By Sebastian Moffett
BRUSSELS, June 20 (Reuters) - The United States and the European Union on Wednesday inched closer to starting negotiations on a long-awaited free trade deal, with the release of a report calling for wide-ranging market opening and mutual acceptance of product standards.
An EU-U.S. working group said that a comprehensive free trade deal could eliminate tariffs and other barriers to trade in goods, services and investment, and enhance the compatibility of regulations and standards.
It could also lower "non-tariff" barriers such as some health and safety regulations, which hinder foreign businesses without formally penalising them.
"Based on our work thus far, the co-chairs of the High Level Working Group believe that a comprehensive transatlantic trade and investment agreement, if achievable, is the option that has the greatest potential for supporting jobs and promoting growth and competitiveness across the Atlantic," the report said.
Though they do not have a formal free trade pact, tariffs on manufactured goods traded between the two economic blocs are generally low, and there are few sectors where dismantling remaining tariffs would create political opposition to a deal.
One potential area of friction, however, is regulatory barriers in industries including financial services and chemicals.
Businesses would like an agreement in which a car tested for safety in the United States would not have to be tested again in Europe, or a drug deemed safe by Brussels would not have to be approved by U.S. government experts.
Wednesday's report said the two sides would seek to create "a more integrated transatlantic marketplace" by addressing issues arising from things like technical regulations and conformity assessment procedures, and by early consultation on regulations.
The report called on officials and businesses in both blocs to present concrete proposals by the end of the year to ease the regulatory differences that impede change.
"We are now entering the last leg of mapping out how we should tackle any eventual negotiation to boost growth and jobs through our trade partnership," EU Trade Commissioner Karel De Gucht said in a statement.
A trade-driven boost to economic growth and confidence would help both President Barack Obama, campaigning to be re-elected in November, and EU leaders, who are struggling with a financial crisis and near-zero growth.
Transatlantic leaders urged the working group to "complete its work as quickly as possible...with the goal of reaching a recommendation...later this year on a decision as to the negotiations".
"A strong outcome can enhance not only transatlantic economic ties, but also address shared market access challenges in third countries and encourage a forward-looking multilateral trade liberalization agenda," said Obama, European Commission President Jose Manuel Barroso and EU Council President Herman Van Rompuy in a joint statement.
"Particularly at this time, a bold initiative to expand trade and investment could make a significant contribution to our strategy to strengthen growth and create jobs," they said.
Still, U.S. and EU officials worry about launching negotiations that could drag on for years without success, such as the Doha round of world trade talks, which started in 2001 and never reached an agreement.