US President Barack Obama has given the green light for comprehensive trade talks between the EU and the US, paving the way for what could become the largest single free trade zone in the world.

Delivering his annual State of the Union address to the US Congress on Tuesday (12 February), he told legislators 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."

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Obama (c): 'Trade that is free and fair across the Atlantic supports millions of good-paying American jobs' (Photo: whitehouse.gov)

Although the move does not come as a surprise, it is a coup for EU diplomats who have been working behind the scenes since November 2011 on preparing the ground for the bilateral free trade agreement.

A deal not just on the elimination of tariff barriers but also on harmonising regulatory and technical standards for products could generate 2 percent of GDP.

The US and the EU already have a huge trade relationship, worth $2.7 billion per day in goods and services, but since November 2011, they have been exploring ways to deepen ties amid rising global competition, particularly from China.

Estimates by the European Commission indicate that a transatlantic trade partnership could be worth around €275 billion per year and lead to the creation of 2 million new jobs.

Joao Vale de Ameida, the EU's ambassador in Washington DC said he is "very happy" with the news, adding that "we will have a much greater influence if we are together."

For his part, Finnish Europe minister Alexander Stubb, commented that it was "good news for the world economy, growth and jobs."

Meanwhile, Dutch Liberal MEP Marietje Schaake called on the EU commission to immediately present proposals to the European Parliament for a formal negotiating mandate.

Although tariff barriers between the two sides are already low - under 3 per cent in most cases - some economic sectors such as agriculture and manufacturing are heavily subsidised on both sides of the Atlantic.

US and EU officials are also expected to focus on harmonising regulation and technical standards.

The EU is currently devoting heavy political capital to bilateral trade accords.

A free trade agreement was agreed with Singapore in December, while a deal with Canada is expected to be completed imminently.

Negotiations with Japan are also expected to be launched in Tokyo in April, meaning that the EU will spend the next year brokering trade deals with two of the world's largest economies.

The bilateral deals come after trade talks at the multilateral level stalled following the collapse of the Doha round of World Trade Organisation negotiations in 2005.

The financial crisis and the recession later prompted a series of protectionist measures to safeguard national economies.

The WTO says that only 18 percent of the trade restricting measures adopted by G20 countries since 2008 have been scrapped, amounting to a total loss of 3 percent of world trade - equivalent to some €350 billion.