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The European Union and America are to open negotiations with the aim of creating the world’s biggest free trade area worth €86bn (£75bn) within two years.

British Prime Minister David Cameron delivers a speech on 'the future of the European Union and Britain's role within it', in central London, on January 23, 2013

David Cameron pledged that Britain, which currently chairs the G8 group of countries, would do everything it could to help broker the difficult talks Photo: AFP

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Bruno Waterfield

By , in Brussels

9:50PM GMT 13 Feb 2013

The talks have been heralded as a “game-changer” that could help kick-start stagnant or contracting European economies back into growth by adding 0.5pc to GDP every year.

David Cameron pledged that Britain, which currently chairs the G8 group of countries, would do everything it could to help broker the difficult talks.

“Breaking down the remaining trade barriers and securing a comprehensive deal will require hard work and bold decisions on both sides,” the Prime Minister said.

EU and US economies account for nearly half of the world’s economic output and a third of global trade, meaning that a transatlantic free-trade bloc would hold great sway over emerging economic superpowers China, Brazil and India.

The talks are expected to be arduous, as trade relations and negotiations between the US and EU have previously been hindered by disputes over market access, regulations and non-tariff barriers, which are often used to protect domestic markets.

Agriculture is also likely to prove a major sticking point, since the US and many EU countries, notably France and those in southern Europe, protect their farming interests and exports. Last week, the EU and Canada failed to resolve problems holding up a free trade pact, with agriculture among “a number of important gaps to be bridged”.

John Cridland, the director-general of the CBI, said: “It’s crucial that both sides now roll up their sleeves and begin formal negotiations. One of the best opportunities to create jobs and stimulate long-term growth is through major trade deals, which make it easier for UK firms and their overseas counterparts to do business.”

José Manuel Barroso, the European Commission president, hailed President Barack Obama’s commitment in Tuesday’s State of the Union address to EU-US trade talks as “an assurance that we mean business”. “It shows that the EU and the US are strategic partners who are ready to go the extra mile to strengthen their economies,” he said.

Mr Barroso expressed hope that negotiations could begin in the first half of this year with a two-year deadline to reach an agreement.

President Obama told US Congress, which has often blocked trade liberalisation in the past, that he had agreed to open the talks “because trade that is free and fair across the Atlantic supports millions of good-paying American jobs”.

There are concerns that the negotiations will lead to the undermining of the World Trade Organisation, after efforts to secure a new Doha round of global trade talks stalled.

Mr Barroso recognised the problem but insisted that “if we do not want trade liberalisation to be stalled, we have to go through this bilateral process”.

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