CORRECTED-UPDATE 3-France threatens to block start of EU-US trade talks

Thu Jun 13, 2013 3:51am EDT

(Corrects title of U.S. ambassador to EU not to Brussels)

* France wants to leave audiovisual sector out of talks

* EU partners fear could lead US to exclude other sectors

* EU governments to try to agree common position on Friday

By Mark John and Philip Blenkinsop

PARIS/BRUSSELS, June 12 (Reuters) - France threatened on Wednesday to block the start of free trade talks between the European Union and the United States if movies and digital media are not kept out of the negotiations.

Two days before EU countries are supposed to give the go-ahead for negotiations, France said it would veto the talks unless the sector - that it sees as crucial to its cultural identity and under threat from Hollywood - is excluded.

"France defends and will defend the cultural exception to the end - that's a red line," Culture Minister Aurelie Filippetti told Reuters TV, referring to current EU rules that allow governments to preserve "cultural diversity" by setting subsidies and quotas that might otherwise be considered contrary to free trade.

The first round of talks - which would seek to establish free trade for all manner of goods - has been tentatively scheduled for July, but both sides must first agree the scope of the negotiations, something EU trade ministers are due to finalise on Friday.

Prime Minister Jean-Marc Ayrault told parliament: "France will go as far as using its political veto. This is about our identity, it's our struggle."

The Transatlantic Trade and Investment Partnership could increase Europe's economic output by 65 billion euros ($86.3 billion) a year, according to the European Commission, with the United States getting a similar boost.

But for the talks to start, EU trade ministers must reach a unanimous agreement in their discussions on Friday. France's stance would appear to make that impossible at this stage.

"TOO BIG TO FAIL"

Paris says it will not be pushed into signing up until it is satisfied that its system of support for film, radio and other audio-visual products remains shielded from Hollywood. It also wants to make sure any future technologies in the cultural sphere, such as visual arts downloads, are protected.

While other EU countries want to protect against too much U.S. content and preserve subsidies, they are happy with a compromise put forward by EU Trade Commissioner Karel De Gucht.

That would allow EU members to retain subsidies and quotas for traditional media, but leave space for U.S. and European companies to compete in the rapidly developing Internet and digital areas, including TV on demand and music downloads.

Britain, Germany and others argue that if the EU excludes the audio-visual sector completely, as France demands, the United States will exclude its own closed sectors.

French Trade Minister Nicole Bricq said the U.S. would, in any case, seek to exclude certain sectors such as maritime transport and financial services. She told newspaper Liberation that culture risked becoming a negotiating pawn in the talks if it was not excluded from the start.

"It's very sensitive for the French," Irish Trade Minister Richard Bruton, who will chair Friday's EU talks, told Reuters.

"If you start taking sectors off the table, complete carve-outs, so will the other side."

Following 14 months of preparations, Brussels and Washington say the time is right for a deal first mooted three decades ago but considered too difficult because of the concerns over the impact of opening markets, especially the farming sector.

German Economy Minister Philipp Roesler said the free trade deal was "too big to fail".

"We should avoid building up taboos at the moment," he said at a conference hosted by the American Institute for Contemporary German Studies in Berlin.

William Kennard, the U.S. ambassador to the European Union, has warned against setting red lines before talks begin, telling the European Parliament that the moment to start talks was now.

"The alignment of stars won't last forever. We need to seize the opportunity," he said last week. (Additional reporting by Robin Emmott in Brussels, Pauline Mevel and Leigh Thomas in Paris and Michelle Martin in Berlin; Writing by Robin Emmott; Editing by Robin Pomeroy)