Large American retailers succeeded in stopping plans for hundreds of millions of dollars in new taxes on olive oil imports into the United States.
On Thursday, congressional Republicans in the United States dropped a proposal for a 20 percent tax on imported goods as part of a broader tax reform plan. The Border Adjustment Tax (BAT) would have put European olive oil producers at a competitive disadvantage in relation to their American counterparts.
European exporters, who account for the vast majority of the $2 billion of olive oil sales in the United States, could have faced hundreds of millions of dollars in new taxes under the proposed plan. The demise of the BAT suggests that European olive oil products will probably not face a sudden cost increase in the American retail market as a result of federal tax reform legislation anytime soon.
Olive oil exporters in Europe have already been grappling with increasing price pressures in the United States due to a lackluster harvest in 2016, surging global demand, and recent declines in the dollar/euro exchange rate. The purchasing power of American retailers who import olive oil from abroad would have been further diminished by the introduction of the BAT.
Retail establishments of all sizes in the United States, including Walmart and Target, were vehemently opposed to the proposal. The tax would have placed pressure on retailers to pass on the new expense to consumers through increased prices, sparking fears of a possible decline in consumer spending. As a result, opponents of the tax were able to successfully dissuade lawmakers by citing probable damage to retail companies — an industry that is currently enduring massive disruptions brought about by new technology.
Proponents of the BAT plan had hoped to encourage greater production of olive oil and other goods inside the borders of the United States by making imports more expensive. American exporters of olive oil would have been exempt from the tax but may have faced the imposition of retaliatory tariffs by foreign governments. While most American olive oil exports go to Canada and Mexico and would have been relatively immune to trade disputes with Europe, US exporters will face a new round of uncertainty as the Trump administration initiates talks to renegotiate the North American Free Trade Agreement (NAFTA) in August.
Tax reform has long been a centerpiece of the Republican agenda in Washington. The import tax, which was projected to have raised $1 trillion over the course of 10 years, was designed to offset large proposed cuts to the American corporate income tax rate, which currently stands at 35 percent. However, without an income source to offset the proposed reduction in the corporate tax rate to 15 or 20 percent, the federal budget deficit would skyrocket.
The full implications for European olive oil exporters of the collapse of Washington’s proposed protectionist measures will probably become more clear as Congress returns from its August holiday recess and the 2017 harvest begins in earnest. However, the mere threat of a 20 percent import tax invariably has many European producers evaluating their strategies on how to secure affordable access to the growing American olive oil market.
More articles on: import/export
Sep. 7, 2023
Spanish Officials Raise Alarm Over Rising Olive Oil Prices While Calling for Calm
Olive oil prices have exceeded €10 per liter at retail and are expected to continue rising. Rain in Andalusia would provide a glimmer of hope for the approaching harvest.
Aug. 7, 2023
Italy Becomes Largest Market for Tunisia’s Organic Olive Oil Exports
Tunisia's organic production is increasingly favored by large Italian bottlers.
Oct. 11, 2023
Morocco Bans Olive Oil Exports in Bid to Control Rising Prices
Officials say the ban will stem olive oil price increases in the country. It won't help elsewhere.
Jul. 26, 2023
Tunisia Plans to Expand Olive Oil Exports to South Korea
Agriculture officials and diplomatic staff touted the country's rising profile as a high-quality producer of olive oil at a local event in South Korea.
Nov. 27, 2023
Two Greek PDO Olive Oils Receive Protection in India
Kalamata and Sitia Lasithiou Kritis extra virgin olive oils have been registered as in India to protect them from imitations.
Jun. 5, 2023
Goya Spain GM Says the Global Olive Oil Sector Potential Lies with Young Consumers
Antonio Carrasco believes olive oil brands must define themselves through quality while communicating these values to young people.
Nov. 6, 2023
Olive Oil Production in Europe Expected to Reach 1.5M Tons in 2023/24
Yields are expected to rebound after last year's historic lows. However, rising prices will hamper exports and consumption.
Oct. 12, 2023
Another Poor Harvest in Andalusia Predicted
Low output in the world’s largest olive oil-producing region will continue to push prices higher.