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Campaigners are urging the UK government to resist pressure from the US tech lobby to place limits on how technology companies should be regulated in any US-UK trade deal.
While big tech lobbyists want to prevent the “unnecessary regulation of online services” in any new free trade agreement (FTA) reached between the two countries, non-governmental organisation Global Justice Now (GJN) is worried that an agreement could hand greater market share, profits and power to already dominant multinational technology companies if their lobbying is successful.
The Internet Association, which represents some of the world’s biggest tech companies including Amazon, Google, Facebook, Uber and Airbnb, published a document on 14 July entitled Digital trade priorities for a US-UK FTA calling for negotiators to prohibit a number of potential measures that could make it easier for the UK government to tax and regulate the technology firms it represents.
This includes prohibiting a digital services tax – which many countries are turning to in order to redress the lack of tax paid by multinational tech companies – and any measures that would remove the intermediary liability protection enjoyed by US-based digital platforms, preventing them from being held accountable for their role in spreading disinformation and online harm.
“Without intermediary liability protections, internet services would not be able to function as open platforms for trade and communication,” said the document. “In the US, intermediary liability protections are key to enabling companies to moderate online content and enhancing digital safety.”
The lobbying group also called for negotiators to prohibit the disclosure of source code to regulators as a condition for letting technology imports into the market, which it claimed “compromised technology and hurt trade”, as well as any requirements to store or process data locally, claiming: “When information is restricted, the economy and exports are hurt.”
Nick Dearden, director of GJN, told Computer Weekly that while the food and NHS-related aspects of the potential US-UK trade deal have taken precedence in the public debate, less attention has been paid to the digital side of it because of generally lower awareness of the implications.
“Companies like Facebook and Google are the robber barons of our age,” he said. “They don’t play by the rules the rest of us abide by, which means they have amassed unimaginable fortunes for their owners, and vast power over our societies. We must find ways of controlling them and taxing them if we are to have any hope of creating more equal and democratic societies.
“The fact that the US trade deal could stop governments taking this action is extremely dangerous. While people are rightly concerned about our food standards and the NHS, the rules governing big tech could actually be the most far-reaching impact of this trade deal. The US trade deal is shaping up to be a corporate charter for the richest people in the world to trample over our society. It must be stopped.”
‘Unfairly’ targeting US businesses?
Levying a digital services tax has been the object of particular ire in the US. On 22 July, for example, leaders of the Senate finance committee issued a statement expressing concern that “unilaterally imposing a discriminatory tax that unfairly targets US businesses unnecessarily complicates the path forward for a US-UK trade deal”.
The authors, senators Chuck Grassley and Ron Wyden, urged Downing Street to “reconsider this punitive action”.
On top of this, the US administration is moving to introduce millions of dollars’ worth of trade sanctions on any country that decides to introduce “discriminatory” digital services taxes.
As France prepared to levy such a tax, for example, the US announced a 25% tariff on $1.3bn worth of French goods, including handbags and cosmetics, and is currently investigating the UK, Austria, Brazil, the Czech Republic, India, Indonesia, Italy, Spain and Turkey with a view to taking similar action.
The UK’s own digital services tax took effect when the Finance Bill was passed in early July, although US-based companies will not have to start paying the 2% levy on digital profits until the end of the financial year. The US is yet to announce similar tariffs on UK markets.
GJN’s Dearden said the problem with any kind of technology regulation for the UK and other European nations is that they do not have tech corporations on the scale of Facebook or Amazon.
“Those big tech corporations exist in America and, to some extent, China,” he said. “What that means is that almost any way that the government chooses to regulate them is going to look unfair, because it won’t apply to businesses here. They just don’t exist at that scale.
“Because the only corporations it would apply to are American corporations – they are the only ones big enough to fall into the net – that would give them a perfect opportunity to challenge, in a corporate court, a government for bringing in extra regulations and suing for that, essentially.”
Dearden said the argument against taxing US tech giants on the basis that it is discriminatory is “economically illiterate”.
“The way that you develop industrial sectors, historically, is to nurture and protect them, at least for a period of time until they can stand on their own two feet,” he said. “There are some countries that basically control the whole world in terms of tech because no other country has managed to develop a tech sector to compete with that.
