High on President Joe Biden’s agenda as he travels to Europe this month for G7 and NATO summit meetings will be discussions to mend the rift in transatlantic relations that President Donald Trump exacerbated with his blustery America First posturing. But if the president believes he can easily restore transatlantic relations to their former state, he is likely in for a rude awakening.
Nowhere is this more obvious than in Europe’s increasing aggression toward U.S. technology companies as manifest in its protectionist efforts to achieve “digital sovereignty.” While the president should, by all means, seek a stronger alliance with European allies, particularly against China, he should not “give away the store” by sacrificing U.S. economic and technology interests simply to make amends.
In the past several years, Europe has responded to America’s growing digital leadership with concern — even alarm. E.U. policymakers regularly call out U.S. technology “colonization” and seek “digital sovereignty” against U.S. “dominant platforms.” The French minister for economic affairs went as far as calling U.S. “big tech” companies an “adversary of the state.”
And the E.U. has backed that sort of rhetorical acrimony with policy action, deploying a wide range of mercantilist tools to protect itself in the hope of hobbling the American giants, Gulliver-like, so the EU “Lilliputians” can grow. The tactics include aggressive and discriminatory antitrust enforcement, as reflected in the proposed Digital Markets Act; limitations on data transfers to the United States; discriminatory taxes on U.S. digital companies; government funding of national tech champions; establishing EU-approved “data intermediaries”; massive fines for privacy, content and other digital violations; and onerous regulatory restrictions on the use of data and AI.
This protectionism might be excused if Europe were running a big trade deficit with the United States. But it isn’t. While the E.U. ran a small trade deficit with the United States in the information and internet services sector — just $1.8 billion in 2019 — it enjoyed a massive overall trade surplus of $153 billion. Yet Europe believes it is justified in limiting access to its markets for one of the few U.S. sectors that competes effectively in Europe.
It is almost certain that E.U. President Ursula von der Leyen will tell Biden that the price for good transatlantic relations is America’s acceptance of Europe’s economic aggression. The president should not fall for it.
During the Trump administration, Europe did virtually nothing to help the United States in its efforts, poorly executed as they were, to defend the global trading system and roll back Chinese innovation mercantilism. The E.U. took advantage of America’s leadership on that front by filling orders in China that had previously been American. With Germany in the lead, Europe is more interested in selling to China than confronting it for its rampant economic mercantilism.
Von der Leyen might very well tell Biden that rather than fight the EU, the United States should join it by emulating Europe’s aggressive technology policies, including passing an onerous and expensive EU-styled national privacy law and breaking up large tech companies. After all, she might point out, many left-of-center constituencies in America would be thrilled, as evidenced when liberal economic commentator Robert Kuttner asked recently, “will the U.S. and the EU join forces to add some rules on privacy, transparency, competition, and some liability for abuses?”
Others will urge Biden to do anything — including accepting the innovation-limiting E.U. policies — in order to form a stronger alliance with Europe, arguing that the China challenge requires compromising America’s core interests to keep friends on its side. But accepting and adopting the E.U.’s regulatory model could significantly weaken U.S. digital innovation and competitiveness by keeping Gulliver tied to the beach. There is a reason why the E.U. lacks a strong digital economy —its restrictive regulations hobble its potential global champions.
So, Mr. President, resist this siren song and defend the U.S. economy and American workers. If you go down the E.U. path, you will turn the vibrant U.S. tech economy into the sclerotic equal of its E.U. counterpart — with few large, globally competitive companies, vastly reduced amounts of venture capital and digital entrepreneurship, and a digital trade deficit. That would not be a world of “Big U.S. Tech”; it would instead be a world that gives way to “Big China Tech.”
Stronger transatlantic ties would be a good thing, and both parties should seek to establish real substantive digital dialogues. But E.U. officials need to dial back their talk of “digital autonomy” and “war on U.S. big tech,” and Biden needs to hold their feet to the fire.
Dr. Robert D. Atkinson is president of the Information Technology and Innovation Foundation, the leading think tank for science and technology policy.
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