US-EU trade talks open as spying furor boils

US-EU negotiations on creating what could become the world's largest free-trade zone opened Monday amid a furor over Washington's spying on its European allies.

Parallel talks were to be held over the US National Security Agency's gathering of huge quantities of Internet data, though last-minute deals kept the more contentious topic of NSA spying on friendly countries from being reviewed.

The row over spying, which erupted after leaks by former NSA contractor Edward Snowden, had threatened to derail the ambitious Transatlantic Trade and Investment Partnership talks even before they started.

The trade negotiations, aiming to reduce tariff and especially non-tariff barriers between the two giant economies and help both pull clear of the financial crisis, target forging a final deal by late 2014.

"The reason why we decided to hold the talks now is that we are convinced that this deal is good for Europe," EU Trade Commissioner Karel De Gucht said in Geneva Monday.

"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."

European Union leaders late last week gave the go-ahead as long as Washington agreed to simultaneous discussions of the NSA's activities.

Brussels had warned Washington 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 -- failing 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."

EU officials had called for broader security talks to review intelligence matters.

But the scope was trimmed to only data collection and privacy issues, after Britain insisted that intelligence was not the remit of the bloc.

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

France demanded that its strong protections for its film and television industry be excluded from the talks.

Only after it was agreed that the negotiating team from the European Commission would not be mandated to discuss audio-visual issues without specific further approval did Paris give its okay to move ahead.

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.

Banking regulations could also come into play as the United States seeks to apply its capital standards for domestic banks to foreign banks.

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 annually ($153 million) to the EU economy, and 95 billion euros for the United States.