EU-US relations face tense times as trade deal looms

Overlooking the stately Boulevard du Régent in central Brussels stands the United States Mission to the European Union, its US flag waving proudly in the breeze.

The last few years have been unusually busy for Washington’s representation in the heart of Europe. The EU’s interest in the tax arrangements of US multinationals operating in Europe, coupled with concerns about data protection and privacy, have put unprecedented pressure on EU-US relations at a delicate time for both as they try to close an ambitious EU-US trade deal before year-end.

In a sign of the simmering tensions between the two blocs, US treasury secretary Jack Lew wrote to European Commission president Jean-Claude Juncker in February accusing the European Union of unfairly targeting US companies in its state-aid probes of the tax affairs of US companies, including Apple's arrangements in Ireland.

US undersecretary of commerce for international trade Stefan Selig was the latest US bigwig to fly into Brussels for meetings with the EU's highest-ranking officials. Speaking to journalists this week in a wood-panelled room on the first floor of the embassy, he set out some of the main issues dominating EU-US relations. While the EU and US are working closely on some issues – both for example are co-operating on combating the excess steel capacity on global markets which they blame on China – they are very far apart on other matters.

Chief among them is data privacy.

The rejection of the "Safe Harbour" agreement underpinning transatlantic data transfer last year by the European Court of Justice following a case taken by privacy campaigner Max Schrems against Facebook Ireland, was the latest attempt by EU law makers to regulate data practices on the other side of the Atlantic. Its successor agreement – the EU-US privacy shield – failed to be endorsed by EU data protection authorities at their review last week amid concerns that the new arrangement does not address some of the concerns about mass surveillance raised in the Schrems judgment.

Agreement

Selig is still confident that the agreement will be in place by June. “While there were some parts of the review that were critical, there was actually a broad acknowledgement of the improvements in Privacy Shield from Safe Harbour and a recognition that this is now a time for us to move forward and implement that agreement,” he said.

Nonetheless, beginning with Germany next week, US officials will travel to a number of EU member states in the coming weeks to drum up support for the deal.

The latest front in the digital battle between Brussels and Washington opened on Wednesday as the European Commission began its second investigation in two years into alleged abuse of market dominance by Google. Following on from its ongoing probe into whether Google is favouring its own shopping services through its search engine, the European Commission sent a "statement of objections" to the tech firm accusing the company of abusing its market dominance by pre-installing apps on the Android devices it sells in Europe.

"Google's behaviour denies consumers a wider choice of mobile apps and services and stands in the way of innovation by other players," EU competition commissioner Margrethe Vestager said, noting that about 80 per cent of smart mobile devices in Europe run on Android.

Google has rejected the antitrust claims. It argues that Android is an open-source platform, and its model helps to keep the costs low for phone manufacturers. It also points out that apps from rival companies, such as Facebook and Amazon, can operate on the Android system.

While parallels have been drawn to the Microsoft case a decade ago when the commission accused the company of abusing its dominance as a PC operation system to force customers to buy Windows Media Player, there are sharp differences.

Most notably, Google does not charge manufacturers for Android, in contrast to Microsoft’s licence-fee model of the time.

Nonetheless the investigation could have a significant impact on Google, either by changing how the company’s Android model works or through the imposition of fines that could reach 10 per cent of annual turnover.

Vestager, who was in Washington earlier this month, has strongly refuted allegations of biThe latest front in the digital battle between Brussels and Washington opened on Wednesday as the European Commission began its second investigation in two years into alleged abuse of market dominance by Google+as against US firms, but accusations of EU protectionism and even jealousy towards the achievements of Silicon Valley have been aired at the highest level. American president Barack Obama said last year that European scrutiny of US tech companies had been driven by the "commercial interests" of Europe's tech companies.

“We have owned the internet. Our companies have created it, expanded it, perfected it in ways that they can’t compete [with],” he told technology news site Re/Code in February last year.

As transatlantic differences continue to arise over the overlapping issues of taxation, data protection and regulation, EU-US relations are likely to remain tense in the months ahead.