France is going to tax Big Tech

Fair levy or French anti-Americanism?

The French Senate has approved a bill to tax large internet and technical companies for their sales generated in France. This is a tax of 3% on sales realized in France with digital products. Another condition is that the companies that must pay this tax must have a worldwide turnover of at least 750 million euros and / or 25 million euros in France.

First and foremost, every company that makes a profit should in the form of profit tax make its contribution to the collective provisions in the country of establishment or in the country where the sales are made. Avoiding taxation by establishing a head office (on paper) in a tax haven, as many multinationals do, is a reprehensible course of action.

Affected by the French tax are mainly large American companies such as Google, Facebook and others. A few European and Chinese companies are also involved. The measure also affects French companies, but they deduct the 3% levy from the corporation tax payable. It is therefore once again a measure that only affects foreign companies and not the French ones. This is, as President Trump already tweeted, a discriminatory measure. Trump is still investigating possible countermeasures in the form of import duties on French products. This to the anger of the French government. But whoever bounces the ball must expect it back. France has the full right to impose this tax, but will also have to accept that America has the full right to impose taxes on French products.

France has been waiting for action from the European Union, but that has not been possible. Now France is doing it alone, just like the flight tax they decided on its own. You are increasingly wondering whether France still wants to introduce measures together with the rest of Europe.

What is strange about the levy is that it concerns 3% of the sales made in France. It not a tax on profit. Therefore, if an internet company makes a loss over its French activities, the tax must be paid. An example: A company has a turnover of 50 million, but the costs are 55 million. Therefore they lose 5 million. Normally no tax has to be paid. In the French system, this company still has to pay a levy of 3% of that 50 million euros, or 1.5 million euros. As a company you would withdraw from a country for less than that!

The nasty aftertaste remains which often arises in French foreign and trade policy. The discussion about this levy is once again peppered with the same anti-Americanism in which France has been very skilled since De Gaulle. Google, Facebook, Microsoft must be tackled because they are large American companies. Short-sightedness is rampant in France. It is for the French not even obvious that multinationals which have their head office on paper in a tax haven also do not pay taxes in America. And in that case we are talking about serious losses of revenue for the American government.

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Why Europe Is Getting Tough on China And What It Means for Washington

By: Andrew Small, April 2019

Read the full article (click)

Time to hit ‘reset’ on Transatlantic Trade

By: Peter Chase, April 2019

Read the full article (click)

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Europe, Please Wake Up
By: George Soros
February 11, 2019


MUNICH – Europe is sleepwalking into oblivion, and the people of Europe need to wake up before it is too late. If they don’t, the European Union will go the way of the Soviet Union in 1991. Neither our leaders nor ordinary citizens seem to understand that we are experiencing a revolutionary moment, that the range of possibilities is very broad, and that the eventual outcome is thus highly uncertain.
 
Most of us assume that the future will more or less resemble the present, but this is not necessarily so. In a long and eventful life, I have witnessed many periods of what I call radical disequilibrium. We are living in such a period today.

The next inflection point will be the elections for the European Parliament in May 2019. Unfortunately, anti-European forces will enjoy a competitive advantage in the balloting. There are several reasons for this, including the outdated party system that prevails in most European countries, the practical impossibility of treaty change, and the lack of legal tools for disciplining member states that violate the principles on which the European Union was founded. The EU can impose the acquis communautaire (the body of European Union law) on applicant countries, but lacks sufficient capacity to enforce member states’ compliance.

The antiquated party system hampers those who want to preserve the values on which the EU was founded, but helps those who want to replace those values with something radically different. This is true in individual countries and even more so in trans-European alliances.

The party system of individual states reflects the divisions that mattered in the nineteenth and twentieth centuries, such as the conflict between capital and labor. But the cleavage that matters most today is between pro- and anti-European forces.

The EU’s dominant country is Germany, and the dominant political alliance in Germany – between the Christian Democratic Union (CDU) and the Bavaria-based Christian Social Union (CSU) – has become unsustainable. The alliance worked as long as there was no significant party in Bavaria to the right of the CSU. That changed with the rise of the extremist Alternative für Deutschland (AfD). In last September’s länder elections, the CSU’s result was its worst in over six decades, and the AfD entered the Bavarian Parliament for the first time.
 
The AfD’s rise removed the raison d’être of the CDU-CSU alliance. But that alliance cannot be broken up without triggering new elections that neither Germany nor Europe can afford. As it is, the current ruling coalition cannot be as robustly pro-European as it would be without the AfD threatening its right flank.

