.S. and the EU already reaches $2.69 billion a day, European Union Trade Commissioner Karel De Gucht said.
Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington, D.C., estimated that a comprehensive agreement would increase U.S. output by about 0.7 percentage point.
German Chancellor Angela Merkel, who has publicly urged the Obama administration to negotiate a trade deal with the European Union, is “very grateful that he has put the topic on the agenda,” her chief spokesman, Steffen Seibert, told reporters in Berlin. Obama’s backing for an agreement was “perhaps the most important signal on Europe” in his State of the Union speech, Seibert said.
U.K. Prime Minister David Cameron, who has said he’ll push for the trade deal at the Group of Eight summit in Northern Ireland this year, welcomed Obama’s announcement.
“Breaking down the remaining trade barriers and securing a comprehensive deal will require hard work and bold decisions on both sides,” Cameron said in a statement. “But I am determined to use my chairmanship of the G-8to help achieve this, and to help European and American businesses succeed in the global race.”
A high-level U.S.-EU working group on jobs and growth said the goals of the agreement would include removing import tariffs, which average 4 percent, and getting rid of other barriers to trade such as the approval processes that businesses have to go through to sell products on both sides of the Atlantic.
Beyond that, De Gucht said, “There seems to be a consensus that the cost of a product contains about 10 percent of red tape. If you can largely [do] away with that, you will have the same product for a lower price without anybody paying for it.”
“So it would certainly affect people’s lives on both sides of the Atlantic,” he said.
If tariffs are removed and the red tape is reduced, the product would be cheaper. This in turn would increase demand and add jobs because the manufacturer would need to hire more people to fill the orders.
“So it’s giving a boost to trade, but also to industry and to services,” he said.
Consumers would benefit from lower, and more uniform, prices, he said. If tariffs are removed, the price of a bottle of French wine would be roughly the same in the U.S. as it is in Paris.
De Gucht said initial talks should start by summer.
The negotiations will cover an array of commercial and agricultural areas. Officials hope to complete them within two years.
“For these negotiations to succeed, we need above all political will,” Barroso said. “These negotiations will not be easy.”
But he said a successful negotiation would result in a “win-win” situation, and be “a game-changer.”
One example of where the two economies could benefit from the talks is carmaking: If each side recognized the other’s car-safety standards - or if the standards were harmonized - an auto manufacturer would not have to satisfy two sets of requirements.
But there are other areas - such as agriculture - that will prove to be more difficult to negotiate.
U.S. Trade Representative Ron Kirk said Wednesdaythat the U.S. plans to push the European Union to relax its ban on genetically modified crops. That’s also a top goal of U.S. Sens. Charles Grassley and Max Baucus, two leading members of Congress on trade issues.
“For us ... everything is on the table across all sectors, including all across the agricultural sector,” Kirk said. “We want to deal with many of these nontariff barriers that frustrate our trade.”
Congressional support for a trade deal depends on issues that include better market access for U.S. agricultural goods, strong intellectual property protections and a means to settle disputes, leaders of the Senate Finance Committee said Tuesday in a letter to Kirk.
“Negotiations will not be easy, but they have enormous potential to open new opportunities for us to sell our goods and services in the EU,” House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, said in a statement.
Information for this article was contributed by Don Melvin of The Associated Press and by Rebecca Christie and Brian Wingfi eld of Bloomberg News.
Front Section, Pages 1 on 02/14/2013