Big Tech is now a proxy for the American government

Linda J. Dodson

Boosting Europe’s technological capabilities is also a central policy in Europe’s plan to recover from the Covid-19 recession, alongside green energy. Taking a leaf out of China’s book, the EU is moving towards a more active industrial policy. This has further fuelled US concerns – and was partly responsible for Steven Mnuchin, the US Treasury Secretary’s decision to withdraw from DST negotiations with EU officials in June.

First in the firing line is France, even though Paris agreed to defer collection of its 3pc tax. Bruno Le Maire, the country’s finance minister, denounced Mr Mnuchin’s decision to withdraw from the global DST talks as “a provocation” and, two weeks ago, the Trump administration proposed new tariffs on French goods. It announced additional duties of 25pc on French cosmetics, handbags and other imports to the US that have a total value of about $1.3bn (£1bn). However, the new trade barriers would not be raised for up to 180 days. This followed a “Section 301” investigation that concluded that the French tax discriminated against US technology companies. The clock is now ticking.

Washington has initiated similar Section 301 investigations of DSTs adopted or being considered by 10 other countries, including Britain, India and Turkey.

Despite the ongoing pandemic, the Trump trade war has not gone away. There is also an EU antitrust inquiry into how companies use data from devices such as smart phones. Last month, furthermore, the European Court of Justice effectively ruled that the US cannot be trusted to process and store citizens’ private data because of concerns about surveillance by American authorities. This will only increase Washington’s resolve to halt the global push for a DST.

It will be very difficult for Europe to play catch-up with the US and China, even with a good industrial policy. Europe has struggled for years to produce a leading technology giant, with the recent collapse of German group Wirecard highlighting its continual failure to do so.

Nevertheless, the US is unlikely to compromise. China managed to leapfrog the US in 5G by using its state apparatus to direct investment at its technology companies towards Beijing’s key priorities. Capitalism, which allows the free market to develop ideas and solutions, proved lacking in this race. Washington has recognised this – with William Barr, the US attorney general, even suggesting that America should consider taking a controlling stake in European telecoms equipment makers Nokia and Ericsson.

US authorities are recognising that more state action is needed to maintain its position as the global hegemon through technological leadership. This means the next trade war escalation will probably be targeted at Europe.

Garry White is chief investment commentator at wealth management company Charles Stanley

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