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Obama calls for U.S. free trade pact with European Union

U.S. President Barack Obama delivers his State of the Union speech on Capitol Hill in Washington, February 12, 2013. REUTERS/Kevin Lamarque
U.S. President Barack Obama delivers his State of the Union speech on Capitol Hill in Washington, February 12, 2013. REUTERS/Kevin Lamarque

By Doug Palmer

WASHINGTON (Reuters) - President Barack Obama on Tuesday called for talks on a far-reaching free trade agreement with the 27 nations of the European Union, throwing his weight behind a deal that would encompass half the world's economic output.

"Tonight I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union because trade that is free and fair across the Atlantic supports millions of good-paying American jobs," Obama said in his annual State of the Union speech.

The United States and the EU already have the largest economic relationship in the world, and one of the most complicated. A pact would unite the United States, the world's largest economy, with four other countries in the top ten: Germany, France, Britain and Italy.

Faced with slow growth on both sides of the Atlantic and rising competition from China and other emerging economies, the long-time allies in late 2011 began looking at ways to build on their existing relationship.

Last week, EU leaders endorsed trade talks with the United States, putting it at the top of a larger agenda that includes negotiations with Canada and Japan.

Two-way goods trade between the United States and the EU now totals more than $600 billion annually. Services trade, including sales by majority-owned U.S. or EU companies in each other's market, adds about $1.2 billion.

U.S. companies have invested around $1.9 trillion in production, distribution and other operations in the EU, far more than in China or anywhere else in the world. EU companies have invested about $1.6 trillion in the United States.

Since most tariffs between the United States and the EU are already low, reducing regulatory barriers to trade in areas like agriculture and chemicals is expected to be the most challenging aspect of the talks.

The EU recently lifted bans on imports of U.S. live swine and beef washed with lactic acid to help build confidence that it can address U.S. agricultural concerns.

TOUGH NEGOTIATIONS

Leaders of the Senate Finance Committee, in a letter to U.S. Trade Representative Ron Kirk earlier on Tuesday, welcomed those steps but said any agreement must also reduce EU restrictions on genetically modified crops, poultry treated with chlorine washes to kill pathogens and meat from animals fed the growth stimulant ractopamine.

"A strong, comprehensive trade and investment agreement with the EU has the potential to create significant good-paying jobs for Americans," but negotiations will be tough, Representative Dave Camp, the Republican chairman of the House of Representatives Ways and Means Committee, said in a statement welcoming Obama's announcement.

The U.S. Chamber of Commerce, an early proponent of trade talks with the EU, applauded the news and urged swift negotiation of a high-standard pact.

The U.S.-EU talks also are expected to tackle new areas, such as setting rules to govern the free flow of information across borders. That is an increasingly important priority for big U.S. Internet companies like Google, Facebook and Amazon but could be hard for EU members France and Germany to accept because of privacy concerns.

Meanwhile, the two sides are locked in a long-running battle at the World Trade Organization over government support for Boeing, the largest the U.S. exporter, and its European rival, Airbus.

That dispute threatens to erupt into a transatlantic trade war in coming years unless the two sides can work out a negotiated settlement.

Obama also reaffirmed his commitment to talks with ten countries in the Asia-Pacific region on a free trade pact called the Trans-Pacific Partnership that negotiators hope to finish this year after more than three years of bargaining.

Talks on the U.S.-EU accord are expected to begin by June. A successful conclusion to both negotiations would secure Obama's reputation as a free trade president after what critics say was a slow start in his first term.

Camp and the Senate Finance Committee leaders also said they planned to push this year for renewal of "trade promotion authority," a law that expired in 2007 that allowed the White House to submit trade deals to Congress for a straight yes-or-no vote without any amendments.

That legislation has long been considered essential in persuading other countries to put their best offers on the table in trade talks with the United States.

(Reporting by Doug Palmer; Editing by Jim Loney)

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