Left unchecked, the U.S. is on an economic collision course with the European Union (EU) that will significantly harm both parties, undoing decades of cooperation that has helped fuel immense growth and prosperity.
The chief culprit in this mess is the EU, specifically its governing body, the European Commission, which has imposed onerous fines and related attacks against U.S. companies. The Biden Administration has, at best, sat by while at times aiding and abetting onerous regulations and confiscations against U.S. companies.
The EU has also created a static economic environment and seems dazed and confused about where it should go next. Simply put the EU wants what the U.S. has: a dynamic, innovative, technologically driven economy. And having failed to create anything like it, it seeks to take from the U.S.
In September, Mario Draghi, the former President of the European Central Bank, issued a stinging report about the need for change in Europe. It found, “The US economy has nurtured new, innovative technologies and investment has followed, redirecting resources towards sectors with high potential for productivity growth; in Europe, investment has remained concentrated on mature technologies.”
Draghi also said in a September speech to the European Parliament, “The core problem in Europe is that new companies with new technologies are not rising in our economy. In fact, there is no EU company with a market capitalization over EUR 100 billion that has been set up from scratch in the last fifty years. All six US companies with valuations above EUR 1 trillion have been created in that period of time.”
The report also slammed the regulatory burdens businesses face from the EU.
“We claim to favour innovation, but we continue to add regulatory burdens onto European companies, which are especially costly for small and medium enterprises (SMEs) and self-defeating for those in the digital sectors. More than half of SMEs in Europe flag regulatory obstacles and the administrative burdens as their greatest challenge.”
However, while large U.S. technology companies operate in Europe, providing its citizens with numerous highly valuable services, many of which are free, these companies are being attacked more ruthlessly than European businesses.
This includes:
- Imposing billions of dollars of fines and extensive regulatory requirements for the benefit of European companies.
- Threatening companies with massive fines. As the U.S. Chamber of Commerce notes, “Among the laws that feature these fines and their thresholds for first-time offenses: Digital Markets Act (up to 10% of global revenues); Competition Law Violations (10%); EU AI Act (7%); Digital Services Act (6%); Corporate Sustainability Due Diligence Directive (5%); and the General Data Protection Regulation (4%).
- Preventing mergers that would have benefitted U.S. companies, including iRobot, maker of the Roomba robotic vacuum cleaner, which Amazon sought to acquire.
At some point, President Trump is probably going to punch back.
Because of the immense value that technology companies create for the U.S. economy and their absence in Europe, President-elect Trump has quite a strong hand to play with the Europeans. He can urge them to back down, treat U.S. companies fairly, and deregulate and open up their economies. This will attract vast investments from U.S. venture capitalists and U.S. technology companies and give Europe the fuel it needs to grow.
President-elect Trump should also order the EU to close its diplomatic office in San Francisco, an outpost for confronting U.S. companies, dictating the terms they must follow to do business in Europe.
If necessary, the President-elect can remind the EU that he took them to task in his first term for trying to impose special taxes and fees against U.S. tech companies and even got France to back down on such measures by threatening targeted tariffs against French luxury goods.
A growing, dynamic, tech-hungry, and innovative Europe benefits both Europe and the U.S. This economic perestroika will enable Europe to thrive once again, and help the free Democratic west be the envy of the world.
