BRUSSELS The European Union will offer to lift tariffs on nearly all goods imported from the United States as part of negotiations towards the world's largest free-trade deal, people familiar with the proposal have told Reuters.
The offer will be made on Monday, a week ahead of face-to-face talks between EU trade chief Karel De Gucht and his U.S. counterpart Michael Froman in Washington, they said.
The European Commission, which handles trade issues for the EU's 28 member states, will tell the United States how far it is willing to open its markets, while U.S. officials are expected to do the same.
Officials familiar with the EU's proposal have told Reuters the European Union will offer to lift 96 percent of existing import tariffs, retaining protection for just a few sensitive products such as beef, poultry and pork.
"This is just the first step, but it sends a message that no sector will be completely shielded from liberalization," said one person involved in preparing the EU offer. The official declined to be named because of the sensitive nature of the talks. Two other European officials confirmed the offer.
Tariffs between the United States and the European Union are already low, and both sides see greater economic benefits of a transatlantic accord coming from dropping barriers to business.
However, Dan Hamilton, professor at John Hopkins University in Baltimore, said that tariff reductions did make a difference given the size of the EU and U.S. markets - 815 million people.
"Just reducing tariffs would be worth five times the U.S.-South Korea trade deal, and that was a big deal in the United States," he said during a recent visit to Brussels, referring to the deal that went into force in March 2012.
BILLION DOLLAR BURDEN
The United States and the European Union are seeking to seal a trade deal encompassing half the world's economic output, hoping it can bring economic gains of around $100 billion dollars a year for both sides.
Monday's exchange of market access offers will happen simultaneously so that neither side has an advantage over the other. The swap marks the first concrete step since negotiations were launched last July, although offers can change considerably during trade talks.
Officials close to the offer exchange said the EU's proposal was split into four categories.
Firstly, Brussels will offer to drop 96 percent of tariffs on the understanding that Washington reciprocates.
Two transition categories will be proposed for a further 3 percent of goods, with periods of three and seven years until tariffs are dropped to allow EU industry to adapt.
These could include commercial vehicles and some agricultural products.
In the final category, sensitive products such as beef, pork and poultry would remain protected but the United States will be granted enlarged quotas. Those quotas will be decided at a later date.
Last year, the EU agreed to allow in an extra 45,000 metric tons of beef from Canada and a U.S. allowance is expected to be at least double that. France and Ireland, as big beef producers, have expressed concern.
The European Commission declined to comment. One EU official said the Commission was preparing the exchange of offers for next week but declined to give more details.
All moves to lower the cost of trade are seen as beneficial for companies, particularly automakers such as Ford, General Motors and Volkswagen, with U.S. and European plants.
EU cars imported into the United States are charged a 2 percent duty, while the EU sets a 10 percent duty on U.S. cars. Including even higher duties for trucks and commercial vans, the burden for automakers amounts to about $1 billion every year.