LONDON — British industry bodies may have welcomed a decision by the U.S. to suspend a round of retaliatory tariffs on fashion and luxury goods, but stressed they’re tired of consumer goods being used as pawns in international trade disputes.
Earlier this week the United States Trade Representative Katherine Tai said after a year of looking into digital services taxes adopted by a raft of countries — including the U.K., Italy and Spain — the U.S. has decided to impose the 25 percent tariffs, and immediately suspend them for up to 180 days while all sides attempt to hammer out a deal during upcoming OECD and G20 meetings.
The U.K. is hosting the 47th G7 summit in Cornwall, England, from June 11 to 13, and resolving the tech tax challenge will undoubtedly be one of the hottest topics on the agenda.
The British government has said it “strongly supports” G7, G20 and OECD discussions on long-term tax reform, and is committed to scrapping its new digital services tax on tech giants such as Amazon once an appropriate international solution is in place.
In early April, the British government introduced a new 2 percent tax on the revenues of search engines, social media services and online marketplaces that derive value from U.K. users. Most of them are U.S. companies, including Amazon, Alphabet, Facebook and Apple.
The British government, along with other countries, has said its aim is to rectify the “misalignment between the place where profits are taxed, and the place where value is created” with regard to digital businesses.
It wants to ensure that large, digital multinationals “make a fair contribution to supporting vital public services” here.
As a result of that stance, the U.S. has been looking to punish the U.K. with new tariffs and to raise $325 million, the amount the U.S. believes the U.K. tax will raise from American tech companies.
The retaliatory tax would have hit — and still might — British clothing, beauty, footwear, gold and jewelry exports to the U.S.
Men’s and women’s outerwear, women’s and girls’ dresses, men’s shirts and ties, beauty products, leather shoes, gold necklaces and jewelry made from base metal would have all been slapped with the 25 percent levy.
Beauty products including perfume, lipstick, eye makeup, nail polish, compressed and non-compressed powders, hair spray and bath salts were also in the firing line of USTR.
Tai said earlier this week that the U.S. “is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes.”
She said the country “remains committed to reaching a consensus on international tax issues through the OECD and G20 processes,” and said the temporary suspension “provides time for those negotiations to continue to make progress while maintaining the option of imposing tariffs, if warranted in the future.”
Brands and industry organizations expressed their relief, for now.
“With the luxury fragrance business showing great growth in North America, including the brands in our portfolio, we’re optimistic about the suspension at this time,” said Emmanuel Saujet, cofounder of International Cosmetics & Perfumes, the North American distributor for brands including The House of Creed, Floris of London, Mizensir, Akro and Domaine Privé fragrances.
Millie Kendall, chief executive officer of the British Beauty Council, said she’s “delighted there is a 180-day suspension. Obviously we don’t want to see a tariff placed on personal care goods for export to the U.S. as this would devastate a remarkable amount of British SMEs [small and medium enterprises] that deem the U.S. to be a very important trading partner. I would hope a resolution will be forthcoming.”
Adam Mansell, CEO of the U.K. Fashion & Textile Association, said the organization is “very pleased that the U.S. has postponed the decision to impose retaliatory tariffs.”
He added that “it is extremely frustrating that the U.K. fashion and textile industry keep getting dragged into trade disputes that have nothing to do with our sector. We urge the U.K. government to ensure our industry is not unfairly penalized in tit-for-tat trade disputes, and we have asked for this to be part of the wider negotiations with the U.S. trade authorities,” in a future post-Brexit trade deal.
Helen Brocklebank, CEO of Walpole, which represents British luxury businesses across a variety of sectors, said the organization is “very relieved that the tariffs have been suspended, pending talks, and also encouraged that the Biden administration is taking a proactive approach to trying to find a global solution that rebalances how the U.S. tech giants pay their way.”
Brocklebank added that Walpole feels “very strongly that it is the wrong thing to do to make high-end British goods pawns in this argument, and hope that 180 days is long enough for there to be a resolution.”
She noted that the British luxury sector provides more than 160,000 sustainable and highly skilled jobs around the U.K. and has “a centuries-old trading relationship with the U.S., resulting in employment and investment [there]. Both sides must find a way through this to ensure that this relationship is not damaged, and jobs on both sides of the Atlantic are not lost.”
Steve Lamar, president and CEO of the American Apparel & Footwear Association, joined his British counterparts, arguing that punitive tariffs ultimately hurt consumers and industry workers.
Lamar said that while AAFA supports the Biden administration’s “efforts to address unfair trading practices, we are concerned that tariffs, in any shape, continue to be used as negotiating tools. Making it more expensive for Americans to get dressed every day is not a way to promote positive change abroad.
“Tariffs are a huge, hidden tax paid by American consumers in the form of higher prices, and by American workers in the form of fewer jobs and lower wages. While we are glad to see that the U.S. Trade Representative is suspending tariffs for at least six months as it continues to navigate the Digital Services Taxes dispute, it would have been preferable to see the threat of tariffs removed entirely.”
USTR began looking into the digital services taxes already adopted, or under consideration, by a raft of countries one year ago.
In January, it determined that the tech levies adopted by certain countries “discriminated against U.S. digital companies, were inconsistent with principles of international taxation, and burdened U.S. companies.”
In late March, USTR revealed proposed trade actions, and later held public hearings so that industry figures from each of the countries under the microscope — including the U.K., India and Austria — could argue their cases.
USTR also confirmed it has terminated four investigations, into Brazil, Czech Republic, the European Union, and Indonesia, “because those jurisdictions had not implemented the digital services taxes under consideration.”