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EU and US free-trade talks launched

Wednesday, 13 Feb 2013, 22:16

 

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The European Union and the US will begin formal talks on a free-trade agreement, paving the way for the biggest trade deal in history.

European Commission President Jose Manuel Barroso made the announcement following President Barack Obama's State of the Union address.

A deal would bring down trading barriers between the two biggest economies in the world.

EU-US trade is worth around 455bn euros (£393bn; $613bn) a year.

"A future deal between the world's two most important economic powers will be a game-changer, giving a strong boost to our economies on both sides of the Atlantic," said Mr Barroso, speaking in Brussels.

The EU estimates that a "comprehensive and ambitious agreement" will boost annual GDP growth by 0.5%.

Mr Obama announced US support for talks as part of his annual address to the US Congress on Tuesday, saying a free-trade deal would "boost American exports, support American jobs and level the playing field in the growing markets of Asia".

It is not clear how long the talks will take, but similar trade deals have involved years of negotiations, and the BBC's Gavin Hewitt in Brussels says the most optimistic timeframe given by European officials is two years.

Continue reading the main story

Andrew Walker
BBC World Service Economics correspondent
One aim of the free-trade agreement would be to eliminate or reduce tariffs - taxes that apply to imported goods.

For both the EU and US average tariffs are already low, below 3% on one measure. But further reductions could nonetheless stimulate additional trade and there are some areas where tariffs are much higher, notably food.

Beyond that, the negotiations would try to reduce regulatory barriers to trade. That is more complex, but the experience of Europe's internal market shows it is sometimes possible.

The desire for bilateral trade liberalisation on both sides of the Atlantic reflects the failure of negotiations for a global deal in the World Trade Organization.

Those talks were launched 11 years ago and are nowhere near concluding. The big powers are anxious to use any opportunity to boost their economic performance.

A US-EU working group was established in 2011 to discuss the prospect of a free-trade agreement.

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