“It’s about monopolies more than free trade, and I think you know the American economy is highly monopolistic – and the whole global economy is highly monopolistic as a result. They don’t want to acknowledge that contradiction between talking about free trade but actually having a deeply monopolistic economy, which these trade deals just lock in.”
Settling disputes through corporate courts
Dearden said that although it is unclear at the moment whether a corporate court system would be implemented as part of a US-UK FTA, corporate courts or “regulatory cooperation councils” are normal features of modern trade deals.
“It gives corporations and governments the chance to challenge the government on the other side of the trade deal around any new regulation it’s bringing in,” he said. “One of these exists in CETA, the Canada-EU deal, and we’ve already seen examples of how businesses are using that to challenge European standards on glyphosate, for example, and other dangerous chemicals.
“It’s a way of corporations getting a constitutionally guaranteed ear of the government on the other side and saying, ‘Look, we think you could achieve your objective here in a much less onerous way, and this is an unnecessary regulation’, and they use this process to get governments to remove it from the table, sometimes before parliamentarians and so on even know about it.”
According to Dearden, although these councils and similar mechanisms give corporations a lot of power, it is still a “softer” approach than a full-blown corporate court system under an investor-state dispute settlement (ISDS) scheme, which would open up “a parallel legal route [for the affected companies] to challenge the UK government for any regulation they introduce that they regard to be unfair”.
Speaking in the House of Commons on 20 July, Labour MP Bill Esterson condemned the use of ISDS, saying: “The Portuguese government was sued using ISDS when the Lisbon metro was returned to public ownership. ISDS clauses in bilateral investment treaties are being used now to prepare a series of cases against the UK government for pausing construction contracts during the pandemic.”
Another Labour MP, Ruth Cadbury, also condemned such schemes, saying: “Settlements have been used by corporations to get rid of plain packaging on cigarettes, scrap bans on fracking, overturn bans on certain medications and stop compensation payments after oil spills.”
She added: “Without transparency, those with the deepest pockets win, we lose our consumer, environmental and social rights, and our planet is further threatened.”
Read more about tech tax plans
- The US has suspended talks with European countries about creating an international tax regime for multinational technology companies such as Google and Facebook, warning of retaliatory measures if they press ahead with their own taxes.
- A new proposal from the Organisation for Economic Co-operation and Development aims to advance international negotiations to address challenges around tax for the digital economy and get an agreement on the matter by 2020.
- The Nordic EU countries have formed a powerful voice against the European Commission’s plans on digital service tax.
In response to questions about whether the UK will ensure there are no ISDS clauses in any deals it signs, Greg Hinds, minister of state for trade policy at the Department for International Trade (DIT), said they were “in the UK’s interests”.
“The UK has never lost a case in any of these tribunals, but for 40 years, UK companies, with jobs at stake, have brought these cases,” he said. “Eighty of the cases – about 1,000 overall – were brought by UK companies and UK investors directly, with UK jobs at stake. That is why this can be very important for UK business and for the jobs of our constituents in making sure that businesses operating abroad are protected.”
This view is reflected in the DIT’s strategic negotiating objectives, which seeks to “establish comprehensive rules which guarantee UK investors investing in the US the same types of rights and protections they receive in the UK, including non-discriminatory treatment and ensuring that their assets are not expropriated without due process and fair compensation”.
Although this is not an explicit call for ISDS, which the negotiating objectives document acknowledges is opposed by non-governmental organisations and individuals more generally, Dearden said: “There is language there that absolutely mirrors what is in an ISDS system.” He added that Hinds’ comments “were probably the most explicit statement yet about how much this government loves ISDS”.
“It is also a completely stupid thing to say because the reason we’ve never been sued is we don’t have these with the US, or any country with businesses big enough to use them to sue us, really,” he said. “Ecuador is extremely unlikely to sue the British government under one of these, because it just doesn’t have the kind of corporations or super-rich investors that are going to use them.
“There is absolutely no question that if you put this in a US trade deal, the British government would be sued.”