Washington Insider-- Monday

New Tariffs for French Goods, but Imposition Delayed

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

USDA Broadens CFAP Eligibility, But Still Leaves Out Additional Wheat Classes, Eggs

USDA announced several additional specialty crops are now eligible for benefits under the Coronavirus Food Assistance Program (CFAP), while others – apples, blueberries, garlic, potatoes, raspberries, tangerines and taro – will see expanded benefits due a price loss that was 5% or greater between mid-January and mid-April.

Peaches and rhubarb no longer qualify for the sales loss portion of the payments and USDA also corrected payment rates on several commodities. Producers of the additional commodities determined to be eligible can start signing up for the benefits July 13.

USDA did not indicate eggs would be added as an eligible commodity nor that classes of wheat other than hard red spring wheat and durum would be eligible.

“USDA is still evaluating comments and will issue another document with additional determinations and payment rates,” USDA said in a Federal Register notice published Friday, noting in a release that additional eligible commodities would be announced “in the coming weeks.”

Despite the changes announced this week, USDA said that it “will not change CFAP costs” even as some have speculated the actions will mean the program could run out of money even earlier.


USDA Says 1.28 Million Acres of Land Accepted Into CRP Grasslands Effort

USDA accepted offers on 1.28 million acres of land to be enrolled in the Conservation Reserve Program (CRP) Grasslands program, 68% of the 1.88 million acres offered for enrollment.

Three states had 100,000 acres or more accepted – South Dakota (377,774 acres), Nebraska (298,890 acres) and Montana (174,314 acres). Contracts under the CRP Grassland enrollment start October 1, 2020.

The 2018 Farm Bill set aside no fewer than 2 million acres for CRP Grassland and the agency said that as of October 1, there will be 2.1 million acres enrolled in the effort.

There are currently 21.9 million acres enrolled in CRP with contracts on 5.36 million acres set to expire September 30. Earlier this year, USDA accepted offers on 3.4 million acres of ground via a General CRP signup, with contracts starting October 1, 2020.

Enrollment under the continuous signup in Fiscal Year (FY) 2020 opened December 9 and runs through August 21.

Washington Insider: New Tariffs for French Goods, but Imposition Delayed

At the end of last week, the U.S. announced 25% tariffs on a series of French goods worth about $1.3 billion. The move is part of a long-running battle between the two countries over taxes on technology giants, Bloomberg said.

Also, the Office of the U.S. Trade Representative said that it will again delay implementation of the new levies for up to 180 days since France “has not yet started collecting its digital tax.” The administration says the delay is to allowing more time “for ongoing discussions on a global deal at the Organization for Economic Cooperation and Development.”

France has held firm on its plans to resume collection of a national digital tax that hits technology giants including Amazon.com Inc., Alphabet Inc.'s Google and Facebook Inc. France says now that it won't “be swayed by threats of U.S. sanctions.”

“France's response will be unchanged,” Finance Minister Bruno Le Maire said in Brussels. “If there is no international solution by the end of 2020, we will, as we have always said, apply our national tax.”

The U.S. withdrew last month from international talks over a digital-tax deal after failing to reach agreement. An international deal would prevent dozens of countries implementing similar levies.

Several European countries – including Austria, France, Spain, Hungary, Italy, Turkey and the UK – have already announced plans for a digital services tax. Many others have discussed implementing one and India expanded a similar levy in April.

“We call on the U.S. to return to the OECD negotiations on taxing digital giants,” Le Maire said. “Sanctions are not a way of operating between countries that are friends, as the U.S. and France are.”

The announcement sends a clear signal to France and other countries that there are consequences to singling out American tech companies said Clete Willems, a partner at Akin Gump.

Still, he added, the tariff delay provides a valuable opportunity to solve this multilaterally. “Both sides need to compromise,” he said. “France needs to back away from trying to tax digital companies before all global service providers and the United States needs to stop insisting that the new rules be optional.”

U.S. lawmakers weighed in shortly after the announcement to express their support. The chairman and ranking member of the Senate Finance Committee issued a joint statement on the topic. “Retaliatory tariffs aren't ideal but the French government's refusal to back down from its unilateral imposition of unfair and punitive taxes on U.S. companies leaves our government with no choice,” said the top Republican, Chuck Grassley of Iowa, and Democrat Ron Wyden of Oregon.

The administration's decision was widely reported in the urban press and elsewhere. For example, the New York Times noted that the administration undertook a trade investigation into the tax a year ago and concluded in December that the French tax “discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy and is unusually burdensome for affected U.S. companies.” The report recommended tariffs as high as 100% on certain French imports valued at $2.4 billion, including cheese, wine and handbags.

The final recommendation was significantly less punitive, with tariffs at 25% --and wine and cheese dropped from the list entirely.

While the United States had initially agreed to work with global counterparts to come up with a unified tax system, other countries have balked at the administration's push for a provision that would effectively allow some American companies to choose whether to be governed by any new system created by a global agreement, the Times said.

It also noted that a “growing list of governments have looked to digital taxes of their own as tax revenues plunge during the pandemic recession. Several European countries, led by France, have been rolling out digital services taxes, which would fall heavily on American internet companies. Italy, Spain, Austria and Britain have all announced plans to levy digital services taxes, which impose duties on the online activity that takes place in those countries, regardless of whether the company has a physical presence.”

The decision to go ahead with the tariffs on French goods could revive a trade fight between the United States and Europe. The president has already imposed tariffs on foreign steel and aluminum, prompting the European Union to retaliate with its own taxes on American goods. The two governments are also at odds over domestic aircraft subsidies, with the Trump administration taxing as much as $7.5 billion of European exports annually as punishment for subsidies given to Airbus.

So, we will see. Taxes on off-shore producers are always very sensitive, and tensions with the EU have been intensifying for some time. This is an issue that producers should watch closely as the season progresses and the fall elections approach, Washington Insider believes.

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