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EU, US to negotiate free-trade deal from spring 2013

BRUSSELS/WASHINGTON - Europe and the United States are set to launch trade talks early next year to deepen the world’s largest trading relationship, EU and US officials say, potentially unleashing billions of euros of new transatlantic business.

Together, the bloc and the United States account for about half the world’s economic output and nearly a third of world trade. But a debt crisis in Europe and elusive American growth are pushing both sides to consider knocking down the final barriers to trade.

A deal could increase economic output by 122 billion euros ($158 billion) a year for Europe alone and add 0.52 percent to the EU’s gross domestic product in the long term, according to European Commission estimates, benefiting industries ranging from chemicals to automakers.

An expert group co-chaired by EU Trade Commissioner Karel De Gucht and U.S. Trade Representative Ron Kirk will in December issue a report recommending pursuing talks, EU and U.S. officials say. They do not expect the outcome of the US Nov. 6 presidential election to influence discussions, though the campaign limits their ability to speak publicly about it.

“The report will recommend the negotiation of a comprehensive agreement between the United States and the European Union,” said a senior EU official who declined to be named, echoing other European diplomats and members of the European parliament interviewed by Reuters.

“Talks could begin in the spring,” a second official said.

EU leaders at a two-day summit in Brussels from Thursday will also commit to “working towards the goal of launching in 2013 negotiations on a comprehensive transatlantic trade and investment agreement,” according to draft summit conclusions.

U.S. officials in Washington told Reuters that talks would go ahead, but that there would be no announcement until after the election.

EU-U.S. commercial links are unrivalled. Transatlantic trade in goods and services is worth $700 billion a year.

Total U.S. annual investment in the European Union is higher than in all of Asia, while EU investment in the United States far outstrips EU investment in India and China combined.

A deal would be the most ambitious in a new generation of sophisticated agreements that go beyond tariffs to take in intellectual property rights, services and regulation.

Eliminating barriers in the automotive sector, which makes up the largest chunk of EU-U.S. trade, could bring a 15 percent fall in costs for both sides, the Commission estimates.

“It would be very useful for us,” Sergio Marchionne, chief executive of Fiat and Chrysler, told Reuters in a visit to Brussels last week, saying the deal could make it easier to exchange car components across the Atlantic.

“One tank of gas”

Businesses on both sides would like an agreement in which a car tested for safety in the United States would not have to be tested again in Europe, and a drug deemed safe by Brussels would not have to be approved as well by the US government.

Small companies who make household appliances, lighting and wiring equipment say prohibitive costs of certifying products for different requirements in Europe and the United States make it impossible currently to export, according to a public consultation by Brussels-based lobby group Business Europe.

According to an internal EU document seen by Reuters, the European Commission and the EU’s 27 countries want the widest deal possible, including access for EU companies to American, state-level government purchasing contracts and services.

With the 10-year-old Doha round of global trade talks deadlocked, the EU and the United States are trying to sign as many free-trade deals as they can to lock in access to fast-growing economies, especially in Asia.

Europe’s trade accord with South Korea came into effect a year ago and the continent is now aiming for a deal with Japan.

Brussels and Washington are eager to avoid getting dragged down into years of talks. But there is optimism.

“I think we can do this quickly, on one tank of gas,” Michael Froman, the White House international economic affairs adviser, told a gathering of service industry companies in Washington last month. “We also know ... where the obstacles are and how to resolve them.”

But both sides appear likely to leave much of the highly sensitive agricultural sector out of the agreement altogether, diplomats say. Washington maintains a 15-year-old ban on EU beef imports imposed because of American concerns about mad-cow disease. The European Union says the ban breaks World Trade Organisation rules.

The United States, in turn, faces prohibitively high tariffs for its beef and pork products, running into Europe’s complex definitions of high-quality meat.

Genetically engineered foods are also contentious, with the United States in favour of developing the industry but with the European Union against. “They will not be part of the deal,” said one EU diplomat in Brussels. ($1 = 0.7730 euros)