Punitive Tariff Trade Dispute "You Come and Me Go" Tears up the US-EU Alliance

After the US threatened to impose tariffs on European Union cars and the continuing escalation of air subsidy disputes between the US and Europe, the US and Europe launched a new round of "lip-and-lip fighting" around the digital service tax, which aroused widespread concern. On the one hand, aggressive and persistent difficulties, while not showing weakness tit-for-tat, there was public opinion exclamation: "The Atlantic Ocean has become more and more'wide'."

Recently, there has been a new plot in the stalemate of trade disputes between the United States and Europe.

According to CNBC, under the pressure of the 301 Survey, the French Senate still approved a digital service tax bill on July 11 to levy a 3% digital service tax on American technology giants such as Google, Amazon and Facebook. On the same day, the Financial Times website reported that the United Kingdom also published a draft legislation to levy a digital service tax from April 2020.

After the US threatened to impose tariffs on European Union cars and the continuing escalation of air subsidy disputes between the US and Europe, the US and Europe launched a new round of "lip-and-lip fighting" around the digital service tax, which aroused widespread concern. On the one hand, aggressive and persistent difficulties, while not showing weakness tit-for-tat, there was public opinion exclamation: "The Atlantic Ocean has become more and more'wide'."

"301 Survey" Increases Tension

According to the Financial Times, France's Digital Services Tax Act stipulates that more than 30 global digital businesses with revenues of not less than 750 million euros will be levied on January 1, 2019, while Internet companies with revenues of more than 25 million euros in France will be levied a digital services tax equivalent to 3% of their turnover in France.

France took the lead in levying a substantial tax on digital services. In fact, besides France, the United Kingdom, Italy, Austria, New Zealand and other countries are also considering levying a digital service tax, and the European Union is also demonstrating this.

The United States reacted strongly to this. American Trade Representative Lethizer pointed out that the digital service tax involves American companies in the world's leading areas, "France has unfairly targeted the tax on some American technology companies."

On July 10, local time, the Office of the United States Trade Representative announced that the United States had decided to launch a "301 investigation" into France's ongoing digital services tax law. It is worth noting that this is the first time that the United States launched an investigation into France, a European ally, in accordance with Article 301 of the 1974 Trade Law.

France is equally tough. According to the Washington Post, French Finance Minister Bruno Lemmel responded that "France is a sovereign country and it is a sovereign act to make decisions on tax matters." He also called on the United States to "resolve disputes between our allies without resorting to threats".

"This inquiry into'unfair conduct'may pave the way for punitive tariffs in Washington." Agence France-Presse issued the first warning. According to the article, "301 Survey" is the main tool used by the U.S. government in the trade war to prove that the imposition of tariffs is "justified" against what the U.S. calls "unfair trade practices". The U.S. move adds another focus to the transatlantic trade dispute.

The Washington Post also believes that the U.S. rarely uses the "301 Survey" against its close allies. This unusual move could exacerbate trade tensions between the United States and Europe.

"Friends worse than enemies"

Why do European countries like France and Britain aim at technology giants? The BBC analyses that "they publish most of their profits at their headquarters, whereas in countries where there is no substantial physical business, they often pay very little or no corporate tax. According to the estimates of the European Commission, the average tax rate for traditional enterprises in the EU is 23%, while that for Internet enterprises is usually only 8% or 9%.

According to the New York Times, the EU authorities have been the most active regulator in the global technology industry, and there has been a long-standing friction with Washington. The EU has punished some US technology companies for anti-competition, tax avoidance and privacy disclosure.

However, the contest between EU countries and US technology giants is only the tip of the iceberg in the economic and trade frictions between the US and Europe. In early July, the U.S. government announced plans to impose additional tariffs on $4 billion of European exports to the United States, putting pressure on the European side over the dispute over subsidies for civil aviation aircraft between the United States and Europe. In April this year, the United States and Europe published lists worth $21 billion and $200, levying huge tariffs on each other's exports.

As CNBC worries, "The danger is manifesting in several ways - the dispute between Airbus and Boeing Airlines, the new tax imposed by France on the US digital giant, the possible sanctions imposed by the US on the supplier of Beixi No. 2 gas pipeline, and the new tariffs imposed on European automobile imports."

Cui Hongjian, director of the European Institute of the Chinese Academy of International Studies, said in an interview with our reporter that the United States and Europe are the largest trading partners with close economic and trade relations and each has its own advantages. At present, the U.S. government pursues the concept of "the United States is the first", ignoring the differences in industrial development between the United States and Europe, looks at bilateral economic and trade frictions from the perspective of trade deficit and national security, changes the past practice of settling disputes within certain rules, and adopts a non-discriminatory strike mode. On the contrary, common economic interests have become the "tool" for the United States to restrict and harm its allies, which is unacceptable to European countries. The economic and trade frictions between the two sides have changed from "recessive" to "explicit".

In addition to the "you come and I go" tariff war, the US-EU free trade negotiations are still moving slowly after nearly three months of resumption. Wang Wang, Vice-Director of the European Institute of the Chinese Institute of Modern International Relations