The situation is far from hopeless. The German Greens have emerged as the only consistently pro-European party in the country, and they continue rising in opinion polls, whereas the AfD seems to have reached its highpoint (except in the former East Germany). But now CDU/CSU voters are represented by a party whose commitment to European values is ambivalent.

In the United Kingdom, too, an antiquated party structure prevents the popular will from finding proper expression. Both Labour and the Conservatives are internally divided, but their leaders, Jeremy Corbyn and Theresa May, respectively, are so determined to deliver Brexit that they have agreed to cooperate to attain it. The situation is so complicated that most Britons just want to get it over with, although it will be the defining event for the country for decades to come.

But the collusion between Corbyn and May has aroused opposition in both parties, which in the case of Labour is bordering on rebellion. The day after Corbyn and May met, May announced a program to aid impoverished pro-Brexit Labour constituencies in the north of England. Corbyn is now accused of betraying the pledge he made at Labour’s September 2018 party conference to back a second Brexit referendum if holding an election is not possible.

The public is also becoming aware of the dire consequences of Brexit. The chances that May’s deal will be rejected on February 14 are growing by the day. That could set in motion a groundswell of support for a referendum or, even better, for revoking Britain’s Article 50 notification.

Italy finds itself in a similar predicament. The EU made a fatal mistake in 2017 by strictly enforcing the Dublin Agreement, which unfairly burdens countries like Italy where migrants first enter the EU. This drove Italy’s predominantly pro-European and pro-immigration electorate into the arms of the anti-European League party and Five Star Movement in 2018. The previously dominant Democratic Party is in disarray. As a result, the significant portion of the electorate that remains pro-European has no party to vote for. There is, however, an attempt underway to organize a united pro-European list. A similar reordering of party systems is happening in France, Poland, Sweden, and probably elsewhere.

When it comes to trans-European alliances, the situation is even worse. National parties at least have some roots in the past, but the trans-European alliances are entirely dictated by party leaders’ self-interest. The European People’s Party (EPP) is the worst offender. The EPP is almost entirely devoid of principles, as demonstrated by its willingness to permit the continued membership of Hungarian Prime Minister Viktor Orbán’s Fidesz in order to preserve its majority and control the allocation of top jobs in the EU. Anti-European forces may look good in comparison: at least they have some principles, even if they are odious.

It is difficult to see how the pro-European parties can emerge victorious from the election in May unless they put Europe’s interests ahead of their own. One can still make a case for preserving the EU in order radically to reinvent it. But that would require a change of heart in the EU. The current leadership is reminiscent of the politburo when the Soviet Union collapsed – continuing to issue ukazes as if they were still relevant.

The first step to defending Europe from its enemies, both internal and external, is to recognize the magnitude of the threat they present. The second is to awaken the sleeping pro-European majority and mobilize it to defend the values on which the EU was founded. Otherwise, the dream of a united Europe could become the nightmare of the twenty-first century.

© 2019 George Soros

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From the German Marshall Fund:

What President Trump Has Been Getting Right and the Weakening of Transatlantic Relations

Thomas Kleine Brockhoff moderated an evening discussion with Professor Stephen Walt from the Harvard Kennedy School of Government in Berlin on his recently published book, “The Hell of Good Intentions: America’s Foreign Policy Elite and the Decline of U.S. Primacy.” Professor Walt shared his perspective on why U.S. foreign policy in recent decades has not met expectations and what steps should be undertaken to alter the country’s course.

You said, “If you squint hard enough you can see the outlines of a sensible grand strategy in some of what the Trump administration has done.” What do you think the administration is getting right, and do you think it is doing the right things to communicate its policy?

They’re not communicating their policy very well at all. The underlying logic or rationale behind many of their moves is pretty hard to discern, which is why I said you had to squint to see it. But there are several things that I think Trump and his advisors have understood about the contemporary world. In particular, they recognize that China is the biggest strategic challenge facing the United States. Therefore we need not only to shift U.S. military attention, but also to focus our efforts at revising China’s economic policies in ways that would be good for the United States but also beneficial to others.

I think Trump has also understood that efforts to spread democracy through military force and to engage in nation building in other countries are not working and are not going to work. If he can get the United States out of those activities, that would be desirable.

