Feb. 13 (Bloomberg) -- The European Union aims to complete trade talks with the U.S. within two years now that leaders on both sides of the Atlantic have pledged to move ahead, EU Trade Commissioner Karel De Gucht said.
A transatlantic trade deal is progressing after President Barack Obama promised to pursue an agreement to expand the world’s largest economic relationship in his State of the Union speech yesterday. The 27-nation EU says the accord will seek to lower tariffs, ease regulatory barriers and expand access in investment, services and public procurement.
“We are committed to making this relationship an even stronger driver of our prosperity,” Obama, EU President Herman Van Rompuy and European Commission President Jose Barroso said today in a joint statement. The EU may complete its preliminary work by mid-year, Barroso told a Brussels news conference, and Van Rompuy called a possible deal a “great prospect” in a message on Twitter.
The EU plans to present draft negotiating plans in March to kick-start the talks, which it says may lead to an accord that will add 86 billion euros ($116 billion) a year to the bloc’s economy. While trade and investment between the U.S. and the EU was valued at $4.5 trillion in 2011, the two governments have been at odds over issues including farm subsidies, health protections and regulatory standards.
“Everything’s on the table across all sectors,” including agricultural issues and genetically modified products, U.S. Trade Representative Ron Kirk said on a conference call with reporters.
Formal discussions should start at the “earliest possible moment,” the EU said in a statement today. “Both sides aim to advance fast once negotiations are started.”
Barroso anticipates difficulties in moving forward on both sides of the Atlantic. He said agriculture offers the EU a chance to expand exports while also touching on sensitive issues.
While the U.S. has criticized EU curbs on hormone-treated beef and other biotechnology products, Barroso said “basic” accords on hormones in livestock and genetically modified crops won’t be part of the talks. He didn’t elaborate.
U.S. officials emphasized the broad reach of the talks.
“Nobody should be under any impression that we’re not going to be resolving agricultural issues,” including those dealing with health and safety, as part of the discussions, Michael Froman, deputy national security adviser for international economic affairs, said on the conference call.
The scope of the deal will be more important than the speed at which it comes together, De Gucht told reporters in Brussels. There are no “explicit carve-outs” in terms of what will be on the agenda, he said.
A high-level working group recommended to both sides that talks move ahead. The report, released today, called for “negotiations on a comprehensive, ambitious agreement that addresses a broad range of bilateral trade and investment issues, including regulatory issues, and contributes to the development of global rules.”
The EU says an accord may add 0.5 percentage point to the bloc’s gross domestic product, and 0.4 percentage point to U.S. GDP, by 2027. That’s the equivalent of 86 billion euros of added annual income for the European economy and 65 billion euros of extra annual income for the U.S. economy, the EU said.
German Chancellor Angela Merkel, who has publicly urged the Obama administration to negotiate a trade deal with the EU, 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.
An EU-U.S. commerce deal may boost German exports by a quarter of a percentage point, said Volker Treier, an economist at DIHK, an umbrella group of German chambers of commerce. “A new trans-Atlantic free-trade initiative could give major impulses to German-American economic ties,” he said in a statement.
The EU may seek to use the talks to boost its agricultural exports, while not directly addressing a longtime dispute between Boeing Co. and Airbus SAS, De Gucht said. Talks continue separately to resolve spats involving the two airplane manufacturers, he said.
Talks with the EU may help Obama meet his goal of doubling exports by the end of 2014 as World Trade Organization negotiations stall and China expands its role internationally. Obama’s administration also plans to complete negotiations on the Trans-Pacific Partnership with 10 nations and buttress America’s role as a manufacturing center.
Non-tariff barriers can be changed to speed trade and help the U.S. expand its exports to the EU, which stand at $459 billion.
Recent U.S. trade deals required years of negotiations. The U.S. didn’t specify when the talks may begin. Kirk has said he plans to leave office by the end of this month and a replacement hasn’t been named.
Congressional support for an EU deal depends on issues including 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 yesterday in a letter to Kirk.
A free-trade agreement between the U.S. and EU is an “enticing opportunity,” wrote the senators, Max Baucus, a Montana Democrat, and Orrin Hatch, a Utah Republican.
U.K. Prime Minister David Cameron, who has said he’ll push for an EU-U.S. accord 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 an e-mailed statement today. “But I am determined to use my chairmanship of the G-8 to help achieve this and to help European and American businesses succeed in the global race.”
The EU, reeling from a sovereign-debt crisis, and Washington-based industry groups including the U.S. Chamber of Commerce and the Business Roundtable have urged the Obama administration to pursue a trans-Atlantic accord. Separate trade talks with Canada have been stalled; De Gucht said today he hopes that agreement can proceed in coming weeks.
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