Foreign governments have unleashed lawfare against American companies, and they are about to pay the price for it. While this onerous practice is on the verge of spreading from Europe to China, South Korea, Brazil and elsewhere, President Trump’s February 21 executive order puts dire consequences in place if the offenders persist.
At its core, corporate lawfare is a sophisticated, educated-sounding way for nations to confiscate U.S. companies’ assets. It involves writing complex laws that devise numerous ways to leverage the companies for billions of dollars in annual fines, even though the U.S. companies’ services are popular.
Lawfare is done by people in suits and with government titles, a much better look than when Cuba and China brazenly went after U.S. companies after their communist revolutions. The funds taken by foreign governments in the form of fines benefit their domestic industries (or at least lip service is given to that) and do so at the expense of U.S. companies’ shareholders and stakeholders.
Lawfare began on a grand scale in Europe during the Biden administration when the Digital Services Act and Digital Markets Act were enacted. With these and other measures, large American tech companies can potentially be fined for well over 25 percent of their global revenue annually. U.S. officials sat by and did nothing as an initial round of fines was rolled out.
Other countries have taken notice of how Europe pushed around the United States and geared up to do the same. In China, as part of the country’s potential response to tariffs, its antitrust regulator, the State Administration for Market Regulation, is building a list of U.S. companies it can go after.
The American targets include the likes of Alphabet (Google), NVIDIA, Apple, Broadcom and others. The driving force behind this is the threat of tariffs, not the companies’ actual business practices, where any antitrust case would be skimpy at best.
Other countries, including South Korea and Brazil, are considering legislation similar to the Digital Markets Act and Digital Services Act. The measures have gained traction.
Why are so many foreign governments finding novel, legalistic ways to create legal and administrative headaches for successful American companies? As the bank robber Willie Sutton would say, “Because that’s where the money is.”
Yet, with the United States now the world’s leader in artificial intelligence research and development and with Europe being a tech wasteland, the United States is approaching this troubling situation from a position of strength.
The February 21 executive order correctly describes the actions by the European Union and others as a form of discriminatory taxation, indeed an unfair confiscation of U.S. assets, that must be met head-on.
It directs the U.S. trade representative to investigate countries that use digital service taxes to discriminate against U.S. companies. It is blunt in identifying the primary target: “Regulations that dictate how American companies interact with consumers in the European Union, like the Digital Markets Act and Digital Services Act, will face scrutiny.”
These and other EU measures are “forms of unfair fines, practices, and penalties that undermine the ability of American companies to operate as intended and force them to incur additional compliance costs, lowering U.S. global economic competitiveness.”
There is a way out of this conflict that is mutually beneficial to the U.S. and EU economies. The EU can stop its arbitrary attacks. Then, it can loosen the regulations on its own economy to attract investments from American Big Tech companies and others so that this decades-long and strong trade relationship can be revitalized.
Vice President JD Vance spoke of this when addressing European leaders in Paris in February, saying, “Just because we’re the (AI) leader doesn’t mean we want to or need to go it alone. America wants to partner with all of you. We want to embark on the AI revolution with the spirit of openness and collaboration.”
America is poised for a bright and innovative future, driven by innovations from AI, regardless of Europe’s policies. Whether Europe will share in those benefits remains to be seen.
Paul Steidler is a senior fellow with the Lexington Institute, a public policy think tank in Arlington, Virginia. He wrote this for InsideSources.com.
Reprinted with Permission from DC Journal – By Paul Steidler
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
