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A transatlantic effort to take on Big Tech

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Opportunities and challenges are often one and the same. So it is at the moment with the US and Europe.

The European Commission wants to grab a “once-in-a-generation” opportunity to reset the transatlantic relationship now that US president Donald Trump is on his way out. President-elect Joe Biden’s administration will want a partnership with Europe to be at the heart of a reinvigorated alliance of liberal democracies that will present an economic and political alternative to China.

However, the 27-nation EU and the US continue to be at war with each other over technology regulation, trade and corporate taxation. Brussels is right that it is time for a reset. But getting there will require thinking about these issues all together, rather than in silos.

Start with tech regulation. The commission is considering new legislation that would take on the most entrenched Big Tech firms, such as Facebook and Google. The idea is to correct the failures of existing antitrust legislation, since competition policy focused on consumer pricing is not built for the era of digital barter. The US Department of Justice’s Google case may begin to shift that, but it will take years to complete.

The commission’s proposals, which would be subject to the approval of EU governments, would define the role and responsibilities of digital “gatekeepers”. They would force them to make their systems more open and interoperable, subject them to algorithmic audits and impose sanctions, such as the divesting of assets, for repeat offenders. 

Silicon Valley is already lobbying hard against the proposals. Companies are counting on the incoming Biden administration, which will include a number of tech-friendly officials from Barack Obama’s time in the White House, to help them stand up to Europe. It shouldn’t. One of the huge risks for the new administration is that it will be seen as too cosy with concentrated corporate power. Witness the cries already coming from the left about some of Mr Biden’s appointees who have backgrounds in private equity. 

Individual appointees should be judged on their own merits. If we didn’t let anyone from either the finance or the technology industries into the new administration, we would be the poorer for it. Take Gary Gensler, a former Goldman Sachs executive, who is now Mr Biden’s chief markets adviser. He cleaned up derivatives trading while at the Commodity Futures Trading Commission during the Obama years.

That said, this is a crucial moment for the new president to send a signal about how he plans to control Big Tech as an industry — or not. European regulation is not perfect, but it is far better than what the US, with the exception of California, has right now, which isn’t much.

Each side needs a swift agreement on how to regulate cross-border data flows, given that digital trade is the only sort that is expanding. The European proposals overlap with the DoJ’s antitrust case in that they both focus on how big platforms can trap customers into choosing their own products and services — an argument Google contests. This should be the start for a new transatlantic approach to curbing the monopoly power of the sector, which has only grown during the pandemic.

It could also be part of the west’s response to China’s digital surveillance state. It makes perfect sense for the US and the EU to create a shared set of standards for 5G and the internet of things, which will massively increase the depth and breadth of digital data over the next few years, using homegrown equipment from companies such as Qualcomm, Nokia and Ericsson. China plans to be free of foreign technology and supply chains by 2035. It is time that the US and Europe created their own digital alliance.

It must be a diverse one. As we move from the consumer to the industrial internet, Europe, as a huge producer of potentially “smart” devices such as white goods and automobiles, has much to gain — but also to lose. For example, it is easy to imagine Google’s Nest division owning much of the data generated by a German washing machine or a French refrigerator, without the data sharing and portability that is a core element of the new EU proposals.

While the new rules are geared more towards the consumer internet, the EU’s policymakers are studying the internet of things and plan to put out a report on consumer-facing IoT by the middle of next year. European companies such as Siemens and SAP have a leg up when it comes to the business-to-business industrial internet.

Still, I would love to see any future digital competition solutions include public data banks in which anonymised personal and industrial data are shared, with independent oversight. It would be a way to ensure that companies of all sizes, as well as researchers and academics, could have equal access to data.

No less welcome would be a transatlantic agreement about how to tax data extractors — be they platforms, fintech firms or French luxury handbag makers. The public sector needs the revenue. And the Biden administration can’t afford to be as cosy with Silicon Valley as the last Democratic administration was.

The perception that the Democrats sold out to corporate interests is one of the reasons we got Mr Trump. Resetting trust in the public sector must also be an end goal for any new transatlantic relationship.

rana.foroohar@ft.com

Follow Rana Foroohar with myFT and on Twitter





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Europe

EU and US set to end Airbus-Boeing trade dispute after 17 years

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The EU and US are poised to resolve a 17-year dispute over aircraft subsidies, lifting the threat of billions of dollars in punitive tariffs on their economies in a boost to transatlantic relations. 

Diplomats and officials confirmed on Monday night that two days of intensive negotiations in Brussels had left the EU and the Biden administration with a draft deal on subsidy rules for Airbus and Boeing. The breakthrough is set to be finalised on Tuesday at US president Joe Biden’s first EU-US summit meeting in Brussels.

