By Andrew Stuttaford
Wednesday, July 22, 2020
Writing in the Wall
Street Journal, Rochelle Toplensky warns that EU/U.S. trade tensions
may soon be on the rise again:
It can be easy to grow complacent
about a small but steady drip, but if it continues for too long, at some point
the dam gives way.
The European Union is intensifying
its long-running crackdown on U.S. tech giants. That increases the risk that an
uneasy trans-Atlantic tax truce could soon come to an end. Investors may be
wise to brace for a hit.
Toplensky notes that “European officials insist their
actions are distinct, law-based efforts that aren’t part of a coordinated
attack on U.S. tech,” but:
From across the pond, however,
these efforts—enacted by many different officials, departments and even
countries throughout Europe—tend to blur together into what looks like a
concerted campaign against a successful U.S. industry. And there is some
evidence to support that perspective.
Late last year, the new European
Commission outlined two primary priorities for the next five years—green and
digital. It has revived industrial policy to level the corporate playing field,
particularly with China, and help European companies to compete globally.
Margrethe Vestager, the tough antitrust enforcer from the last commission, was
reappointed to an expanded role and is seeking new powers and regulations that
could delve deep into tech platforms’ business models.
To describe Vestager as a “tough antitrust enforcer” is
too kind. In reality, she is a tough mercantilist, looking to reinforce the
EU’s long-floundering attempts to plan its way to parity with U.S. tech, an
effort that has been going on for a long, long time.
Who can forget the launch in 2000 of the EU’s Lisbon
strategy?
The Union has today set itself a
new strategic goal for the next decade: to become the most competitive and
dynamic knowledge-based economy in the world, capable of sustainable economic
growth with more and better jobs and greater social cohesion.
That strategy ended up, as it was always going to do, in
failure, thus the harder line taken by Vestager against American companies that
have had the effrontery to do well, a strategy that also included attacking
Ireland for setting its taxes too low (“unfair competition”) in a successful
attempt to attract investment from the likes of Apple. The latter line of
attack has just suffered a major
setback in the European Court of Justice. The verdict can be appealed,
however, and, given the influence of both the tax cartel and the EU’s
mercantilists, could well be.
Toplensky:
Losing the tax cases is unlikely to
stop the commission’s efforts. It might instead revive efforts to create an
EU-wide DST, particularly if the Organization for Economic Cooperation and
Development fails in its efforts to reform digital tax by the end of the year.
U.S. politicians from both
political parties support retaliatory tariffs against Europe. The USTR seemed
to de-escalate earlier this month when it said it would apply a 25% levy on
French goods from January if Paris applied its 3% DST, much less than the 100%
tariff Washington threatened last December. Investors in French luxury
companies shrugged off the announcement, maybe relieved at the lower rate or
possibly counting on their Chinese customers to carry them through. Car makers
and industrial companies might be less sanguine.
Meanwhile I couldn’t help noticing this tiny detail in
the EU’s stimulus package (via Bloomberg,
my emphasis added):
In order to defray the cost of the
program, the bloc will increase the amount of revenue it can collect. A new tax
on non-recycled plastic waste will be introduced next year, and the European
Commission is preparing proposals on a digital tax and a carbon border
adjustment mechanism that would take effect in 2023.
Trouble ahead, I reckon.
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