By Emre Peker 

BRUSSELS -- The European Union's top trade official arrives in Washington Tuesday with a daunting task: convince the Trump administration that, contrary to White House claims, the bloc's economic relationship with the U.S. is fair.

In two days of meetings, EU Trade Commissioner Cecilia Malmstrom will press counterparts including Commerce Secretary Wilbur Ross to exempt the bloc from President Donald Trump's steel and aluminum tariffs, which are set to take effect Friday.

Mr. Trump invoked a threat to national security to justify the tariffs, leaving the EU aghast, given that 22 of the bloc's 28 members are also North Atlantic Treaty Organization allies of the U.S.

EU officials are urging the White House to consider both significant trans-Atlantic economic links and risks the duties could pose to the broader alliance that shaped the postwar global order. The EU is also calling on the U.S. to jointly tackle China's market-distorting policies instead of punishing partners world-wide.

"What we want to do is to clear up this mess," Ms. Malmstrom told the European Parliament last week. "We don't want a trade war."

The U.S. and the EU together account for nearly half of global economic output -- and each is the other's top trading partner.

Annual trade in goods and services tops $1 trillion, while bilateral foreign-direct investment stands at $5 trillion annually. Average tariffs of 5.2% in the EU and 3.5% in the U.S. are among the lowest globally -- compared with an average of about 9% among the World Trade Organization's 164 members.

"If the president thinks the EU is unfair, then boy, is everyone else even more unfair," said Peter Chase, a former U.S. diplomat who is now a Brussels-based fellow at the German Marshall Fund. "The trans-Atlantic relationship is completely unique in that it is an evenly balanced, investment-based relationship -- it's not just trade-based."

Mr. Trump has repeatedly criticized EU trade policies. "The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on Steel & Aluminum. If they drop their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours. Big Deficit. If not, we Tax Cars etc. FAIR!" he tweeted this month.

Mr. Trump has focused on specific EU duties -- like cars, which at 10% are four times the U.S. level for the EU -- that the administration blames for skewing commerce and exacerbating America's trade deficit.

Both European and American policy makers have for decades angled to protect select industries for domestic interests. That has resulted in high levies from both sides on certain products, from apparel to agriculture, despite their collective drive toward a tariff-free world.

The U.S. has safeguarded certain crops for years, with levies of as much as 350% on some tobacco products such as snuff and up to 32% on some cotton apparel. European officials have shielded farmers such as citrus growers with up to 34% tariffs on products including some juices, and still maintain a 10% levy on cars despite boasting six of the world's 20 biggest auto makers.

Typically, countries impose tariffs in sectors that otherwise cannot compete against trading partners. Those tariffs can have long-lasting effects.

A postwar French-German push for tariffs on U.S. poultry to protect domestic farmers prompted President Lyndon B. Johnson in 1963 to retaliate with a 25% "Chicken Tax" against pickup trucks and vans from European auto makers, including Volkswagen AG. The duty has remained for more than half a century, despite lower EU levies, from 10% to 22%, on commercial vehicles.

Nonetheless, duties across the Atlantic average below 3%, according to EU figures. About 70% of U.S.-EU trade in goods is in chemicals, machinery and transport equipment, facing tariffs ranging from 1.2% to 4.5%, trade data show.

The delicate balance painstakingly negotiated over decades to promote free trade and competition while protecting strategically important products makes tit-for-tat measures all the more disruptive for certain industries. The U.S. and the EU each apply tariffs on roughly 10,000 different product categories.

"How you introduce fairness into a system as complex as that is not a simple question, and doing it line-by-line is obviously quite a challenge," said Ken Ash, trade and agriculture director for the Organization for Economic Cooperation and Development. "If you look at the EU-U.S. trading relationship, it is remarkably open already."

One way to iron out outstanding issues, say trade specialists, could be a comprehensive economic arrangement, like the Trans-Atlantic Trade and Investment Partnership that Brussels and Washington negotiated for three years. Their aim was to eliminate 98% of levies while establishing mutual regulatory recognition, which would remove non-tariff barriers such as different product specifications and safety standards.

But public and political resistance on both sides of the Atlantic, and Mr. Trump's election on his "America First" platform opposed to multilateral treaties, in effect ended talks for the pact known as TTIP in 2016.

Now, the two allies find themselves on the brink of an escalating trade spat.

EU officials said Brussels would swiftly impose EUR2.8 billion ($3.5 billion) in counter-tariffs to rebalance its trade with the U.S. if Washington doesn't exempt the bloc from steel and aluminum tariffs, ultimately eyeing levies on American products of up to EUR6.4 billion.

Mr. Trump has threatened to retaliate with taxes on European cars, calling on the EU to slash tariffs to facilitate more U.S. exports and secure a waiver.

"When the president says he is unhappy about too many barriers and tariffs between the EU and the U.S., I can understand him," European Council President Donald Tusk said last week. "That is the reason why, a few years ago, we started trade negotiations with the U.S. We should go back to these talks now -- make trade, not war, Mr. President."

Write to Emre Peker at emre.peker@wsj.com

(END) Dow Jones Newswires

March 20, 2018 05:44 ET (09:44 GMT)

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