| >The negotiations broke down because the Europeans have failed to develop as successful a digital economy and run a large digital economic deficit with the United States. That is undeniably one aspect of it. However, I think the other one is that digital services have become a larger part of the world economy and they are structurally unlike anything that existed when the current rules of taxation were devised. Traditionally, services required people on the ground and local subsidiaries that were subject to taxation and regulation. For instance, you can't run banking and insurance services for European customers entirely from the US. Trade in goods always benefitted from geographic proximity as well, even without tariffs. A situation where you can provide services to a huge number of customers on the other end of the world without any local representation or taxation of corporate profits (or other income) is historically relatively new and does in my view justify calls for reform of global taxation. >They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff. Claiming that trade imbalances as such are somehow unfair and need to be remedied is in my view nonsense, but it is an idea popularised by Mr. Trump himself. You can't have it both ways unless you accept that mercantilist power politics is all there is and neither enlightened self interest nor principles play any role whatsoever. I think we can do better than that. |