“I am very positive that we will find an agreement on the Airbus-Boeing issue today, in our conversation with our American friends,” Ursula von der Leyen, the European Commission president, said on Tuesday morning. “I am very positive and convinced that we will deliver together today.”

People close to the talks said the governments of Airbus’s three home countries in the EU — Germany, France, and Spain — were being consulted on the draft deal ahead of it being confirmed on Tuesday. 

The deal will take the form of a five-year accord to suspend punitive tariffs linked to the disagreement, coupled with the creation of a working group and ministerial dialogue on subsidy limits, according to people close to the talks.

The intention is that this will ensure the disagreement never re-emerges, including for new aircraft models.

The breakthrough will lift a cloud of uncertainty hanging over the airline sector, while removing the threat that EU and US consumer goods could again be hit with punitive tariffs because of the dispute. 

Those duties — on a wide range of products, from French wine to US spirits and sugarcane molasses — were suspended after the EU and US agreed in March to lift them for four months and to start negotiations on a solution. 


$7.5bn


Extra tariffs imposed by the US on European goods in October 2019

The Airbus-Boeing dispute is one of the longest running battles in the history of the World Trade Organization — a disagreement both sides have acknowledged they could increasingly ill-afford as they seek to forge closer co-operation in dealing with China’s model of state capitalism. 

EU trade commissioner Valdis Dombrovskis held talks with US trade representative Katherine Tai and commerce secretary Gina Raimondo in the days leading up the summit as the sides strove to get an agreement over the line. 

Tai’s office declined to comment.

Companies on both sides of the Atlantic have long called for a solution. The matter took on greater urgency after the US targeted European exports worth $7.5bn with extra tariffs in October 2019, while the EU imposed additional duties on $4bn of US exports last year. Both sets of measures were in line with WTO rulings in favour of each side.

But both the US and EU have been found over the years to have failed to properly implement WTO panel rulings on illegal subsidies for their aircraft manufacturing champions.

EU and US trade officials emphasised the complexity of the dispute, with each side taking issue with the other’s claim to have complied with WTO decisions. The nature of subsidies on each side of the Atlantic is also very different, with EU officials pointing to sizeable US defence contracts as one example. 

The end of the Airbus-Boeing dispute would remove one important irritant in trade relations, but others remain. 

Brussels last month held back from increasing tariffs on US goods as a goodwill gesture in a disagreement over Trump-era tariffs on European steel and aluminium. 

The two economies are also yet to fully bury their differences over digital taxes, with the issue now tied up with broader international talks. 

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Nato warns China’s military ambitions threaten international order

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Nato leaders have warned that China poses “systemic challenges” to the rules-based international order, in a sign of growing western unease over Beijing’s military ambitions.

Members of the transatlantic alliance convening in Brussels on Monday cited activities such as disinformation, Chinese military co-operation with Russia and the rapid expansion of China’s nuclear arsenal as part of the threat, according to a Nato communiqué.

The strength of the statement shows how far relations between the west and Beijing have deteriorated in the 18 months since Nato countries last met. Then they had issued a cautious statement about the “opportunities and challenges” presented by China.

The tougher language at US president Joe Biden’s first Nato summit comes as members of the 72-year-old cold war-era military pact vowed to widen co-operation in new theatres of conflict from cyber space to outer space. The Nato communiqué followed a tougher line from the weekend’s G7 meeting, when the club of rich democracies criticised China over human rights, trade and a lack of transparency over the origins of the coronavirus pandemic.

Jens Stoltenberg, Nato secretary-general, insisted Beijing was “not an adversary” but said the alliance needed to “engage with China to defend our security interests”.

“There is a strong convergence of views among allies,” he said, adding that Nato was primarily concerned about Beijing’s activities in the group’s Euro-Atlantic sphere of operation. “China’s growing influence and international policies present challenges to alliance security.”

China’s “stated ambitions and assertive behaviour” posed “systemic challenges to the rules-based international order and to areas relevant to alliance security”, said the summit communiqué, approved by the leaders of the 30 Nato member states.

“We call on China to uphold its international commitments and to act responsibly in the international system, including in the space, cyber and maritime domains, in keeping with its role as a major power.”

The communiqué pointed to China’s “coercive policies”, its accumulation of nuclear warheads and sophisticated delivery systems, and its participation in Russian military exercises in Atlantic region waters. Another trend troubling Nato allies is the involvement of Chinese companies in critical infrastructure in Europe, such as ports and via telecommunications company Huawei.

Nato said it would aim for “constructive dialogue” with Beijing “where possible”, including on climate change, in a sign of more nuanced views held by some of the alliance’s members.

