US, EU open tough talks on trade, spying

(WASHINGTON) - Landmark US-EU trade talks opened in Washington Monday as the two sides also discussed US spying activities that infuriated Europeans and threatened to hold up what could be the world's largest free-trade deal.

In the wake of disclosures that the United States has not only been vacuuming up huge quantities of phone and Internet data but also snooping on its allies, European officials gathered at the Department of Justice to discuss the super-secret National Security Agency's activities.

Just blocks away, officials launched the ambitious negotiations for the Transatlantic Trade and Investment Partnership, which aims to reduce commercial barriers between the two giant economies and help both pull clear of the financial crisis.

The spying row, which erupted after leaks by former NSA contractor Edward Snowden, had threatened to derail the long-planned trade talks even before they started.

But angered Europeans agreed late last week to go ahead with the TTIP plan -- if they could also hold simultaneous discussions on the NSA's activities.

Brussels warned Washington last week in a letter obtained by AFP that it might reconsider two key data-sharing deals -- hard-won agreements to share airline passenger data and SWIFT banking details -- unless they get US assurances of "full compliance with the law" in its spying programs.

"We are experiencing a delicate moment in our relations with the US," the EU's Home Affairs Commissioner Cecilia Malmstroem said in a letter to Homeland Security Secretary Janet Napolitano.

"Mutual trust and confidence have been seriously eroded and I expect the US to do all that it can to restore them."

There was no official confirmation that the intelligence-related talks were under way, but sources close to the matter told AFP that two representatives from the European Commission, in the security and privacy fields, and representatives of the 28 EU member states, were meeting with US counterparts at the Justice Department.

Official statements for the opening of the trade talks avoided reference to the spying furor, focusing instead on the potential to bring the huge US and European economies closer together.

"In TTIP, we have the opportunity to accomplish something very significant for our economies, for our relationship, and for the global trading system as a whole," US Trade Representative Michael Froman told the opening meeting.

"We have an opportunity to spur growth and to generate significant increases in the already substantial number of jobs supported by transatlantic trade and investment."

In Geneva, EU Trade Commissioner Karel De Gucht said in a statement that a deal would be good for Europe.

"We are convinced that this trade agreement will result in more jobs and more growth -- and that will help to get us out of the economic crisis," De Gucht said.

The trade negotiations are expected to be rocky, even without the spying controversy, after pre-opening salvos laid down some red lines.

Washington wants financial regulation to be off the table, amid concerns that EU rules for banks are too lenient, while France demanded that its strong protections for its film and television industry be excluded from the talks.

More broadly, Europe will raise the widespread preferences that US states, cities and the federal government give to local contractors and suppliers, including in the lucrative defense sector.

And Washington will push Europe to open up to US biotechnology products like genetically modified foods, which many European consumers consider dangerous.

If an agreement can be reached, it would create the world's largest free-trade area, involving 820 million people.

Trade in goods and services between the United States and the EU last year was worth nearly $1 trillion. Cross-Atlantic direct investment totaled about $3.7 trillion in 2011.

A study for the EU by the Centre for Economic Policy Research in London said TTIP could add about 119 billion euros ($153 million) annually to the EU economy, and 95 billion euros for the United States.

Both sides acknowledged the difficulty of wrapping up a deal before late 2014 when a new European Commission will be elected.

"We will work hard to get a result... Whether we will succeed to do everything before the end of next year, we will see," said De Gucht.

"We know there will be challenges," said Froman.

"But we also know that there is strong political will at the highest levels on both sides of the Atlantic determined to stay focused and get this done on one tank of gas."