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News & Insights on Europe

News and Views on Europe – 27 Apr 2018

posted by eucentresg

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What did Macron get out of his visit to the US

French President Emmanuel Macron was received in full state honours in Washington this week during his three-day visit. Prior to the visit, there had been talks about the specific policy agenda of the visit. Reuters reported that this visit would “include efforts to convince Trump to exempt Europe from steel tariffs and convince the US to maintain its military presence in Syria”. During the visit, President Macron also had the opportunity to address Congress, making him the eighth French president to do so. During the said address to the joint houses, President Macron was “highly critical” of Trump’s stance on the Paris agreement and trade tariffs, considering the dealmaking and conciliatory intent of the White House visit.

Although a senior adviser to the French president disclosed that both parties “made proposals” and “advanced arguments” with “a discussion that went in the right direction”, post-talks, it was later reported that Trump had budged little nor acquiesce to some of President Macron’s proposals, with President Trump being described as largely non-committal; “leaving Europe at large in a state of uncertainty on a range of hot-button strategic and commercial matters”. If President Macron had high expectations that this visit would bring the aforementioned issues to the fore with some concrete outcome, it appears that that had not been the case. Even with regards to Syria, “where the French president said that he had ‘convinced’ Trump to keep American troops on the ground for a longer period”, President Trump remained largely stoic.

But even if he had succeeded in pushing forth his agenda, EU member countries may find Macron’s “successes too bilateral” particularly as the bloc has not been involved in discussion. That President Trump’s revelation of his “new Iran deal”, had been revealed only to President Macron without consulting the European Union, has raised some eyebrows. It would appear that President Trump’s preference for bilateral trade deals carries on into the political sphere. Recently, it has also been discussed to some extent that President Macron is regarded by Washington as representing the EU or speaking on behalf the EU to some degree, which in the event, sidelines Germany’s traditional strategic position as a representative of the EU. Hence while Macron may not have gotten any concrete deals from Trump, he seemed to have establish himself as the European leader capable of dealing with an unpredictable US “ruled” by Trump.

 

The EU pushes for regulation within the AI Industry

On its mission to spur the AI industry, the Commission is taking a different approach from the US in stressing on the preservation of fundamental rights and consumer protection. Politico reported that the European approach to AI is an ethics-first approach, heavily championed by France – that “according to Macron, people will continue to view AI with a degree of suspicion, unless a certain level of transparency is guaranteed.” With this strategy, a “high-level group of experts” will come on board to craft and release the frameworks for AI legislature by the end of the year, whereas it is expected that the EU’s expenditure on AI research and development will increase significantly by “70% to around €500 million, effective immediately.

Although laudable, this plan is not without obstacles. It will be impossible if member countries are not all on-board with ethics-first approach. Last month, Committee Vice Chair Mady Delvaux noted that “different member states are introducing their own regulations”, which is something that the Commission had hoped to prevent.

To ensure operability for and within businesses, some experts, such as Liam Benham, vice president for government and regulatory affairs in Europe at IBM, think it is vital and most ideal if there is a “harmonized legal framework at EU level, governing rules around things such as liability”.

The EU currently faces stiff competition in the AI industry from the global superpowers and lags behind the two. Yet it is determined to pursue a different approach, notably “not copying the US or Chinese” but to centre AI technologies on transparency and regulated algorithmic decision-making process. It also aims to provide customers with insights on consumer-driven AI, which are “deep learning” technologies that “allow computers to learn and make their own decisions by mimicking.. human brain patterns”. Whilst business leaders said they welcome “the EU’s ambitions to become a stronghold of data protection in a world that could soon be dominated by AI-powered technologies” they also appeal for a balanced approach that would not put business at a competitive disadvantage.

In related news, it was reported that a pan-European innovation agency that is comparable to the US Defense Advanced Research Projects Agency as proposed by French President Macron has been shelved by the Commission. Per President Macron’s proposal, he had hoped that Europe will benefit from a similar agency, that “explicitly reaches for transformational change instead of incremental advances”. The EU Commissioner for Research and Innovation, Carlos Moedas cited that Darpa is “too top-down” in approach. As Europe currently lacks the means and expertise to host such an agency, a more bottom-up approach would probably make more sense.

 

Brussels after Apple over tax and competition considerations

Apple and the Irish government signed an agreement on Tuesday (24 April) for Dublin to recover over €13 billion in tax breaks given to Apple (plus approximately €2 billion interest). Paschal Donohoe, the Irish finance minister, said the money would be recovered in a series of payments starting in the second quarter of 2018, with all funds expected to be paid by the end of September.

The European Commission ruled in August 2016 that Apple had received unfair tax incentives from the Irish government. The tax break was deemed “illegal” by Brussels essentially because it was not made available to all companies. But both Apple and Dublin denied the allegations, saying the company’s tax treatment was in line with Irish and EU law. After Dublin missed a January 2017 deadline to recover the tax breaks, Brussels referred Ireland to the European Court of Justice (ECJ) last October. This week’s agreement on how to recover the money is likely to save Ireland from a second ECJ referral that could result in a fine.

Ireland, which builds the economic success on being a low-tax entryway for multinationals seeking access to the EU, is concerned that collecting back taxes could reduce its attractiveness as an investment destination. So, Dublin has appealed against Apple’s tax bills. The case is expected to be heard in autumn.

While Ireland is against the ruling, the ECJ’s decision enjoys some public support in other countries like France. Early this month, a French group opposed to Apple’s tax manoeuvring in Europe took to the company’s stores in a public protest. The group named Attac France said the protest was over Apple’s refusal to pay its fair share of local taxes in France. To get their point across, Attac members laid down in and around the stores to symbolise what they said the 67 million French citizens who get shafted by Apple not paying taxes in the country. The group demanded the French government collect what it believed to be anywhere from €60bn-€80bn in taxes Apple and other large companies evade paying every year.

Apart from the tax disputes, Apple is at odds with Brussels on another case concerning the American company’s acquisition of British music startup Shazam. The European Commission on Monday (23 April) opened an investigation of the takeover. The probe came after the Commission said earlier this year it would either approve or investigate the deal by 23 April, in the face of requests from some member countries to look into the takeover due to competition concerns.

In its announcement about the move, the Commission said the investigation was prompted by the consideration that the merger “could reduce choice for users of music streaming services.” The Commission’s preliminary investigation suggested that, after taking over Shazam, Apple would obtain access to commercially sensitive data about customers of EU music streaming competitors. “Access to such data could allow Apple to directly target its competitors’ customers and encourage them to switch to Apple Music,” the Commission said. The Commission has until 4 September to take a decision on the case.

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