(Updates throughout with quotes, background)
By Doug Palmer
WASHINGTON, July 25 (Reuters) - The United States and the European Union should seize a historic opportunity to restore much-needed economic growth by starting bilateral free trade talks early next year, Britain’s ambassador to the United States said on Wednesday.
“Estimates suggest that a comprehensive deal covering goods, agriculture, services, investment, government procurement and regulatory co-operation would be worth two to three percent in GDP gains to the EU and the U.S.,” British Ambassador Peter Westmacott said in a speech.
The pact would increase business confidence on both sides of the Atlantic, encouraging companies to invest some of the trillions of dollars they have sitting on the sidelines, Westmacott said.
The United States and the 27-nation EU, already the world’s largest trade and investment partners, have been exploring the idea of launching free trade talks since late last year.
The combined output of the two economies is over $32 trillion dollars, or nearly half the world total. Bilateral trade reached $989 billion in 2012 and combined investment in each other’s economy is close to $3.5 trillion.
Last month, the two sides inched closer to talks with the release of a joint report calling for wide-ranging market opening and mutual acceptance of product standards.
The initiative comes as an ongoing debt crisis is crippling growth across much of Europe, and driving EU leaders to pursue potential new trade pacts with Canada, Japan, India and others in bid to create jobs and restore growth.
Westmacott said he hoped U.S. and EU leaders would make a formal decision to launch negotiations near the end of this year, with a goal of finishing in 2014.
Britain has long been one of the most forward-leaning members of the EU in support of free trade.
But Westmacott told the Washington International Trade Association he believed the “stars are aligned” throughout Europe for trade talks with the United States.
“I think there is a sense that we really do need to go ahead because we don’t have many other remedies,” he said.
High commodities prices also should make it easier to deal with sensitive agricultural issues that have been a source of frustration on both sides of the Atlantic, he added.
U.S. officials have pressed the EU to remove some longstanding regulatory barriers to U.S. agricultural goods before the two sides formally begin talks.
Westmacott acknowledged it is “probably the case that issues like that will have to be resolved” first.
The potential for job creation from a U.S.-EU trade pact is too great to let the opportunity slip away, he said.
“Despite the low level of our current tariffs, the huge size of our commercial relationship means that the potential economic benefits would be far greater than from any prior free trade agreement,” Westmacott said.
Reporting by Doug Palmer; Editing by Andrea Ricci and Vicki Allen