"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 his annual State of the Union speech.
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 10: 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.
The EU recently lifted bans on imports of US live swine and beef washed with lactic acid to help build confidence that it can address US agricultural concerns.
Lawmakers want EU to lift GMO ban
Leaders of the Senate Finance Committee, 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," but negotiations will be tough, Representative Dave Camp, the Republican chairman of the House of Representatives Ways and Means Committee, said in a statement welcoming Obama's announcement.
The US Chamber of Commerce, an early proponent of trade talks with the EU, applauded the news and urged swift negotiation of a high-standard pact.
The U.S.-EU talks also are expected to tackle new areas, such as setting rules to govern the free flow of information across borders. That is an increasingly important priority for big US internet companies like Google, Facebook and Amazon but could be hard for EU members France and Germany to accept because of privacy concerns.