Europe

Tuesday, January 7, 2020 - 16:10

USTR Gets Earful on French Food, Luxury Goods Tariffs


By Brooke Migdon

WASHINGTON (MNI) - Distributors of European specialty foods and goods urged the U.S. Trade Representative to put an end to the digital tax dispute with France Tuesday, asserting the counter measures proposed by the U.S. government have little to do with the distribution of information or communication technologies.

Hearing witnesses said the United States' proposed retaliatory tariffs of up to 100% on wine, cheese, handbags and other French products totaling $2.4 billion would threaten their bottom lines and cause consumer costs to skyrocket.

"I can't think of a single instance where that cost wouldn't be passed on," said Joanna Rosenberg of Zwilling J.A. Henckels & Staub, which manufactures French enameled cast iron cookware, one of the products targeted by the counter tariffs.

"We see no upside for the United States," said George Kakaty, president and CEO of French porcelain distributor Bernardaud NA, Inc. "Should these tariffs go into effect, our company would be crushed -- and we would not be alone."

French Finance Minister Bruno Le Maire said Tuesday following a phone call with U.S. Treasury Secretary Steven Mnuchin Monday that the U.S. and France had agreed to try to reach a compromise on digital services taxation on the sidelines of the World Economic Forum in Davos, beginning a two-week countdown.

France should not be subjected to any U.S. counter tariffs prior to the forum, which begins on Jan. 21, according to Le Maire.

U.S. tech giants have alleged since the tax's proposal last year that it discriminates against U.S. business and targets specific U.S. companies like Apple and Facebook. The services tax, which applies retroactively from January of last year, puts a 3% tax on the total annual revenue of companies providing digital services to French consumers and only applies to the world's largest tech companies, most of which are based in the United States.

Rachel Stelly, policy counsel at the Computer and Communications Industry Association, which represents Google, Amazon and other U.S. tech giants, said Tuesday that France's digital tax warrants a "strong response" from the U.S. to deter both France and other countries considering implementing their own digital tax.

Italy joined France in enacting its own legislation earlier this month. The United Kingdom, Canada and India, among others, are also considering implementing a tax on digital services.

Witnesses at the hearing argued the lack of connection between the items affected by the United States' retaliatory tariffs and digital services would do little to change France's behavior, regardless of the economic impact on either side.

"We shouldn't be here," said Nate Herman, senior vice president of policy at the American Apparel and Footwear Association. Herman also testified at an earlier USTR hearing after the World Trade Organization awarded the U.S. with $7.5 billion in tariffs over the European Union's illegal subsidies to aircraft supplier Airbus.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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