Upcoming US-EU Trade War: Taxing Tech Giants

♠ Posted by Emmanuel in Americana,Europe,Technology,Trade at 6/26/2020 11:01:00 PM

Trump wants his administration to beat up US tech giants, not European nations.

If you've paid attention to US news, you're aware that Facebook and other tech giants have been in the Trump administration's crosshairs for supposedly suppressing "conservative" viewpoints that differ from their supposedly liberal, West Coast biases. After--by his reckoning, at least--wanting to be politically neutral by giving Trump free rein, Mark Zuckerberg recently took a more proactive stance to removing Trump's more [ob]noxious social media messages. Recently, FB banned a campaign ad that had an inverted triangle--a Nazi-era mark for non-desirable persons to be executed in concentration camps like homosexuals and immigrants [sounds familiar]?

Just as I write, the fear of mass boycotts has prompted Zuckerberg to announce giving Trump an even shorter leash on outright politically motivated lies--or so he says:

Facebook said Friday that it will flag all “newsworthy” posts from politicians that break its rules, including those from President Donald Trump. CEO Mark Zuckerberg had previously refused to take action against Trump posts suggesting that mail-in ballots will lead to voter fraud, saying that people deserved to hear unfiltered statements from political leaders. Twitter, by contrast, slapped a “get the facts” label on them. 

“The policies we’re implementing today are designed to address the reality of the challenges our country is facing and how they’re showing up across our community,” Zuckerberg wrote on his Facebook page announcing the changes. Zuckerberg said the social network is taking additional steps to counter election-related misinformation. In particular, the social network will begin adding new labels to all posts about voting that will direct users to authoritative information from state and local election officials.

In retribution for being censored, Trump has threatened to remove protections granted to tech giants under Section 230 of the 1996 Communications Decency Act: No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. 

So it's a no-holds-barred Trump administration versus tech giants fight, right? Well, no. Actually, the administration is taking up their cause of avoiding being taxed in the European Union. Treasury Secretary Steven Mnuchin even recently walked out on negotiations to establish a global pact to tax the likes of Facebook and Google. The hope was that a unified global scheme would forestall revenue-hungry EU states from taxing US tech giants themselves or at the bloc-level. With the US not participating in those negotiations anymore, it's off to the races in the trade war stakes:

Europe and the United States are hurtling toward a trade war over who has the right to tax Google, Facebook and Amazon. After Washington confirmed Wednesday [June 17] that it had pulled out of talks on global rules for taxing the digital economy, officials including Bruno Le Maire, the French finance minister, and Paolo Gentiloni, the European economy commissioner, threw their weight behind national or EU-wide digital levies — plans that would likely bring retaliation from the U.S.

“We need an understanding in the global negotiations,” Gentiloni tweeted. “If the American stop makes it impossible, a new European proposal will be put on the Commission’s table.” The stand-off is expected to reignite a transatlantic trade dispute that has been simmering for more than a year. At stake is which country has the right to tax digital companies whose operations now span the world.

The truth is, at the global level at least, the Trump administration is protecting the American tech giants' corporate interests. If the Europeans dare tax US tech giants, then the US Trade Representative's office is readying retaliatory tariffs on a range of European goods:

U.S. officials have pushed back at EU claims that digital companies are not fairly taxed, saying national or EU levies represent unfair treatment of American companies, as well as illegal tariffs under global trade rules. Earlier this month, President Donald Trump’s administration launched a series of trade investigations that could lead to tariffs on countries in Europe, Asia and South America if they adopt digital service taxes. 

In 2019, Washington had threatened to slap tariffs on $2.4 billion of French goods like wine and cheese in retaliation for the country’s digital taxes. Both sides eventually agreed to postpone such actions until an agreement could be reached within the OECD over how to tax the digital economy. “What they’re doing is fundamentally unfair to American companies,” U.S. Trade Representative Robert Lighthizer told Congress on Wednesday. “They’re picking on them because they’re the best and they’re American companies.”

As Phil Collins once sang, it's a groovy kind of love America's current leadership has with the tech giants. On one hand, Trump is battling them at home, purportedly over curtailing free speech. For all that melodrama back home, it also appears that the US government still has its corporate titans' interests in mind abroad. Technology will undoubtedly be the industrial battleground for global dominance in the future, not automobiles, oil, or other dominant sectors of days gone by. 

Over a fifth of market capitalization of the S&P 500 index is now composed of Facebook, Amazon, Apple, Microsoft and Google [Alphabet], AKA FAAMG. The stock market would strongly vouch for Lighthizer's assertion that they represent America's best. So, if it means fighting for Facebook's ability to evade taxes abroad, the Trump administration has no reservations whatsoever in championing it. None at all.