EU and US free-trade talks launched and why the EU shouldn’t.

European Commission President Jose Manuel Barroso made the announcement following President Barack Obama’s State of the Union address.

The US said that “everything is on the table” in the talks.

A deal would bring down trading barriers between the two biggest economies in the world.

EU-US trade is worth around 455bn euros (£393bn; $613bn) a year.

“A future deal between the world’s two most important economic powers will be a game-changer, giving a strong boost to our economies on both sides of the Atlantic,” said Mr Barroso, speaking in Brussels.

The EU estimates that a “comprehensive and ambitious agreement” will boost annual GDP growth by 0.5%.

Mr Obama announced US support for talks as part of his annual address to the US Congress on Tuesday, saying a free-trade deal would “boost American exports, support American jobs and level the playing field in the growing markets of Asia”.  More from BBC

European Commission President Jose Manuel Barroso said a free-trade deal would be ‘ground-breaking’

Why the EU should not get into bed with the US over trade

A US-European free trade zone is on the agenda. There are at least four good reasons for Europe to stay away from it, writes the liberal Die Welt.

They were abbreviated to NTA and NTMA, TAD, TED and Tafta. Initiatives designed to deepen the economic relationship between America and Europe. They remained nothing but initiatives, disappearing into oblivion. Now the next attempt has come along.

Industry lobbyists on both sides of the Atlantic can hardly stay in their seats from sheer anticipation. Business wants it, the politicians are going along with it, and in principle, free trade is a good thing. Still, this most recent plan seems likely to meet great scepticism.

1. A bad sign for the rest of the world

Tariffs actually play a role in transatlantic trade only because the volume of goods traded is so large. For their exports to the US in 2010, Europe’s chemical companies paid about €700m into the US Treasury. The tariff rate, however, averages just 2.25 per cent.

Cutting tariffs of this magnitude may be some relief to businesses, but it will do nothing for overall economic growth. That’s why a breakthrough is needed not tariffs, but on trade barriers.

2. Third parties will be at a disadvantage

If Europe and the US were to agree a deal among themselves on liberalising trade, all the other states would automatically be discriminated against. The great danger is that, in the end, there would merely be a redirection of trade flows, not the creation of new ones. Moreover, the rest of the world could interpret a transatlantic agreement as an “exclusion, maybe even a blackmailing of third parties,” complains Langhammer.

3. Death knell for “Doha”

The Doha Round has ground to a halt, and whether it can ever be brought to a conclusion is questionable. The alliance between the EU and the US could send out a signal that the age of bilateral trade agreements has now finally dawned.

4. Focusing on the wrong trading partner

Transatlantic trade has surged in recent years, which is precisely why industry associations are pressuring governments on both sides of the Atlantic to speed up the agreement. But the game is shifting elsewhere – to Asia and Latin America.

World economic expert Langhammer fears that a transatlantic merger would harm Europe’s trading balance by harming its economic relationship with the emerging economies.

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