FRENCH WINE, THIS VICTIM COLLATERALS Research Paper

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FRENCH WINE, THIS VICTIM

COLLATERALS OF THE CONFLICT BETWEEN

WASHINGTON AND BRUSSELS

In retaliation for subsidies paid to Airbus by European states, Washington was authorized by the World Trade Organization (WTO) to apply taxes, particularly on French wine. The industry is worried about the consequences of this trade war.

French wines are still "in the lion's den" and threatened with new American sanctions in the dispute between Washington and Brussels over Airbus and Boeing, despite the truce mentioned this week on the digital tax.

"Since the middle of the week, we have felt a lightening of the pressure concerning possible American retaliation to the French will to institute a digital tax, but the exports of French wines are subjected since October 18 to taxes of 25% in an aeronautical conflict between Boeing and Airbus which can still worsen between now and mid-February", summarizes for the AFP a senior official of the wine industry.

"We are worried about the risk of a hardening of the aeronautical conflict which penalizes our exports month after month" adds Bernard Farges, president of the National Confederation of producers of wines and brandies with controlled appellations of origin (CNAOC). "French wines are in the mouth of the wolf" he adds.

In addition to French wines, Washington has been authorized by the World Trade Organization (WTO) to apply these taxes to Spanish olive oil, Italian cheeses and Scotch whiskies, in retaliation for subsidies paid to Airbus by European states.

In France, the entire wine industry has asked the government to quickly set up a "French compensation fund for impacted companies" to defend a sector "under attack in a conflict that is not its own".

"TO SAVE TIME"

The anxiety is all the greater because with a turnover of more than one billion euros in 2018, "the United States is the leading export market in value for French wines," said Mr. Farges and Louis Fabrice Latour, Vice President of the Federation of Exporters of Wines and Spirits (FEVS).

A sign that the October 18 taxes are already claiming victims, the value of Bordeaux wine exports to the United States fell by 46% in November over a year.

For Mr. Farge and Mr. Latour, the truce interview on the digital file only "saves time" and "does not settle the Airbus file".

France announced this week that it was postponing the levying of a tax on the digital giants this year to avoid new American taxes on luxury goods and champagnes. Paris is now awaiting the formal suspension by the Trump administration of the procedure opened in December against the French digital tax, which could lead to sanctions.

On the Airbus file, moreover, "there is a system called a carousel within the US Department of Commerce which allows, after four months after the first taxes are triggered, to review by increasing their amount or purpose, what the Americans can do at any time until February 15 or 16, since the WTO has granted them the principle of taxing up to 7.5 billion dollars of trade flows and they did not fill their quota on October 18", Mr. Farges worries.

"They only used $1.4 billion of the $7.4 billion they had available. They have a capacity to raise the temperature that is not very reassuring," said a source close to the negotiations.

"AGRICULTURAL AND FOOD EXCEPTION"

In turn, the EU should be allowed next year by the WTO to impose customs sanctions against the United States, accused of subsidizing Boeing. "But the French wine world cannot wait that long," says a professional.

Read also: US sanctions: the US advises the EU against retaliatory measures

To settle the dispute, the new European Trade Commissioner Phil Hogan - former Agriculture Commissioner - visited Washington in mid-January.

Following this, Donald Trump and the President of the European Commission, Ursula von der Leyen, announced this week in Davos their willingness to conclude a comprehensive trade agreement in the coming weeks, a surprise statement in an attempt to calm the game on both sides of the Atlantic.

In defense of the French and European agricultural sector, Agriculture Minister Didier Guillaume indicated this week that France now wishes to obtain a "food and agricultural exception" in world trade for future free trade treaties, in order to spare these sectors from trade wars.