President Donald Trump
Joshua Roberts | Reuters
President Donald Trump could fight back against France’s new tax on U.S. technology companies by unleashing biting tariffs on key French goods, according to trade experts.
The French Senate on Thursday passed a 3% tax that will affect American firms such as Facebook and Google. The tax, already approved by France’s National Assembly, would apply to companies that draw about $850 million in revenue worldwide from digital services — and about $28 million from within France.
Ahead of the tax’s passage, the Office of the U.S. Trade Representative started an investigation into whether the measure “is discriminatory or unreasonable and burdens or restricts United States commerce,” U.S. Trade Representative Robert Lighthizer said Wednesday. Once it finishes the probe, the agency could retaliate with tariffs or other steps to deter France — and potentially other countries — from putting new taxes on top U.S. companies.
“Once the investigation is complete, USTR will determine based on the findings of the investigation whether and what action should be taken,” the USTR said in a statement Thursday when asked how the administration could hit back at France.
The probe under Section 301 of the Trade Act of 1974 could take up to a year, according to Jennifer Hillman, a Georgetown Law professor and former USTR and World Trade Organization official. She expects it to end “much faster” than that, and thinks “chances are high” that the Trump administration will find a violation.
French wine drinkers beware
The Trump administration will most likely respond by slapping tariffs on iconic French goods, experts said. That could mean duties of up to 100% on signature French products. Think wine, cheese or perfume.
“I would expect steep tariffs on a very symbolic product, which is obviously the French spirits and wine industry. … That’s symbolic, and it does hurt economically, as well,” said Jorn Fleck, associate director of the Future Europe Initiative at the Atlantic Council.
In a CNBC interview last month, Trump suggested he could put tariffs on French wine. He said California wine producers have complained to him about France putting higher tariffs on imports than the U.S. does.
“And you know what, it’s not fair. We’ll do something about it,” he said.
France exported 3.2 billion euro (about $3.6 billion) in wine to the U.S. last year, making America its biggest export market, according to the Federation of French Wines and Spirits Exporters.
Trump’s other options to retaliate against France
The investigation gives Trump options to hit French industries beyond wine. For instance, he could put smaller tariffs of up to 5% on all French imports. But the move is unlikely, according to Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.
The Trump administration has another alternative that experts consider more drastic. The White House could use Section 891 of the Internal Revenue Code to double taxes on French companies doing business in the U.S.
When France was mulling the digital tax last month, Sens. Chuck Grassley of Iowa and Ron Wyden of Oregon — the top Republican and Democrat on the Senate Finance Committee, respectively — urged Treasury Secretary Steven Mnuchin to consider raising taxes on French subsidiaries. But experts believe the White House will prefer targeted tariffs to increased taxation.
“That would be pretty draconian, and I think would not be proportional” to France’s digital tax, Hufbauer said.
As the U.S. investigates its options to retaliate, it will also work to strike a multilateral agreement on digital taxation with countries in the Organization for Economic Cooperation and Development, or OECD. But a resolution is not expected until next year.
The slow, multilateral OECD process is a tough sell for Trump, a showman who likes to make blunt political points. He may prefer a move he can tout as a concrete example of cracking down on the European Union, especially as he runs for reelection in 2020.
“The president can use this for his political advantage,” Fleck said. “You’ve heard him talk about the EU being almost worse than China in terms of some of its trade practices.”
It remains to be seen whether Trump wants to open another front in his global trade conflict during an election season. He is already scrambling to reach a deal with China as the world’s two largest economies try to avoid a widening trade war.
In May, his administration delayed tariffs on EU cars and auto parts imports by up to six months.
Europe is at odds over who will replace Christine Lagarde at the IMF
International Monetary Fund (IMF) managing director Christine Lagarde speaks during a press conference in Tokyo on October 4, 2018.
Kazuhiro Nogi | AFP | Getty Images
European officials are still scratching their heads over Christine Lagarde’s successor at the International Monetary Fund (IMF), according to several people with knowledge of the discussions, with no standout candidate for the role.
Lagarde is due to start her new job as president of the European Central Bank (ECB) in November, leaving the IMF’s chair empty. In Europe, EU member states agree that the next IMF managing director needs to be from the continent — but they’re struggling to rally behind one particular name.
