* World's biggest trading partners aim for deal by end of
* Pact could boost US and EU GDP by more than $100 billion
each a year
* Revelations about U.S. spying have soured ties
By Doug Palmer
WASHINGTON, July 8 The United States and the
European Union began talks on Monday on a landmark bilateral
free trade agreement, despite European concerns about U.S.
spying that had threatened to delay the start after nearly two
years of preparation.
U.S. Trade Representative Michael Froman touted the economic
benefits a deal would bring, not just for the United States and
Europe but for the global trading system.
"We have the opportunity to complement one of the greatest
alliances of all time with an equally compelling economic
relationship," he said in remarks to the two delegations as the
talks got under way in Washington.
"And we have the opportunity to work together to establish
and enforce international norms and standards that will help
inform and strengthen the multilateral, rules-based trading
President Barack Obama and European leaders announced a
decision in February to pursue a trade pact, but revelations
about U.S. government surveillance of phone and Internet records
have since soured relations.
Charges that Washington was spying on the 28-nation EU have
further strained relations, with France suggesting that the
opening round of the talks be delayed for two weeks before
softening its stance so they could could proceed.
U.S. internet companies, meanwhile, are concerned that EU
privacy rules could increase their costs and make them less
competitive by restricting the flow of data across borders.
"The reason why we decided to hold the talks now is that we
are convinced that this deal is good for Europe," European Trade
Commissioner Karel De Gucht told reporters in Geneva.
"We are convinced that this trade agreement will result in
more jobs and more growth."
An EU official said that in parallel to the main talks on
Monday, high-level U.S. and EU experts met, also in Washington,
to address intelligence oversight, intelligence collection,
privacy and data protection issues.
The proposed Transatlantic Trade and Investment Partnership
pact would be the world's biggest free-trade deal, covering
about 50 percent of global economic output, 30 percent of global
trade and 20 percent of global foreign direct investment.
The Centre for Economic Policy Research in London has
estimated that an ambitious agreement that eliminates tariffs
and reduces regulatory barriers could boost U.S. and EU economic
growth by more than $100 billion each a year.
The United States and the European Union are already each
other's top trade and investment partners, with two-way trade
that totaled more than $646 billion last year.
Business groups on both sides of the Atlantic support the
proposed deal, but consumer, food-safety and environmental
advocates expressed concern in a letter to Obama and European
leaders on Monday that an agreement could weaken important
ONE TANK OF GAS
This week's talks are expected to be mainly organizational,
with negotiators split up into 15 different groups to deal with
issues ranging from agricultural market access to electronic
commerce to investment and competition policy.
One big EU interest is getting exemptions from U.S. "Buy
American" requirements on public-works projects, while the
United States wants the EU to reduce barriers to genetically
modified crops that have frustrated U.S. farmers for years.
Former EU Trade Commissioner Leon Brittan called for a
U.S.-EU free-trade agreement in 1995, but it took the rise of
China, the death of world trade talks and the havoc of the
global financial crisis to make the time finally right.
Even then, the two sides have tiptoed up to the talks. A
high-level working group examined the issue for more than a year
before releasing its recommendation in February for negotiations
on a comprehensive trade and investment agreement.
U.S. officials, chastened by a decade of fruitless
negotiations in the Doha round of world trade talks, said they
wanted to be certain of reaching a deal, and reaching one
quickly, before launching talks with the EU.
"If we're going to go down this road, we want to get it on
one tank of gas," Froman said earlier this year.
For now, one tank of gas for both sides means reaching a
deal before the current European Commission, the executive
branch of the EU, finishes its term at the end of 2014.
But many trade experts believe the talks could stretch into
Since tariffs across the Atlantic are relatively low, much
of the focus will be on reducing and preventing regulatory
barriers to trade in areas ranging from agriculture and autos to
chemicals and pharmaceuticals.
"There are sensitivities on both sides that will have to be
addressed. But we think the prospect of a broad and
comprehensive agreement gives us our best opportunity for
achieving something that has eluded us before," Froman told
Reuters in a recent interview.
U.S. firms such as Google Inc and Facebook Inc
want Washington to tackle EU privacy and data protection
rules that put them at a disadvantage in the EU market for cloud
computing, social media, mobile apps and other internet
That goal might be harder to achieve after revelations that
the U.S. National Security Agency uses customer data from many
internet companies to identify potential threats.
"It's made a difficult negotiating issue even harder,"
although the gains from a potential overall agreement are so big
that they still favor the two sides reaching a deal, said
Jeffrey Schott, a senior fellow at the Peterson Institute for
International Economics, a Washington think tank.
Last week, the EU threatened to suspend two agreements
granting the United States access to European financial and
travel data unless Washington showed it was respecting EU data
German Chancellor Angela Merkel, one of the biggest
proponents of the trade deal, said on Saturday that Europe must
make sure its concerns about U.S. surveillance are not swept
under the carpet as the talks proceed.