David Cameron held out the prospect of Europe and the US concluding the "biggest bilateral trade deal in history" after Washington and Brussels agreed on Monday to launch talks to free up markets on both sides of the Atlantic.

The prime minister was joined by Barack Obama and the European commission president, José Manuel Barroso, as negotiations were formally launched at the start of the UK-hosted G8 summit in Northern Ireland.

Cameron, frustrated at the lack of progress in the global Doha trade liberalisation talks, said an agreement could help bring down high levels of unemployment by creating up to 2m jobs globally. "This is a once in a generation opportunity and we are determined to seize it," he said.

Cameron, whose domestic economic strategy requires export-led growth, said the deal would mean extra jobs, more choice and lower prices for the UK.

With the stalled Doha talks now in their 12th year, Obama warned that the negotiations – which the UK hopes will be completed by the end of 2014 – are unlikely to be trouble-free. Officials from the EU and the US will meet for the first time in Washington next month.

France insists that cultural industries are excluded from the negotiations, fearing that the planned transatlantic trade and investment partnership will increase Hollywood's power in Europe.

"This is a priority for the United States," the American president said. "We will give negotiators a strong mandate but we will have to intervene to break through logjams."

Washington and Brussels have warmed to the idea of cutting their own bilateral trade deal after it became clear that they would not be able to overcome the objections of leading developing countries – such as India and Brazil – to a global agreement involving the liberalisation of manufactured goods, services and agriculture.

In the past, international trade talks have been dominated by the EU and the US, and Obama stressed that some of the old tensions could resurface. "We must resist the temptation to downsize our ambitions and avoid the difficult issues just ton get a deal," he said.

"There are going to be sensitivities on both sides. There are going to be politics on both sides but if we can look beyond the narrow concerns to stay focused on the big picture, the economic and strategic importance of this partnership, I'm hopeful we can achieve the high-standard comprehensive agreement that the global trading system is looking to us for."

Obama, who has been critical of the failure of the eurozone to end its three-year sovereign debt crisis, warned that trade was not a silver bullet but had to be part of a comprehensive strategy.

The president said: "The US-EU relationship is the largest in the world. We trade about $1tn [£650bn] in goods and services each year, we invest nearly $4tn in each other's economies and all that supports around 10m jobs on each side of the Atlantic. This potential ground-breaking partnership would deepen those ties."

"We're talking about what could be the biggest bilateral trade deal in history," Cameron said as he predicted that a successful deal would add up to £100bn to the EU economy and up to £85bn to the US economy. "A deal that will have a greater impact than all the other trade deals on the table put together."

The prime minister has made trade liberalisation one of the main themes of the G8 summit. UK officials said an agreement could boost British trade by £10bn – worth £380 for each household.

Cameron added: "The whole point is to fire up our economies and drive growth and prosperity around the world – to do things that make a real difference to people's lives. And there is no more powerful way to achieve that than by boosting trade."

Barroso said: "Negotiations might not always be easy but they will be worth it. We will find solutions to thorny issues, we will keep our eyes on the prize and we will succeed. We intend to move forward fast."

Although much transatlantic trade already has low or no tariffs, there are a number of sectors, such as financial services, where officials believe there is scope for liberalisation.

The volume of goods exchanged across the Atlantic – a third of global trade – means that a free-trade area would be a significant bloc. The EU is also keen to end swingeing duties on high-value European produce such as cheese and champagne.

The bulk of the talks will focus on bringing EU-US regulations into line. This could mean that American medicines that have passed US safety regulations would not face a second barrage of checks once they arrive in Europe, or a British airline flying from London to Los Angeles would be allowed to pick up passengers in New York – a practice currently banned because European airlines cannot operate domestic flights in the US.

From genetically modified seeds to chlorinated chickens, the EU and the US have a long history of trade spats. Both sides insist that "parochial" concerns should not be allowed to derail the hoped-for trade agreement.

The Bertelsmann Foundation thinks that the US would be likely to be the biggest winner, with a long-term boost of 13.4% to its gross domestic product per capita, compared with 5% for the EU.

Pascal Lamy, director general of the World Trade Organisation, believes that agreeing a bilateral deal will not be easy, largely owing to problems in harmonising zing different product standards in the EU and the US.

Tim Jones, policy officer at the Jubilee Debt Campaign, said: "This trade deal is about further deregulating the economy. Hiding behind the name of 'trade' are a raft of measures which will make it harder to prevent banks being reckless.

"At the same time as failing to deal with the current financial crisis, G8 leaders are sowing the seeds of the next."