US & EU: Friends Or Foe?

Source: Konica.al.


The relationship between US and EU is strained in the Trump era. But now the EU is extending an olive branch to US to counter the common competitor: China. 


This reminds me of what Winston Churchill said: “We have no lasting friends, no lasting enemies, only lasting interests”.


Let’s Be Friends Again?

The EU will call on the US to form a new global alliance with a detailed draft plan, to let go of the tensions in the Trump era and face the “strategic challenge” from China.

  • The proposal seeks to launch a new transatlantic agenda in 2021 H1, and rebuild ties on common issues including digital regulation, the Covid-19 pandemic, and fighting deforestation. 
  • To counter the common competitor - China: The proposal points out the importance of collaboration to better prepare against geopolitical risks from China’s growing international presence. 
  • The 11-page draft plan will be submitted for endorsement by EU national leaders next week.


Roadblock: taxing tech firms

Yet, digital tax for US tech groups is a dividing factor for the US and Europe. France demanded US tech giants to pay digital service taxes starting December (that’s today!). 

  • How much is the fee? France charged these tech firms 3% of revenues from digital services earned in France last year. 
  • Other governments also joined, including the UK, which is scheduled to begin collecting in April.


Why targeting big tech? Europe thinks that US tech companies do not pay a “fair level of” tax for the big profits they make, especially with the high revenues this year due to the pandemic.


This is not a new dispute. 

  • Both sides agreed to talk on a multilateral taxation framework overseen by the OECD in January, and France temporarily stopped collecting digital tax. 
  • But the US paused the talks with OECD countries in June, and threatened to impose tariffs on France products including handbags in July if France pushed for the digital service tax. 


How will this impact the EU-US relationship?

France’s move now ended the truce with Washington. US side is expected to impose tariffs of 25% on USD 1.3 bln worth of French handbags and make-up, with threats to add 100% of tariffs on champagne and cheeses. 


The proposal draft calls both sides to bury the tensions, such as the taxation issue over tech giants and jointly build the digital regulatory environment. Do you think a deal will be reached?



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