EU, U.S. Advance Free-Trade Deal

ENNISKILLEN, Northern Ireland—The U.S. and the European Union said they would start talks to build a free-trade agreement to boost growth and create jobs across the Atlantic, a deal that officials hope will strengthen the world's biggest two-way economic relationship.

The talks' launch was announced by U.S. President Barack Obama, European Commission President José Manuel Barroso, European Council President Herman Van Rompuy and U.K. Prime Minister David Cameron, who spoke in a joint news conference ahead of a meeting here of leaders from the Group of Eight.

The first round of talks will take place next month in Washington, D.C.

Officials want the trade pact to be ambitious: They hope it will largely eliminate trade tariffs and harmonize regulations across a broad range of industries, greasing the gears of trans-Atlantic trade and investment.

But with greater ambition comes greater challenges for the talks. Besides negotiating directly with the U.S., Europe must balance the interests of 27 different member states—28 once Croatia joins the bloc this summer—and the European Parliament, while the Obama administration must deal with a restive Congress and a thicket of lobbyists from industries whose fortunes could be changed by an agreement.

"There are going to be sensitivities on both sides," Mr. Obama said. "There are going to be politics on both sides but if we can look beyond the narrow concerns to stay focused on the big picture—the economic and strategic importance of this partnership—I'm hopeful we can achieve the high-standard comprehensive agreement that the global trading system is looking to us for."

"It's important that we get it right, and resist the temptation to downsize our ambitions just to get a deal," he said.

U.S. and EU officials hope that by launching the talks, they will deliver a boost to confidence for businesses and workers, helping to support what has been a disappointing recovery from the recession that followed the 2008 financial crisis.

"Global economic prospects remain weak," the G-8 leaders said in a statement following the first session of their two-day gathering. They added that they were committed to "exploiting all sources of growth."

Mr. Obama said that while a free-trade deal will be "critical," it won't be a "silver bullet" that solves all economic problems. Greater cooperation in a range of other areas is needed to boost jobs and growth, he said.

Speaking on the same platform, Mr. Cameron said that a trade deal between the U.S. and the EU would be "the biggest…in history," and could help create two million new jobs on both sides of the Atlantic.

"This is a once-in-a-generation prize and we are determined to seize it," he said.

EU ministers opened the way for the announcement on Friday when they overcame differences between France and its partners over how such a pact could potentially impact subsidies for filmmakers and other artists. France, which has long protected its audiovisual sector under a subsidy policy known as the "cultural exception," successfully lobbied the EU to exclude European film, music and TV industries from the trade talks for now.

The U.S. side warned last week that Washington could respond by carving out from the negotiations parts of the American economy that Europeans are seeking access to. William Kennard, the U.S. ambassador to the EU, said in a statement last week that "in reaction to a restriction on [audiovisual] negotiations, folks in Washington will be pressed to pull back on issues of interest to Europe."

"When you start taking things off the table at the very beginning, it's not a good sign," said Bill Reinsch, president of the National Foreign Trade Council, which represents businesses and advocates of free trade. "What everyone is afraid is that this will start a downward spiral of each side taking things off the table."

A U.S. administration official said Monday that "it's important that this be a comprehensive agreement."

Some EU officials worry the U.S. could make demands in industries such as the financial sector. Both sides will also be hard pressed to reach an accord on agriculture, an area that has long dogged EU-U.S. relations.

But Mr. Barroso said Monday the audiovisual-sector exclusion wouldn't threaten the prospects of a successful conclusion. The commission had always agreed that cultural products couldn't be treated like other goods, and that some form of "quotas or subsidies" would continue to be necessary to protect cultural and linguistic diversity, he said.

Monday's announcement followed an earlier meeting here in which German Chancellor Angela Merkel, French President François Hollande, Italian Prime Minister Enrico Letta and Irish Prime Minister Enda Kenny also participated.

The announcement marks a significant result for Mr. Cameron and the U.K.'s efforts to advance free trade during its yearlong presidency of the G-8—the grouping that comprises the U.S. and U.K., Japan, Germany, Russia, Canada, France and Italy. The EU also participates in the talks. The G-8 summit is also expected to focus on combating tax evasion and avoidance and increasing corporate transparency.

In the past, free-trade negotiations have been launched with similarly high hopes, but dragged on for many years, and ultimately delivered much less than their sponsors had set out to achieve. Most notably, multilateral free-trade talks launched in 2001 have failed to make any progress.

Mr. Barroso said talks between the U.S. and the EU will move more quickly toward a positive conclusion.

"We intend to move forward fast, we intend to make rapid progress," he said. "It won't be an easy task, but we will find solutions."

The U.S. and the EU were at pains to stress that their search for an agreement to remove barriers to trade and investment weren't intended to be to the detriment of other parts of the global economy.

"Everyone can benefit," Mr. Barroso said, pointing to companies outside either the EU or the U.S. that make components which are incorporated into goods that are traded between the two.

Mr. Cameron said that while a free-trade agreement could expand the EU economy by as much as £100 billion ($160 billion) and the U.S. economy by £80 billion, it could also be worth as much as £85 billion to the rest of the world.

In their statement on the economy, G-8 leaders noted that financial markets have rallied in response to actions such as the Bank of Japan's 8301.JA +5.26% decision to make large purchases of government bonds, the continuing provision of stimulus by the U.S. Federal Reserve and efforts by the European Central Bank to calm nerves in the euro zone's government bond markets.

But they said rising asset prices have yet to aid economic growth or help create jobs.

"This optimism is yet to be translated fully into broader improvements in economic activity and employment in most advanced economies," the leaders said.

June 17, 2013

Source: The Wall Street Journals