Finally, I think he has correctly understood that our European allies were not bearing a sufficient weight within the alliance – not taking as much responsibility for European defense as they should. That’s not unique to Trump, by the way; every U.S. president since Eisenhower has had a similar view. The problem is that he has not been able to articulate a strategy for achieving any of those ends, or to advance them in a way that’s getting him closer to the desired results. In fact, in some cases I think he’s acted in a completely counterproductive and incoherent fashion. As a result, he has undermined the United States’ position around the world, but without getting any real benefits for it.

Given these things, what signals should policymakers here in Germany take? I’m thinking not so much about the short term, but the long-term relationship with the United States.

I think the most important thing to realize is that the weakening of the transatlantic relationship did not begin with Donald Trump – although he has acted in ways that has exacerbated it to no one’s benefit. Once the Cold War was over, the rationale for a deep U.S. security engagement in Europe had disappeared, or at least decreased dramatically. With the rise of China, the focus on Asia has grown enormously. Even beginning with the Bush administration, and certainly during the Obama administration, you saw greater focus on Asia and less focus on Europe. This trend will continue long after Donald Trump leaves the White House.

Given that, what future do you see for the NATO alliance, if any? Do you think we’ll still have NATO as we know it 25 years from now?

You won’t have NATO as we know it. You might still have headquarters in Brussels, annual summit meetings, and some of the other trappings of the alliance, but it may not be all that strategically important. It’s even possible – I think ultimately desirable – for the United States’ role to gradually decline, even if it remains a formal member and the Europeans take much greater responsibility for their own defense.

Europe has a large population, is wealthy by global standards, and has all the latent potential to create and maintain the military capabilities it needs to protect itself against any expected dangers. The only question is whether or not Europe will be able to find the collective will to do so, or whether countries will ultimately feel the need to do so individually. Ideally that process would be done while remaining on good terms with the United States, because we should not bear any ill will towards any European countries. That’s where I think we’re headed over the longer term, and I hope this process occurs in a gradual, cooperative, and amicable fashion.

The views expressed in GMF publications and commentary are the views of the author alone.

© German Marshall Fund, January 22, 2019

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Why is Donald Trump threatening more tariffs – and what next?

What is Trump’s latest tariff threat towards China?

Raising the stakes in the escalating trade standoff between the US and China overnight, Donald Trump has asked US trade officials to draft plans for additional tariffs on $200bn (£152bn) of Chinese imports. The president wants them set at a 10% rate, while indicating he would be prepared to impose tariffs on yet another $200bn of imports if China were to retaliate.

Has the US already imposed tariffs on China?

The latest measures come on top of $50bn of tariffs approved by the White House, effective from 6 July, in retaliation to alleged intellectual property theft by China. These latest measures come as an escalation and could make it difficult for China to retaliate further, given the country only imported about $170bn of US goods and services last year.

The $50bn tariffs focus on industrial sectors designed to benefit from the “Made in China 2025” industrial strategy put forward by Beijing, and cover products ranging from aircraft to robots and cars. The list does not include products regularly bought by US consumers, such as mobile phones and TVs.

Has China retaliated?

Responding to the first wave of proposed tariffs, China has drawn up a list of like-for-like tariffs on $50bn worth of US products such as soya beans, cars and aircraft – but it has yet to impose them. On Tuesday, Beijing promised “strong countermeasures” should America go through with its latest threat. China’s commerce ministry noted: “If the US loses its senses and publishes a new list [of tariffs], China will be forced to take comprehensive measures that are both strong in quantity and gravity and will fight back.”

What about tariffs on the UK and Europe?

Trump is fighting trade disputes on multiple fronts. China might stand apart as the biggest target for the US president, but his traditional allies are in the crosshairs for different reasons. In May, Trump announced steel and aluminum tariffs on the rest of the world in order to protect US producers – and has refused to exempt the EU (including the UK), Canada and Mexico.

Each trading partner has promised countermeasures should Trump refuse to back down, while seeking to settle the dispute at the World Trade Organization.

Why is Trump imposing the tariffs?

During the 2016 election campaign, Trump promised to protect American jobs and to renegotiate US trade deficits with countries around the world. The US has the world’s largest trade deficit – meaning it buys more goods and services from other countries than it sells overseas – worth $568bn last year.

China is responsible for the bulk of the deficit in terms of goods, exporting $376bn more to the US than it bought from US producers.

What are the potential consequences for the global economy?

When the first raft of Chinese tariffs were put forward, analysts believed the consequences could be contained, but now the stakes are rising, and attitudes appear to be hardening on both sides.

