WASHINGTON, Jan. 7 (Xinhua) -- Dozens of U.S. industry representatives from the wine, apparel and other sectors on Tuesday voiced their concerns over the administration's proposed Section 301 tariffs on French imports in response to France's digital services tax (DST), calling for a multilateral solution.
TARIFFS THAT "MAKE LITTLE SENSE"
While the American Association of Exporters and Importers (AAEI) is "deeply concerned" about France's DST, "we do not believe that this issue is such a long-standing trade irritant to warrant Section 301 tariffs levied on a bilateral basis," AAEI President and CEO Marianne Rowden said in a testimony at a public hearing held at the U.S. International Trade Commission.
David Bowler, owner of Bowler Wine, said the proposed tariffs would force the price of these wines so high that they would become "unsellable," which would particularly hit smaller importers and distributors, who are already struggling with the financial impact from the 25-percent tariffs imposed in October due to the Airbus-Boeing subsidy dispute.
"I'm extremely concerned that the poison tip of the tariff arrow will overshoot its mark and hit thousands of American small businesses in the heart, killing them," Bowler said in his testimony.
Joanna Rosenberg, chief marketing officer of Staub and Zwilling J.A. Henckels, said imposing increased duties by as much as 100 percent on French enameled cast iron cookware "would not be effective" to bring about the elimination of France's DST, but it would "disproportionately harm" American consumers, retailers and restaurants.
"The tariff increase will force us to consider lay-offs and reduced compensation for tax-paying U.S. employees," said Rosenberg, who noted that the German-owned cookware producer employs more people in the United States than it does in France.
Nate Herman, senior vice president for policy at the American Apparel and Footwear Association, asked "what do handbags and digital services have to do with each other?" He immediately answered the rhetoric question: "Nothing."
"This is the second time in just the last few months that I am here testifying on a subject that makes little sense to our members," said Herman, who noted that he also testified when the industry was targeted by the U.S. government with retaliatory tariffs in the Airbus-Boeing dispute with the European Union (EU).
"If a punitive tariff is imposed by the U.S. government, our members will be forced to source fewer handbags, which will obviously lead to lower sales, which impacts our workers -- American workers," Herman said, adding that France will likely retaliate.
The Computer & Communications Industry Association (CCIA), which represents tech giants such as Amazon, Google and Facebook, however, backed the administration's tough stance.
The association "welcomes" the U.S. Trade Representative's conclusions in the Section 301 report that the French DST "discriminates against U.S. Internet firms," said CCIA President Matt Schruers.
"France's action warrants a substantial, proportionate response from the United States," Schruers said. "We need to make clear that undermining multilateral efforts at global tax reform with unilateral, discriminatory taxes will have consequences."
MULTILATERAL SOLUTION THE WAY OUT
The one-day public hearing, hosted by the Section 301 committee, came as the administration is considering imposing additional tariffs of up to 100 percent on some 2.4 billion U.S. dollars' worth of French products, including champagne, cheese and handbags.
In early December, U.S. Trade Representative Robert Lighthizer said he proposed the additional tariffs on French products after an investigation under Section 301 of the Trade Act of 1974 concluded that France's digital services tax discriminated against U.S. companies, such as Google, Apple, Facebook, and Amazon.
Despite U.S. opposition, the French Parliament passed the new law in July 2019 to impose a tax on digital giants. French Finance Minister Bruno Le Maire said the tax is necessary to make big Internet companies pay their fair share of taxes.
The French digital services tax imposes a 3-percent tax on annual revenues generated by companies with total annual revenues from covered services of at least 750 million euros (830.36 million U.S. dollars) globally and 25 million euros (27.68 million dollars) in France.
Calling France's "unilateral" digital services tax a "troubling" precedent, Sam Rizzo, director of policy at the Washington-based Information Technology Industry Council, said in his testimony that the tech sector's ultimate goal is one in which all parties reach a multilateral solution on appropriate international income tax reforms.
Rizzo noted that a number of countries worldwide are advancing similar measures like France, such as Britain, Canada, the Czech Republic, Spain, Poland, and Turkey, while Italy's and Austria's DST went into effect at the beginning of the year.
"The simplest way to avoid further escalation would be for France and other countries considering unilateral actions to withdraw individual measures and all parties to continue engaging through the OECD process," Rizzo said, referring to the multilateral negotiation at the Paris-based Organization for Economic Cooperation and Development (OECD).
Similarly, Bowler urged the United States and France to negotiate a resolution that removes the digital services tax, while working towards a "timely" multilateral net income tax-based consensus at the OECD.
Le Maire, who has recently warned of retaliation, told reporters in Paris on Tuesday that he and U.S. Treasury Secretary Steven Mnuchin had agreed to double their efforts in the coming days and strive to reach a compromise on digital taxation within the OECD framework.
"We are in a critical period at the OECD, and the outcomes of the current negotiations are likely to define key global trading relationships for years to come," Rizzo said.