Obama calls for U.S. free trade pact with European Union

WASHINGTON (Reuters) - President Barack Obama on Tuesday called for talks on a far-reaching free trade agreement with the 27 nations of the European Union, throwing his weight behind a deal that would encompass half the world's economic output.

"Tonight I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union because trade that is free and fair across the Atlantic supports millions of good-paying American jobs," Obama said in the prepared text of his annual State of the Union speech to Congress.

The United States and the EU already have the largest economic relationship in the world, and one of the most complicated. A pact would unite the United States, the world's largest economy, with four other countries in the top ten: Germany, France, Britain and Italy.

Faced with slow growth on both sides of the Atlantic and rising competition from China and other emerging economies, the long-time allies in late 2011 began looking at ways to build on their existing relationship.

Last week, EU leaders endorsed trade talks with the United States, putting it at the top of a larger agenda that includes negotiations with Canada and Japan.

Since most tariffs between the United States and the EU are already low, reducing regulatory barriers to trade in areas like agriculture and chemicals are expected to be the most challenging aspect of the talks.

The EU recently lifted bans on imports of U.S. live swine and beef washed with lactic acid to help build confidence that it can address U.S. agricultural concerns.

Two senior U.S. senators, in a letter to U.S. Trade Representative Ron Kirk earlier on Tuesday, welcomed those steps but said any agreement must also reduce EU restrictions on genetically modified crops, poultry treated with chlorine washes to kill pathogens and meat from animals fed the growth stimulant ractopamine.

"A strong, comprehensive trade and investment agreement with the EU has the potential to create significant good-paying jobs for Americans," Representative Dave Camp, the Republican chairman of the House of Representatives Ways and Means Committee, said in a statement welcoming Obama's announcement.

(Reporting by Doug Palmer; Editing by Jim Loney)