Analysts at the consultancy Oxford Economics estimate the combined $250bn of US tariffs on China with retaliatory countermeasures would lower GDP growth by up to 0.3% in both countries. The World Bank has also warned a worldwide escalation of tensions would have consequences for global trade equivalent to the financial crisis of 2008.

© The Guardian, Richard Partington, June 19, 2018.

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EU-US Trade: European Commission endorses rebalancing duties on US products

The College of Commissioners endorsed today the decision to impose additional duties on the full list of US products notified to the World Trade Organisation (WTO), as part of the EU’s response to the US tariffs on steel and aluminium products.

Following today’s decision to apply additional duties to selected imports from the United States, the Commission expects to conclude the relevant procedure in coordination with Member States before the end of June so that the new duties start applying in July.

The application of the rebalancing duties is fully in line with WTO rules, and corresponds to a list of products previously notified to the WTO. The WTO Safeguards Agreement allows for a rebalancing corresponding to the damage caused by the US measures with EU exports worth €6.4 billion (2017) being affected. The EU will therefore exercise its rights immediately on US products valued at up to €2.8 billion of trade. The remaining rebalancing on trade valued at €3.6 billion will take place at a later stage – in three years’ time or after a positive finding in WTO dispute settlement if that should come sooner.

Commissioner for Trade Cecilia Malmström said: “This is a measured and proportionate response to the unilateral and illegal decision taken by the United States to impose tariffs on European steel and aluminium exports. What’s more, the EU’s reaction is fully in line with international trade law. We regret that the United States left us with no other option than to safeguard EU interests.”

The imposition of rebalancing duties on a list of selected US products is part of the three-pronged response outlined by the European Commission, that includes the launch of legal proceedings against the US in the WTO (on 1 June) and the possible triggering of safeguard action to protect the European market from disruptions caused by the diversion of steel from the United States market. On this, an investigation was launched on 26 March and the Commission has nine months to decide whether safeguard measures would be necessary. If the investigation confirms the necessity for swift action, such a decision could be taken by summer. As regards aluminium, the Commission has put in place a surveillance system for imports of aluminium to be prepared in case action is required in that sector.

On 7 March, the College of Commissioners decided that the Commission should continue engaging with the US on other trade-related processes. A trilateral meeting with the US and Japan took place on 31 May in Paris, during which progress was made to address some of the root causes of the current tensions in the trading system, including China’s trade distorting practices.

European Commission, June 6, 2018.

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US – EU Trade

U.S. goods and services trade with the EU totaled nearly $1.1 trillion in 2016.  Exports totaled $501 billion; Imports totaled $592 billion.  The U.S. goods and services trade deficit with the EU was $92 billion in 2016. 

The United States had $686 billion in total (two ways) goods trade with the European Union during 2016, its largest Goods trade partner.  Goods exports totaled $270 billion; Goods imports totaled $416 billion.  The U.S. goods trade deficit with the EU was $147 billion in 2016.

Trade in services with the EU (exports and imports) totaled an estimated $407 billion in 2016.  Services exports were $231 billion; Services imports were $176 billion.  The U.S. services trade surplus with the EU was $55 billion in 2016.

According to the Department of Commerce, U.S. exports of Goods and Services to the EU supported an estimated 2.6 million in jobs in 2015 (latest data available) (1.2 million supported by goods exports and 1.4 million supported by services).

Exports US to EU

  • The EU countries, together, would rank 1st as an export market for the United States in 2016.
  • U.S. goods exports to the EU in 2016 were $269.6 billion down 0.8% ($2.3 billion) from 2015 but up 27% from 2006.  U.S. exports to the EU accounted for 18.6% of overall U.S. goods exports in 2016.
  • The five largest country markets were: United Kingdom ($55.3 billion), Germany ($49.4 billion), Netherlands ($39.7 billion), Belgium ($32.1 billion), and France ($31.1 billion).
  • The top export categories (2-digit HS) in 2016 were: Aircraft ($38.5 billion), Machinery ($29.4 billion), Pharmaceutical Products ($26.4 billion), Optic and Medical Instruments ($25.6 billion), and Electrical Machinery ($20.8 billion).
  • U.S. domestic exports of agricultural products to the EU totaled $11.5 billion in 2016 (total exports of $11.8 billion). The EU countries together would rank 4th as an Ag Export Market for the United States.   Leading categories include: tree nuts ($2.6 billion), soybeans ($1.9 billion), wine and beer ($756 million), and prepared food ($579 million),
  • U.S. exports of services to the EU were $231.2 billion in 2016, up 1.2% ($4.1 billion) from 2015 and 60% since 2006.  Top export sectors were professional and management services ($5Intellectual property ($50.2 billion), and travel (including education) ($40.4 billion).