The Nato broadside reflects an attempt by the Biden administration to use his first European trip to mobilise allies to push back against China.

Beijing hit back at criticism by the G7 club of rich democracies this weekend, accusing the group of “sinister intentions” and “artificially creating confrontation and friction”.

The Nato leaders also pressed ahead with efforts to modernise a grouping originally set up as bulwark to the Soviet Union. Nato is now pulling back from an era of “expeditionary” international missions, with its forces preparing to leave Afghanistan along with US troops after almost two decades.

The Nato heads of state and government approved a cyber defence strategy and extended existing powers to invoke the alliance’s “Article 5” principle of collective defence, in cases of co-ordinated cyber attacks.

“[This] will upgrade the defence, political and intelligence dimensions of cyber across the alliance,” Jake Sullivan, US national security adviser, said before the meeting.

UK prime minister Boris Johnson had also called for more investment in cyber defences in the wake of the Covid-19 pandemic, when hostile states were accused of carrying out cyber attacks on allies’ health systems.

Nato leaders also pushed through measures to strengthen their collective response to attacks on satellites, and to build capabilities in emerging technologies such as artificial intelligence. Members of the alliance have become increasingly preoccupied with potential military uses of AI and with the growing activities of China and Russia in outer space.

As well as confronting external threats, Nato faces some chronic internal divisions, notably between Turkey and some member states such as France in the eastern Mediterranean.

Additional reporting by Helen Warrell in London



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Biden says he is open to exchange of cybercriminals with Putin

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US president Joe Biden said he was open to Russian president Vladimir Putin’s proposal to hand over cybercriminals to the US if Washington did the same for Moscow, just days before the two leaders meet for a summit in Geneva.

Biden and Putin will sit down in Switzerland on Wednesday for their first face-to-face meeting since the former was sworn in as US president. Both leaders said at the weekend that relations between their two countries were at a low point, but Biden’s latest comments suggested there could be room for co-operation.

Speaking at the conclusion of a meeting of G7 leaders in the UK on Sunday, Biden told reporters he was receptive to Putin’s suggestion of reciprocal extradition of cybercriminals responsible for disruptive ransomware attacks.

Earlier on Sunday, Russian state TV aired an interview with Putin in which the Russian president said that Moscow and Washington must “assume equal commitments”.

“Russia will naturally do that but only if the other side — in this case the United States — agrees to the same and will also extradite corresponding criminals to the Russian Federation.”

Asked about Putin’s comments, Biden said: “Yes, I am open to, if there are crimes committed against Russia, that in fact are people committing those crimes are being harboured in the United States, I am committed to holding them accountable.”

“I was told as I was flying here, that [Putin] said that,” Biden added. “I think that is potentially a good sign of progress.”

An increasing number of audacious ransomware attacks has paralysed companies in recent weeks. These have included the disruption of the Colonial Pipeline, which provides petroleum supplies for much of the US east coast, as well as operations at JBS, the Brazilian meat processing company. The White House has said it believes both attacks originated in Russia.

Jake Sullivan, US national security adviser, later clarified that Biden had not signed up to a “prisoner swap”.

“What he was saying was that if Vladimir Putin wants to come and say I am prepared to make sure that cyber criminals are held accountable, Joe Biden is perfectly willing to show up and say cyber criminals can be held accountable in America, because they already are. That is what we do,” Sullivan told reporters on Air Force One en route to the Nato summit in Brussels, the second leg of Biden’s first foreign tour as president.

“This is not about exchanges or swaps or anything like that.”

Putin told NBC News in an interview that aired on Friday that relations between the US and Russia were at their “lowest point in recent years”. Biden on Sunday said that he agreed with the characterisation, but also pointed out areas where he believed the two countries could work together.

The White House confirmed on Saturday that Biden would hold a solo press conference following the summit with Putin, rather than share a stage as his predecessor Donald Trump did with the Russian president in Helsinki in 2018.

Joe Biden disembarks from Air Force One in Belgium on Sunday for a Nato summit
Joe Biden disembarks from Air Force One in Belgium on Sunday for a Nato summit © Benoit Doppagne/POOL/EPA-EFE/Shutterstock

“This is not a contest about who can do better in front of a press conference or try to embarrass each other,” Biden said. “It is about making myself very clear what the conditions are to get a better relationship.”

He added: “Russia has engaged in activities which we believe are contrary to international norms. But they have also bitten off some real problems they are going to have trouble chewing on. For example, the rebuilding of Syria, of Libya.”

“I am hopeful that we can find an accommodation that can save the lives of people in, for example, Libya.”



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