US wine industry appeals against levies on French products

A French wine grower in his cellar. The US is threatening to impose tariffs of up to 100 per cent on $3.3 billion of French goods, including sparkling wine, in retaliation for a digital services tax that it says penalises American tech companies such
A French wine grower in his cellar. The US is threatening to impose tariffs of up to 100 per cent on $3.3 billion of French goods, including sparkling wine, in retaliation for a digital services tax that it says penalises American tech companies such as Google, Apple, Facebook and Amazon.PHOTO: AGENCE FRANCE-PRESSE

They warn of layoffs, even collapse, should Trump's threatened tariff hikes take effect

American importers have begged the Trump administration not to go ahead with its threatened tariffs of up to 100 per cent on US$2.4 billion (S$3.3 billion) worth of French products, including wine, cheese and cosmetics.

The proposed tariffs are in retaliation for France's new digital services tax that Washington says targets American tech giants.

The trans-Atlantic dispute is the latest in a series of trade squabbles which has seen the Trump administration wield threats of tariff hikes as a negotiation tactic. The dispute is escalating just as America's preliminary trade deal with China appears to have been sewn up.

The European Union has promised to stand behind France, which has vowed to retaliate against the proposed US tariffs.

But the United States and France on Tuesday also agreed to give themselves two weeks to find a compromise, before US Treasury Secretary Steven Mnuchin and French Finance Minister Bruno Le Maire meet at the World Economic Forum at the end of the month.

US wine importers have warned that the tariffs would devastate the country's almost US$70 billion wine industry - a third of which is imported wines - affecting a wide range of businesses from the restaurants they supply to warehouses, trucking companies and even domestic wineries.

Mr Timothy Gagnon of Selection Masscale, a California-based wine import business with 15 employees, was one of several dozen industry insiders who testified at a US Trade Representative (USTR) hearing in Washington on Tuesday and Wednesday, asking for their products to be exempt from the tariffs.

He and others noted that the US wine industry was already reeling from the 25 per cent tariffs on certain French, Spanish and German wines imposed two months ago as part of a separate but ongoing trade dispute over European subsidies to large aircraft makers.

The new tariffs cover more categories, including sparkling wines.

Thin profit margins also means that wine importers and restaurants cannot afford to absorb the cost of the tariffs and must raise prices, they said.

Mr Michael Daniels of Vintage 59, a small wine import business, said: "Any increased tariff burden levied on wines or spirits from the EU... will force our customers to choose different products. Any significant sales losses, even during a short period, will require layoffs. Any extended period of losses could lead to our full-scale collapse."

 
 
 
 

Wine executives also feared that the tariffs would result in European wine exporters permanently taking their business elsewhere.

The French digital tax, passed in July last year, imposes a 3 per cent tax on revenue generated by digital services and affects firms with global revenues above €750 million (S$1.1 billion) and French revenues of above €25 million.

A USTR investigation concluded that the tax discriminated against American companies, and the Trump administration last month threatened retaliatory tariffs against French goods.

But France said it has been grappling with how to tax tech giants which do business within its borders, and other European countries are considering similar taxes.

Mr Gary Hufbauer, Peterson Institute for International Economics senior fellow and trade expert, in a commentary on the tax, said: "The thresholds and definitions of 'taxable services' ensure that US firms are the primary target."

In Washington, tech giants represented by the Computer and Communications Industry Association have urged the US to respond strongly to the tax.

 
A version of this article appeared in the print edition of The Straits Times on January 10, 2020, with the headline 'US wine industry appeals against levies on French products'. Print Edition | Subscribe