Trade Update (June 8)
Section 301 Investigation Into Digital Services Taxes
On Tuesday (Jun. 2), the Office of the U.S. Trade Representative (USTR) announced it will initiate Section 301 investigations into digital services taxes being considered by 10 U.S. trading partners.
According to a Federal Register Notice, digital services taxes (DST) being imposed or considered by the European Union, India, Indonesia, Italy, Spain, Turkey, Austria, Brazil, and the Czech Republic will be investigated.
“The United States Trade Representative announced today that his office is beginning investigations into digital services taxes that have been adopted or are being considered by a number of our trading partners,” USTR said in a press release.
Last week, the European Commission proposed that member states use DSTs to raise revenue to fund stimulus efforts in response to the coronavirus pandemic.
“President Trump is concerned that many of our trading partners are adopting tax schemes designed to unfairly target our companies,” USTR Robert Lighthizer said regarding the investigation.
“We are prepared to take all appropriate action to defend our businesses and workers against any such discrimination,” he added.
The Organization for Economic Cooperation and Development (OECD) hopes to conclude talks by the end of the year to establish an international framework that allows countries to tax companies with business operations but no physical presence in tax jurisdictions. Because of the coronavirus pandemic, an OECD ministerial set for July was delayed until October.
To view the USTR press release, click here.
To view the Federal Register notice, click here.
U.S. Trade Down in April
Exports and imports dropped by record amounts in April, the first full month of government-ordered shutdowns due to coronavirus.
U.S. exports fell 20.5 percent and imports fell 13.7 percent. The goods and services trade deficit increased to $49.4 billion. Additionally, the report showed that U.S. exports to China during the first four months of the year are well below the pace needed to meet the targets laid out in January which use trade numbers from 2017 as a benchmark.
To view the Commerce Department’s report, click here.
Trump Admin Seeks Australia’s Help in WTO Search
The Trump administration is asking Australia to help find a “compelling” candidate to take charge of the World Trade Organization (WTO) and help drive reform.
Australia’s ambassador to the U.S., Arthur Sinodinos, told the Australian Financial Review that USTR Robert Lighthizer had recently spoken to Trade Minister Simon Birmingham about “finding a good candidate for the WTO director-general position.”
“We’re keen to get someone who has a commitment, obviously, to an open trade and investment system and someone who has the clout and convening power to bring various groupings to the table,” Sinodinos said.
“So the Americans have been very interested in whether we have candidates and we’ve been looking further into that,” he added.
The director-general is elected by the WTO’s 164 members.
U.S. – Brazil Trade
On Thursday (Jun. 4), Brazilian diplomat Nestor Forster said the U.S. and Brazil are making progress on an agreement covering trade facilitation, digital trade, and regulatory practices.
The current talks do not cover reducing tariffs on agricultural products and manufactured goods. Forster said that the mini-deal would set the stage for a more meaningful agreement in the future.
Brazil has made significant efforts to join the OECD and WTO’s government procurement pact in an effort to open up their economy. American companies may look to Brazil to shift their supply chains out of China as Brazil works to make their country an easier place to do business.
Forster said Brazil wants to reach a free trade agreement with the U.S. in 2021 or soon after.
House Ways and Means Democrats wrote a letter to Lighthizer on Wednesday (Jun. 3) to express their opposition to deeper trade ties with Brazil.
To view the letter, click here.
 “USTR announces new investigations into digital services taxes.” Inside U.S. Trade, 2. Jun. 2020. https://insidetrade.com/daily-news/ustr-announces-new-investigations-digital-services-taxes?s=iust
 Palmer, Doug. “U.S. trade down record amounts in April.” Politico Pro, 4 Jun. 2020. https://subscriber.politicopro.com/article/2020/06/us-trade-down-record-amounts-in-april-1946717
 Greber, Jacob. “White House enlists Birmingham in search of new WTO boss.” Australian Financial Review, 6 Jun. 2020. https://www.afr.com/world/north-america/white-house-enlists-birmingham-in-search-of-new-wto-boss-20200604-p54zqh
 Palmer, Doug. “Brazil envoy sees ‘stepping stone’ trade deal with U.S. this year.” Politico Pro, 4 Jun. 2020. https://subscriber.politicopro.com/article/2020/06/brazil-envoy-sees-stepping-stone-trade-deal-with-us-this-year-1946955