Exports EU to US

  • The EU countries together, would rank as the 2nd largest supplier of imports to the United States in 2016.
  • U.S. goods imports from the EU totaled $416.4 billion in 2016, down 2.6% ($11.2 billion) from 2015, but up 25% from 2006. U.S. imports from the EU accounted for 19.0% of overall U.S. imports in 2016.
  • The five largest country suppliers of imports are: Germany ($114.1 billion), United Kingdom ($54.3 billion), France ($46.7 billion), Ireland ($45.5 billion), and Italy ($45.3 billion).
  • The five largest categories in 2016 were: Machinery ($64.9 billion), Pharmaceuticals Products ($55.2 billion), Vehicles ($54.6 billion), Optic and Medical Equipment ($27.5 billion), and Electrical Machinery ($26.8 billion).
  • U.S. imports for consumption of agricultural products from EU countries totaled $20.6 billion in 2016 (total imports of $20.7 billion). The EU countries together rank 3rd (to Canada and Mexico) as a supplier of Ag imports to the United States.  Leading categories include: wine and beer ($5.7 billion), essential oils ($2.5 billion), snack foods (including chocolate) ($1.5 billion), vegetable oils ($1.3 billion), and processed fruits and vegetables ($1.1 billion).
  • U.S. imports of services from the EU were $176.5 billion in 2016, up 1.4% ($2.4 billion) from 2015, and up 35% since 2006. Top import sectors were travel (including education) ($37.0 billion), transport ($33.8 billion), and IPR ($18.9 billion).

Trade Balance

  • The U.S. goods trade deficit with the EU was $146.8 billion in 2016, a 5.7% decrease ($8.9 billion) over 2015  The U.S. goods trade deficit with the EU accounted for 22.8% of the overall U.S. goods trade deficit in 2016.
  • The United States has a services trade surplus of $54.8 billion with the EU in 2016, up 0.8% from 2015.

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Transatlantic trade under siege

The CETA agreement between the EU and Canada is almost ready to be ratified. This despite fierce attacks by opponents. Thanks to CETA European companies gain easier access not only to the Canadian market, but through the provisions in the NAFTA agreement (which covers all of North-America) to the US and Mexican markets as well.

But how about TTIP? This enormous masterpiece of a trade agreement between the United States as the world’s number one economy and the EU representing 28 European countries plus a number of economically associated countries like Switzerland and Norway. European politicians from Germany and France are doubting TTIP will ever be ratified. They blame the United States for not making enough concessions to European demands. I can imagine that the American negotiators can easily utter the same accusation. That is how the game has to be played obviously.

The European Commission (EU Government) still is determined to have TTIP ratified by 2017. I hope they are right, but a loud voice inside my head is telling me otherwise.

Free trade and the back scaling or completely abolishing of tariffs is not the disputed issue here. The provisions about government independent trade courts, consumer protection and food safety however are difficult and hotly debated issues.

Maybe TTIP has grown too large. Not only to many pages, but foremost to many issues to be covered.

A simpler version of a trade agreement could work for partners on both sides of the Atlantic.

So if you don’t want a detailed agreement covering almost everything, and you want it fast, what to do then?

Step one could be an agreement to abolish all import dues on existing trade between TTIP partners. That would give an enormous boost to Transatlantic trade without changing anything on laws and regulations concerning the question of which goods are allowed to be imported into a country. It’s just an administrative burden that gets lifted and companies save a lot of money.

A second step could be reviewing each other’s safety and environmental standards to determine which ones are equal, compatible or easy adjustable to reach the point that a free flow of these goods between TTIP partners is possible. Other products are excluded from the deal for the time being.

The most difficult item in the negotiations are the independent trade courts. Well, it is my humble opinion that if you have lost a negotiation item just accept it. No independent courts please. Let the existing courts in the respective TTIP partner’s countries judge any disagreements concerning transatlantic trade.

Maybe this step by step approach will bring us a comprehensive trade agreement much sooner than to wait for a TTIP agreement that covers everything but might not come at all.