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France Says Davos Deadline Set to Calm Trade Tensions With U.S.

Dispute revolves around how governments are allowed to raise tax revenue from an economic frontier that knows few boundaries.

France Says Davos Deadline Set to Calm Trade Tensions With U.S.
A logo sits on display inside the Congress Center on day three of the World Economic Forum (WEF) in Davos, Switzerland. (Photographer: Jason Alden/Bloomberg)

(Bloomberg) --

Two weeks until Davos, and the clock is ticking.

That’s how long the U.S. and France gave themselves to find a compromise on a digital-taxation dispute that threatens a transatlantic trade war and a new front in the Trump administration's effort to redirect global commerce toward America's advantage.

“I had a long discussion with U.S. Treasury Secretary Steven Mnuchin yesterday,” French Finance Minister Bruno Le Maire said in Paris on Tuesday. “We agreed to redouble our efforts in the coming days to try to find a compromise on digital taxation in the framework” of the Organization for Economic Cooperation and Development, he said.

“We have given ourselves 15 days until our next meeting on the margins of the Davos summit at the end of January,” he added.

Le Maire spoke alongside Phil Hogan, who took over as European Union trade chief in December. The Irishman helped portray a united front, saying “the EU Commission will stand together with France and all other member states who wish to have the sovereign right to impose digital taxation on companies in a fair way.”

The dispute revolves around how governments are allowed to raise tax revenue from an economic frontier that knows few boundaries: digital commerce.

Last month, the U.S. said it would hit $2.4 billion of French products with tariffs in response to a 3% tax France instituted on the digital revenue of large tech companies including Google, Apple, Facebook and Amazon. The office of the U.S. Trade Representative said the levy discriminates against U.S. companies.

Threatened U.S. tariffs of as high as 100% target goods including sparkling wine, cheese and makeup. The EU has vowed to retaliate if Washington follows through.

The self-imposed deadline marks the start of the World Economic Forum’s annual meeting in the alpine town of Davos, Switzerland Jan. 21-24. That makes Hogan’s planned first official visit to Washington for trade talks with U.S. officials next week all that more important if a European-U.S. trade skirmish is to be avoided. Le Maire warned France would cease the negotiations if the U.S. went ahead with tariffs during the 15-day period.

USTR won’t have to wait until Hogan arrives to get an earful. At a public hearing Tuesday in Washington, the witness list includes U.S. wine and cheese merchants that stand to get crushed by big import taxes, as well as American tech industry representatives who oppose the French digital tax. Also on the roster of speakers are officials from champagne producer Laurent-Perrier and cookware maker Le Creuset.

Charting the Trade War

France Says Davos Deadline Set to Calm Trade Tensions With U.S.

After feeling ignored over Brexit for the last four years, British business is hoping for a change of fortune in 2020. As Minister Boris Johnson prepares to start trade talks with the EU, U.K. companies are gearing up to lobby for a final accord that limits any economic disruption. At stake is access to the U.K.’s single biggest export market.

Today’s Must Reads

  • Tariff fallout | American companies and consumers are paying almost the full cost of U.S. tariffs, and the impact of those duties on import volume magnifies over time, according to a paper circulated by the influential NBER.
  • Global automaker | Tesla kicked off production in China at a ceremony near Shanghai, marking a major step in Chief Executive Officer Elon Musk’s global push for electric-vehicle domination.
  • Risk appetites | Investors are embracing China’s markets, encouraged by progress on trade and signs that the world’s second-largest economy may be stabilizing.
  • Strategic trade | Turkey and Russia will inaugurate a third natural-gas pipeline between their countries on Wednesday, deepening Ankara’s reliance on Russian energy.
  • Car crash | German car production fell to its lowest in almost a quarter of a century last year as Europe’s biggest economy suffers from trade-war fallout.

Economic Analysis

  • Trade wish list | U.S. trade officials are eyeing an ambitious wish list in 2020 that includes extracting more concessions from China and Japan, initiating formal negotiations with the U.K., and prepping for a possible showdown with the EU.
  • Shock to the system | What’s worse for the global economy than a trade war? An actual war, Bloomberg Economics says. 

Coming Up

  • Jan. 8: France trade balance
  • Jan. 9: Germany trade balance
  • Jan. 14-16: EU trade chief Phil Hogan plans trip to Washington
  • Jan. 15: Trumps plans to sign phase-one deal with China

--With assistance from Laura Davison.

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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