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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