Opposition to Wine Tariffs Strong in DST Investigation Comments

The Office of the U.S. Trade Representative received close to 400 comments on the possibility of punishing Austria, Brazil, the Czech Republic, India, Indonesia, Italy, Spain, Turkey and the United Kingdom if they start collecting digital service taxes, as the countries have proposed. The USTR is also considering punishing the European Union, which is considering a unionwide DST.

The comments, received by the July 15 deadline, were dominated by more than 300 individuals, rather than trade groups, most of whom work in the wine industry and oppose further tariffs on imported European wines. One wine importer said she would not have needed a Paycheck Protection Program loan if her business hadn't been hurt by 25% tariffs on French wines in the Airbus dispute.

Wine importer John Waddell wrote: “Half my business was wiped out by 2019 wine tariffs on EU wines. The other half by COVID-19. We are just now recovering from pandemic and are looking at another lock down this fall.”

Adam Brenneman, who works for a wine and liquor distributor in Colorado, said European wine sellers are finding other countries to sell to. “The countries your intended punitive tariffs are directed at will not feel the slightest financial pinch. Where these tariffs will be felt will be solely on our shores,” he wrote. “Please stop hurting Americans because you think you can stick it to the rest of the world.”

Identifying as a Trump supporter, David Helter said the coronavirus, along with the 25% tariffs on French wines, has devastated his wine sales business, even though he sells domestic wines, too. “Continuing, escalating and/or broadening these tariffs will just be salt on the wound for this industry,” he wrote.

Gallo Winery, a large U.S. producer, also asked the U.S. not to go forward with more taxes on imported wines.

One commenter drew a parallel between the harm of the China Section 301 tariffs and this proposal. “This potential tariff will not do what it is intended to do, as a matter of fact it will only punish Americans. I work for a wholesale chemical company who has already been immensely damaged by section 301 tariffs,” Rebecca Treas wrote.

Trade groups concerned about the proposed DSTs -- including the U.S. Chamber of Commerce and the National Foreign Trade Council -- asked the U.S. to continue working toward a global solution through the Organization for Economic Cooperation and Development.

The Chamber wrote, “Contrary to some press accounts, the Chamber understands real progress has been achieved in some aspects of the negotiations under way under the aegis of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting process. All parties have interests in these negotiations that should provide motivation to press forward to a successful conclusion.”

Many also cautioned against the use of tariffs as the consequence for levying discriminatory taxes.

“It may be the case that these DSTs are unreasonable or discriminatory, or burden or restrict U.S. commerce, and therefore merit enforcement action. However, the U.S. chemical industry would prefer negotiation of a multilateral solution with trading partners that have imposed or seek to impose DSTs,” the American Chemistry Council wrote.

The NFTC said its member companies “support the U.S. Government taking steps to defend U.S. businesses against these discriminatory tax regimes. But we also believe the US should be cautious about proceeding with tariffs that could trigger a trade war that will harm the broader economy.”

It advised the administration to “focus on securing the rapid removal of DSTs and obtaining commitments to refocus on OECD negotiations, rather than creating conditions that would lead to counter-retaliation or result in a drawn-out trade war, particularly as the economy continues to recover from the COVID-19 pandemic.”

The National Association of Manufacturers said “U.S. retaliatory measures against any of these trading partners ... should not include tariffs on manufactured goods.”

But trade groups whose members would be most affected by DST did not discourage the use of tariffs. The Information Technology Industry Council said Belgium and Kenya should be in the crosshairs because they are also considering such taxes.

The Computer and Communications Industry Association praised the use of tariff threats on France's DST in suggesting that it could be effective again. “CCIA takes seriously the impact that tariffs can have and, as a general policy view, believes that they only be used in limited circumstances, in a targeted manner, and where there is a clear strategy in place designed to change the behavior of a trading partner. In the French case, it was encouraging that this strong action led to the temporary pause of collection on behalf of the French government in January 2020.”