MercoPress. South Atlantic News Agency

USA and EU make official talks to begin Atlantic free trade alliance

The announcement was anticipated by President Obama in his State of the Union speech

The United States and the European Union agreed on Wednesday to push for the launch by the end of June of talks to create an Atlantic free trade alliance that could be a benchmark for global partners to follow. A free trade deal would be the most ambitious ever attempted, encompassing half the world's economic output and a third of global trade flows.

“These negotiations will set a standard, not only for our future bilateral trade and investment, including regulatory issues, but also for the development of global trade rules,” European Commission President Jose Manuel Barroso told a news conference.

Speaking after the release of a joint US/EU report recommending the start of talks, Barroso said the two were expected to launch negotiations in the first half of the year. The report sees the EU economy gaining around 0.5% and the US economy around 0.4% by 2027, with 86 billion Euros of added annual income for the former and 65 billion Euros for the latter.

The report's release comes a day after US President Barack Obama threw his weight behind a potential deal in his state of the union address.

The announcement comes ahead of this week’s G-20 talks in Moscow and following the ‘currency war’ controversy which surfaced at the latest Group of Seven richest nations meeting on Tuesday.

The discussion erupted after Japan decided to ease monetary policy stoking fears especially in Europe of the ‘currency war’ between major economies in which policy-makers seek to devalue their currencies to make exports more competitive.

Japan's promised measures pushed the Yen lower, making exports cheaper than its competitors, and prompted France to call for a debate and action to make the sure that the Euro zone exports were not put at a disadvantage as a result.

In a statement the G-7 defended foreign exchange rates set by the market, despite the criticism by France and amid mounting concern about politically driven devaluations.

“We, the G-7 ministers and governors, reaffirm our longstanding commitment to market determined exchange rates and to consult closely in regard to actions in foreign exchange markets,” they said in a brief statement issued by G-7 president Britain.

“We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates,” they added.

The G-7 statement was published ahead of Friday's G-20 meeting in Moscow, where exchange rates are expected to figure prominently after Japan took steps to boost its economy and exports.

Japanese Finance Minister Taro Aso rejected last week criticism that Tokyo was orchestrating a slide in the Yen, a day after German leader Angela Merkel voiced concern over the new Japanese government's exchange rate policy.

“The criticism that (the government) is manipulating the currency rate is completely off the mark,” Taro Aso told journalists in the Japanese capital.

Aso's comments were the latest in a simmering row over Japan's currency, with critics saying Tokyo's pressure on the central bank for aggressive policy action amounted to meddling that could spark a global currency war.