EU-US ‘tech alliance’ faces major obstacles on tax, digital rules

The EU's willingness to collaborate on tech may not be reciprocated by Washington.

EU-US ‘tech alliance’ faces major obstacles on tax, digital rules

With the Trump era quickly winding down, Europe and the United States are eager to rekindle the transatlantic relationship, and Brussels wants to refocus on tech.

But the EU capital may not find its enthusiasm reciprocated in Washington D.C.

In a joint statement Wednesday from the European Commission and the EU foreign affairs service, officials outlined what they wanted from Washington: more cooperation on cybersecurity and digital trade, a push for democractic values in the online world and unified EU-U.S. positions on hot-button topics like the role of Big Tech in society and digital taxes.

“Our shared values of human dignity, individual rights and democratic principles make us natural partners to harness rapid technological change and face the challenges of rival systems of digital governance,” the EU said. “This gives us an unprecedented window of opportunity to set a joint EU-US tech agenda.”

But those ambitions face a brick wall of Realpolitik.

While many on both sides of the Atlantic are willing to join forces to combat the rising threat of China — including in next generation 5G mobile networks — the U.S. and Europe still do not see eye-to-eye on some core digital policy issues that will define the next four years.

“I worry that people may be running a bit ahead of themselves, I think it’s difficult to look at this one aspect [of 5G security] in isolation,” said Julian King, a former British European commissioner whose brief included security issues, in an interview ahead of Wednesday’s announcement. Tackling things like 5G security and cybersecurity is “going to be one part of the wider debate we have between the Europeans, the U.S. and others around how to manage the geopolitics of tech,” he said.

On how to levy digital taxes, on what privacy protections should be in place to secure people’s online data and on how far regulators should go to reduce the dominance of a small number of Silicon Valley companies, Europe and the United States continue to diverge.

China denominator

For transatlantic policymakers looking to score easy wins when Joe Biden enters the White House on January 20, they don’t have to look much further than the growing chorus on both sides of officials keen to challenge China’s digital rise.

Over the last 10 years, Beijing has raised Western policymakers’ hackles for stealing rival companies’ intellectual property, using state-backed banks to fund takeovers of local companies and leveraging its massive domestic market to tilt the digital scales in its favor.

Under Trump, aggressive efforts to contain China — one manifested in intense lobbying of EU countries to reduce their reliance on telecommunications equipment from Huawei, the Chinese tech giant — had started to pay off.

Several, mostly Eastern European, countries signed agreements with the U.S. to not use Chinese equipment makers, while others, most notably the United Kingdom, became more hawkish on relying on Huawei for their domestic networks.

The European Commission, now a year into its tenure, similarly has grown more cautious about the bloc’s trading relationship with China, and has proposed a series of new checks — including on how EU data is shipped to China and on Beijing’s ability to scoop up domestic companies — that have won praise by China hawks in Washington.

“There should be a new common focus on protecting critical technologies,” European officials said Wednesday in reference to greater EU-U.S. digital cooperation.

Brussels also wants to push ahead with closer regulatory ties with Washington, including the creation of a so-called EU-U.S. Trade and Technology Council to coordinate joint positions and boost transatlantic trade.

Yet for all of this bonhomie, underlying — and persistent — problems remain, including differences between Berlin and Washington on China’s long-term economic involvement in Europe. 

Wide apart

On critical digital portfolios, too, some of which are about to get revamped by Brussels in the coming days, European and U.S. officials remain miles apart.

In its statement Wednesday, the EU outlined its desire to push ahead with new digital taxes — a key priority for countries like France whose officials have seen Amazon and others benefit financially during the COVID-19 crisis while domestic competitors continue to struggle.

But the U.S. has remained opposed to a major rewriting of such rules, and U.S. officials warned the incoming Biden administration would likely take a similar approach to that of Trump, balking at any changes that would lead to a reduction in income sent from Big Tech to the U.S. Treasury Department.

“It’ll be very difficult to find anyone in Congress who would be supportive of that idea,” said Peter Chase, a former U.S. official and now senior fellow at the German Marshall Fund of the United States.

Brussels is also keen to push ahead with greater checks on companies like Facebook and Google — digital platforms that have become dominant in sections of the online economy and that will be central to new EU digital proposals to be published next week. Washington has similarly become more skeptical over the role of Big Tech.

Leading global discussions on tech regulation standardization was “something the Europeans have always done, the Americans have always opposed it,” said Viviane Reding, a Luxembourgish former justice commissioner and regular critic of U.S. surveillance and tech policies. “If the Americans join us, that would be fine,” she said. “It would be the first time on regulation, but it would be the right thing to do.”

But U.S. policymakers are reluctant to go as far as Europe in policing these tech giants, questioning if the EU’s aggressive stance is more to protect local firms from international competition than to shield consumers from online abuses. 

That, combined with ongoing partisan politics making it difficult to get anything passed in Congress, makes it unlikely the U.S. will be in a position to match Europe on new digital rulemaking, at least until the COVID-19 pandemic fades into memory.

“We’re just behind on these topics,” said one Congressional staffer. “You can’t ask us to run when we’re not yet walking.”

A critical problem, according to several EU and U.S. officials who spoke to POLITICO, was priorities. While both sides have other high-priority issues like combating climate change and corralling the coronavirus to keep them busy, Brussels has made digital central to its agenda.

In contrast, the incoming Biden administration has yet to signal how far it wants to go on revamping the U.S.’s stance on tech, but has made it clear that COVID-19 and tackling the financial crisis connected to the ongoing pandemic will be critical policy goals in 2021.

“For the Biden team, it’s not a priority,” said Frances Burwell, a distinguished fellow at the Atlantic Council, who tracks EU-U.S. digital policymaking. “They want some digital policies, but Biden does not have Big Tech in his target zone. He has other priorities.”

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