Under Friday's deal, trade ministers at a meeting in Luxembourg agreed to France's demand to keep its movie and television industry out of the hotly anticipated trans-Atlantic talks. But, they agreed it could be possible to debate it at a later time, meaning the deeply divisive issue could resurface later.
The outcome should allow Obama and his EU counterparts to announce the start of negotiations for a deal expected to provide a big boost to growth and jobs by eliminating tariffs and other barriers that have long plagued economic relations.
A free trade pact would create a market with common standards and regulations across countries that together account for nearly half the global economy.
The compromise came after day-long talks pitting France's steadfast commitment to its "cultural exception" allowing for state subsidies and restrictive quotas for movies and TV shows against the free-trade proponents who insist all issues should be put on the table.
"Play ball!" tweeted Finland's European Affairs Minister Alexander Stubb after the agreement.
All other EU nations have vowed to protect the culture industry as well, but the large majority nevertheless wanted it to be part of the talks. They fear that removing it would set off tit-for-tat claims on both sides.
The 27 EU nations want to enter the sweeping talks with a unanimous mandate, giving France, the bloc's second biggest economy, major sway over the outcome.
For most, the potential gains were too important to let the talks slip.
"An EU-U.S. agreement could potentially represent 400,000 jobs in the EU, so that's a prize really worth working for," said Irish Enterprise Minister Richard Bruton, who chaired Friday's EU meeting.
"We require flexibility on all sides to reach agreement," he said during a break in the meeting. "We think it is important for Europe and this is the time to do it."
An EU-commissioned study shows that a trade pact could boost the 27-country bloc's economic output by 119 billion euro ($159 billion) a year and the U.S. economy's by 95 billion euros ($127 billion). Another estimate showed eliminating tariffs alone would add $180 billion to U.S. and EU gross domestic product in five years' time while boosting exports on both sides by about 17 percent. That could add about 0.5 percent annually to the EU's GDP and 1 percent to the U.S.
For Europe in particular, that extra growth would be crucial to help pay high public debt and bring down unemployment, which is at record highs.
Tariffs between the EU and the U.S. are already relatively low, averaging 5 percent to 7 percent. But the pact would have huge benefits because of the sheer size of the market bilateral trade is worth $1 trillion annually, the largest commercial relationship in the world.
The prospects sounded so good that all seemed aligned for a launch of the talks during Obama's European visit. Both the U.S. and Britain said they wanted to announce the opening of negotiations by the G-8 summit on June 17-18, with talks expected to start around the beginning of July.
But France and Hollywood have always had a fraught relationship. Paris has for years sought to protect its cultural industries with lavish subsidies and quotas as competition grew from other countries particularly the U.S., whose exporters are helped by having a massive domestic market and the use of English, the world's pre-eminent language.
And since the EU is a patchwork of often tiny countries with their own languages and cultures, such protection has become a fully acceptable practice in the bloc.
Because of this, France says the EU is so unlikely to give up such protection that there is no point in even including it in the negotiations.
EU Trade Commissioner Karel De Gucht, who will negotiate on behalf of the 27 countries based on a unanimous mandate, said the proposals so far include guarantees that protection for the cultural industry would be maintained.
Finnish Foreign Trade Minister Alexander Stubb said that with such guarantees "there's absolutely nothing that threatens the French or the European film industry and I shall certainly continue to watch all of my beloved French movies even after this free trade negotiation has been finalized."
De Gucht has said that if the EU excludes the cultural industry before the talks begin, the U.S. will do the same for another sector, such as public procurement or aviation. The U.S. says nothing should be taken off the table before negotiations begin.
As the summit drew closer, however, some of the most divisive issues in trade relations appeared as intractable as ever. Besides the issue of culture, deep differences remained over agriculture, food safety, climate change legislation, financial deregulation and intellectual property enforcement.
The best-case timetable for completing the pact is the end of 2014. However, for many experts, that is overly optimistic and the consensus is it will take a few years.
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Associated Press writer Marjorie Olster contributed from Washington
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Follow Raf Casert on Twitter at https://twitter.com/rcasert
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