“The truth is that there is no readily available tried and tested European all-rounder,” a European minister, who did not want to be named due to the sensitive nature of the talks, told CNBC.
There is no official shortlist of candidates, but many governments of EU nations have put forward a name to take the top job. Some of the non-official candidates are:
- Jeroen Dijsselbloem, former Dutch finance minister and president of the Eurogroup (which brings together the 19-euro zone finance ministers).
- Mario Centeno, the Portuguese finance minister and currently Eurogroup chief.
- Nadia Calvino, the Spanish finance minister.
- Olli Rehn, central bank governor of Finland and former European commissioner for the euro.
- Mark Carney, the current governor of the Bank of England — a Canadian citizen who also has Irish and English passports.
- Kristalina Georgieva, from Bulgaria, who is currently serving as chief executive of the World Bank.
- Mario Draghi, the outgoing ECB president.
According to two other European officials, who also preferred to remain anonymous, none of the candidates have the right profile at this stage. Some names also don’t have enough experience or they are not liked by certain governments due to their political affiliation, their past comments or their background, the officials told CNBC. Since the IMF’s formation back in 1945, the managing director has always been from Europe.
There is also an age restriction to deal with. The IMF’s rules state that managing directors must be under 65 years of age when appointed and cannot serve beyond their 70th birthday. As such, the chances of certain candidates, such as Kristalina Georgieva, become much smaller.
“If (the) age limit is adapted to today’s realities, there is Georgieva and Draghi,” the European minister told CNBC.
France, who’s chairing the discussions across the different EU capitals, is reportedly looking at ways to change the laws. However, it is unclear whether that idea would be approved inside the IMF.
A source within the French government told CNBC that Paris “does not have a preferred candidate and will play its coordination role impartially.” Meanwhile, a separate EU official confirmed to CNBC that the aim is to have an agreement by the end of the month.
EU has 35 billion euro list ready if US hits EU cars: EU trade chief
European Commissioner Cecilia Malmstrom holds a news conference in Brussels, Belgium March 7, 2018.
Eric Vidal | Reuters
The European Union would retaliate with extra duties on 35 billion euros ($39.1 billion) worth of U.S. goods if Washington went ahead with tariffs on EU cars, the bloc’s trade chief said on Tuesday.
“We will not accept any managed trade, quotas or voluntary export restraints and, if there were to be tariffs, we would have a rebalancing list,” European Trade Commissioner Cecilia Malmstrom told a committee of the European Parliament.
“It is already basically prepared, worth 35 billion euros. I do hope we do not have to use that one,” she continued.
GE reveals new parts for the ‘world’s largest offshore wind turbine’
GE Renewable Energy, a subsidiary of General Electric based in Paris, revealed “the first manufactured components” for its gigantic Haliade-X 12 megawatt (MW) offshore wind turbine.
On Monday, the firm displayed the first nacelle for the turbine, which will now be shipped from Saint-Nazaire in France to Rotterdam-Maasvlakte in the Netherlands. A nacelle sits directly behind a turbine’s blades and is a shell-like structure that contains crucial pieces of kit. These include the turbine’s gearbox, controller, generator and brake.
GE Renewable Energy said that a prototype of the Haliade-X 12 MW would be installed onshore in the Netherlands in order to “simplify access for testing.” Another nacelle is being assembled with a view to testing it in “actual operational conditions” at a site in the U.K.
John Lavelle, the CEO of GE Renewable Energy Offshore Wind, said the firm was “on track to start commercializing this new product very shortly.”
As technology develops, the size of wind turbines is increasing. In September 2018, MHI Vestas Offshore Wind, a major player in the sector, launched the first commercially available double digit turbine, the V164-10.0 MW. The turbine has 80-meter long blades which weigh 35 tons each, and a tip height of around 187 meters.
The scale of GE Renewable Energy’s Haliade-X 12 MW turbine is also considerable. It will have a capacity of 12 megawatts, a height of 260 meters and a blade length of 107 meters. The turbine will generate 67 gigawatt hours of gross annual energy. The company has repeatedly described it as “the world’s largest offshore wind turbine.”
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