|Trans-Atlantic Dispute Over Iraq War Hits Trade|
Thu Apr 3,12:33 PM ET
By Samuel Fromartz
WASHINGTON (Reuters) - France's opposition to the U.S.-led war in Iraq (news - web sites) has led to calls for a boycott of French goods, while Europeans have started avoiding American products such as Coca-Cola.
These actions show how a conflict in the political arena can spill over into trade, even though it may not be easy in today's global market to single out a purely national product.
In Washington, lawmakers last week called on Defense Secretary Donald Rumsfeld to cancel an $881 million contract with a French-owned food service company that feeds U.S. Marines, even though it employs Americans.
Small companies, whose retail trade makes them an obvious target for consumer action, have already been targeted.
"Since the beginning of January, our sales to the U.S. have decreased by 20 percent," said Marc Refabert, chief executive of Fromages.com, a company in Tours, France, that sells French cheese via a Web site.
Refabert attributed the decline to a combination of factors: the euro's increasing value, making French imports more expensive for Americans, the sluggish global economy, and France's stance on the war.
During the last six weeks, he said, the company has lost some 1,200 American customers. About 75 percent of the company's business comes from the United States.
Michael Yurch, president of Sherry-Lehmann Wine and Spirits in New York City, said some distributors report a declining demand for French wines. But he said his company has not felt any effect, so far.
"Oh, you get a comment here or there about our ads featuring French wines," Yurch said. "Some customers think it's inappropriate."
But that, he noted, was the exception.
Calls for boycotts have grown, however, even though their aim is less than precise since so many foreign companies employ Americans in the United States and so much trade is not visible to the public.
Shares in the giant French-owned food service company Sodexho Inc. fell last week after a news report that U.S. lawmakers were set to urge cancellation of the group's contract with the U.S. Marines. The company employs 110,000 Americans.
Nearly a quarter of all European-U.S. trade also consists of transactions within companies, according to Pascal Lamy, the E.U. Trade Commissioner. Unlike wine and cheese, that trade will not fall under scrutiny since the general public is not aware of it.
The picture is further complicated by the fact that in 2001, the United States was the largest direct investor in France, according to the Invest in France government agency, creating 8,000 jobs.
Nevertheless, boycotts appeal to some consumers, which is why some German and French restaurants have been taking Coca-Cola off the menu.
In the United States, a recent poll by Fleishman-Hillard and Wirthlin Worldwide found 64 percent of Americans had a less favorable attitude toward French companies than before the war.
Of the respondents, 46 percent were likely to try a substitute product for one made in France, while 29 percent said they were more likely to "boycott or avoid" purchasing French goods.
"I think there are some warning signs here," said Philip Diehl, co-chair of Fleishman-Hillard's Public Affairs Practice. "I was surprised by how strong the consumer reaction was."
The poll also found a decline in interest among U.S. consumers for German and Canadian goods, because of those countries' views regarding the war.
Aside from German automobiles and French wine and cheese, however, American consumers had a tough time identifying foreign goods. They saw Heineken, for example, as a German import, though it is from the Netherlands, which is among the countries not opposed to the war effort.
Yoplait was pegged as a French yogurt brand, though it is owned by General Mills Inc., a U.S. company.
Considering that Germany's BMW makes automobiles in South Carolina and the German-American company DaimlerChrysler owns the Chrysler, Dodge and Jeep brands, the lines become further blurred.
So in this global environment, who would most likely be hurt by an American boycott? As far as French wines go, at least, "a lot of people who are small farmers," Yurch said.