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US Policymakers Should Fight Back Against EU Attacks on America’s Tech Sector

US Policymakers Should Fight Back Against EU Attacks on America’s Tech Sector

March 5, 2024

Are U.S. policymakers suffering from Stockholm Syndrome? That would be a reasonable conclusion for political observers as they witness most U.S. government officials standing idly by as the EU heaps extensive new regulations and record-breaking fines designed to bring down U.S. tech companies. Most have either looked on with indifference or eagerly cheered the steadily growing attacks. With friends like these, who needs enemies?

Perhaps it is all a misunderstanding. Most recently, the European Commission has announced a $2 billion fine against Apple, arguing that its App Store has hurt competition among music stream apps. The fact that the Commission’s decision primarily benefits Spotify, a Swedish company, is probably just a coincidence. Such an eye-watering fine must mean that Apple has been abusing its position as the dominant music streaming service in the EU, right? Well, no. As Apple pointed out in a statement following the decision, “Spotify has a 56 percent share of Europe’s music streaming market.” Or perhaps Apple was blocking its competitor? No, said Apple, “the Spotify app has been downloaded, redownloaded, or updated more than 119 billion times on Apple devices.” Then it must be that Apple unjustly enriches itself off its Swedish competitor in the music market, right? No again: “Spotify pays Apple nothing.”

The EU’s fine against Apple, though enormous, is not even the largest against a U.S. tech firm in recent years. In 2017, the EU fined Google $2.7 billion for allegedly unfairly promoting its comparison shopping services and, a year later, fined the company an additional $5.1 billion for alleged anticompetitive practices on Android. The EU fined Meta $400 million in 2022 and $1.3 billion in 2023 for alleged violations of Europe’s data protection laws on Instagram and Facebook, respectively. If these regulators incorporated, they would be one of the EU’s most successful start-ups, which sadly is a low bar.

The EU shows no signs of slowing down. The General Data Protection Regulation (GDPR), the EU’s data protection law passed in 2016, allows for fines of up to 4 percent of a company’s global revenue for its most severe violations. The Digital Services Act allows fines of up to 6 percent of global turnover. The newly passed Artificial Intelligence Act allows fines of up to 7 percent of global turnover. Those are tough to top. But, “Hold my beer,” says the Digital Markets Act, which allows fines of up to 10 percent of global revenue, or 20 percent of global revenue for repeated violations.

Instead of speaking up on behalf of U.S. economic interests, some U.S. regulators even appear to be aiding and abetting the EU in these efforts. The Federal Trade Commission (FTC), for example, announced plans last year to embed a staffer in Brussels “to assist with implementation of the Digital Markets Act.” Senator Ted Cruz (R-TX) has rightly questioned why the FTC was using “taxpayer resources to directly coordinate with foreign lawmakers to create new regulations in overseas jurisdictions that target American businesses.”

EU policymakers insist they are not targeting U.S. tech companies. European Commissioner for Internal Markets Thierry Breton claims that this accusation is an “urban legend,” but actions speak louder than words. The reality is that the EU has declared open season on American tech companies and the United States has mounted no coordinated response. In December, a bipartisan group of lawmakers from the U.S. House of Representatives sent a letter to President Biden warning that the EU was unfairly targeting U.S. tech companies while ignoring large Chinese tech companies in designating “gatekeepers” under the Digital Markets Act. The administration appears to be ignoring their objections. Instead, U.S. government officials continue to work closely with their European counterparts in the EU-U.S. Trade and Technology Council to “deepen transatlantic trade and economic relations” while ignoring the elephant in the room.

The U.S. government has a responsibility to protect U.S. businesses, and their workers, from foreign attacks, whether they be from rebels menacing U.S. cargo ships, hackers infiltrating U.S. networks, or regulators targeting U.S. business models. These attacks hurt U.S. economic interests, threaten U.S. jobs and competitiveness, and weaken a key U.S. sector’s capacity for innovation through billions in lost revenue and opportunities. For example, iRobot, the Massachusetts-based robotics company, announced that it would layoff almost a third of its staff after the EU blocked Amazon’s acquisition of the company. Why are U.S. policymakers allowing foreign officials to singlehandedly determine the future of two American companies?

Ideally, the United States would work out this issue through diplomatic engagement, but given how rigid EU policymakers appear to be on this issue it is time for more drastic measures. One option would be to create a retaliatory fee for EU travelers coming to the United States. Such a fee would be taking a page out of the European playbook as Americans must begin paying around $8 to enter Europe’s Schengen Area starting next year. Congress could create a reciprocal fee for Europeans traveling to the United States that combined any fees Americans must pay to enter the EU plus an additional fee to cover the cost of protectionist fines and digital services taxes assessed by EU member states against U.S. companies. Other options would also be viable, and lawmakers should get creative.

Among those standing in the way of a more robust U.S. response to the EU’s predation are progressives, including those in Congress, who see the EU as their allies in the Neo-Brandeisian campaign to bring down large U.S. technology companies. For them, an anticorporate and anticapitalist agenda takes precedence over broader U.S. economic interests. Also standing in the way are policymaking elites in U.S. think tanks, academia, and advocacy groups who place a harmonious transatlantic relationship ahead of U.S. national interests.

It’s time to wake up. As long as the EU continues to act this way, it is not behaving like it is America’s friend, and U.S. foreign policy should reflect that. One thing is clear: If U.S. policymakers do not step up to address the threat that European laws and regulations pose to U.S. economic interests, then the EU will only increase the size and severity of its fines and other confiscatory actions.

EU Commissioner Breton has argued, “It is time to take our destiny into our own hands.” That is advice that U.S. policymakers should follow, too.

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