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2021 could mark a reset in the frosty US-EU tech relationship

Hopes are high in Europe common ground might be found with the Biden administration on privacy, data, regulation, taxation and China.

The incoming Biden administration marks an opportunity for a reset in the US-Europe relationship, a refresh that is sorely needed in technology policy.

Countering China's growing strength is a strategic priority for both Europe and the US. The seamless, open internet enjoyed in the US and Europe is at odds with the insular, censored internet that China is exporting to other countries. Both the US and Europe stand to benefit from preventing China's model from becoming the norm.

The two huge economies also share concerns that China could become the dominant force in establishing standards in emerging technologies, including 5G, AI and autonomous vehicles.

Nick Clegg, Facebook's policy chief, said at the Web Summit conference this month that uniting the US and Europe against China is Biden's foremost strategic tech challenge. The Chinese internet, he said, "is built on a very different set of values" than the internet of the US and Europe.

Read more: Generation China: Exploring the nation's technological ambitions.

The US and Europe haven't always seen eye to eye on how to handle tech. They will have to resolve their differences or put them aside for the greater good. That might not be easy because big hurdles stand in their way. 2021 will provide both the change and the urgency to make dealing with them possible. Here's what's at stake:

Keeping Big Tech in line

For years now, the biggest regulatory threat to Silicon Valley tech giants has come from Europe, where antitrust cases, taxation and privacy rules have forced companies to pay massive fines and rewrite their policies. 

President Donald Trump has historically viewed these cases as an attack on the US. Over the past year, however, the US has ramped up its own antitrust investigations into Big Tech. The two regions are coming closer to convergence than they have in the past. 

Still, Europe keeps pressing forward.

On Tuesday, the EU Commission unveiled two key pieces of legislation, the Digital Services Act and Digital Markets Act, which could form the basis of how the bloc regulates tech companies operating in Europe for years to come, incorporating everything from content moderation to antitrust. 

The Digital Markets Act, in particular, will have major ramifications for Silicon Valley because it would categorize the biggest and most powerful companies as industry "gatekeepers." That would give them extra responsibilities to prevent them from using their dominance to hurt smaller companies.

European Competition Commissioner Margrethe Vestager, who was one of the primary architects of the new legislation, said at the Web Summit that targeting US companies wasn't "a motive" for the bills and didn't think it would harm US-Europe relations.

"You're welcome to do business in Europe, no matter what flag you're flying," she said. "But with strength, with power, also comes responsibility."

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Margrethe Vestager is no stranger to negotiating with tech giants.

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Facebook, Google, Apple and Amazon have already been fined billions of dollars by EU authorities. But under GDPR and antitrust rules, the EU could potentially demand companies stop offering some services or completely change how they do. (Facebook, for example, is in the midst of a legal battle because the Irish Data Protection Commission has ordered it to stop transferring data out of Europe.)

The EU could even demand that the tech giants be broken up, though that is an unlikely option. Vestager has called breaking up those companies the "nuclear option" and a "last resort."

Still, Silicon Valley companies feel immense pressure from Europe, as their lobbying efforts ahead of the DSA and DMA announcements show.

Research by the Corporate Europe Observatory, which keeps an eye on lobbying in Brussels, found that Google, Amazon, Microsoft, Facebook and Apple are among Europe's biggest spenders. In total, the companies spent 21 million euros ($25.6 million) between 2018 and 2019. During that period, Google racked up an 8 million euro bill, more than any other company.

It's no mystery why the tech giants are prioritizing their efforts in Europe. What starts in the EU often informs policy elsewhere. The GDPR, for example, influenced California's privacy rules.

Taxes and tariffs

Another major issue that hangs in the balance and could create transatlantic discord is taxation.

For many years, the chorus of voices arguing that US tech giants should pay more tax in countries they operate in has grown louder throughout Europe. France, the UK and other countries have proposed and designed digital taxation programs to force companies to pay more tax, even if they don't have a physical presence.

The national rules have emerged from frustration with outdated international tax laws, which in the eyes of Europe allow US companies to game the system. The Trump administration has responded angrily to threats that US companies be taxed outside of the country, and has threatened to impose retaliatory tariffs on European imports, including champagne and cheese.

International negotiations on taxation in the digital age were supposed to address the issue in 2020. The discussions, however, haven't resulted in a solution.

Last month, France said it would begin collecting its digital taxes in December after a temporary truce was called earlier this year, when it became apparent the Organization for Economic Co-operation and Development, which facilitated international tax negotiations, said it had failed to find a solution. 

Pascal Saint-Amans, who runs the tax policy center at the OECD, told the Web Summit that tax laws no longer worked and encouraged big companies to game the system. 

Getting the OECD's 137 countries to agree on new tax rules, however, was like "herding cats," he said. Saint-Amans said the US could play a crucial role to "reboot the negotiation." The new deadline for an agreement is mid-2021.

Friends or frenemies?

Taxation is far from the only technology issue the incoming president will be forced to negotiate with Europe in the new year. The EU, which has held itself at arm's length from the US for the past four years, is seeking to strike a cozier relationship with Biden on all things tech.

Europe gave some ground to the US on 5G security policy in 2020, and sanctions imposed by the US on China's Huawei caused some countries to reassess their relationship with the company. The UK, for example, executed an about-face and pledged to remove, and ban future use of, Huawei kit from its 5G network.

But Europe hopes to align itself with the US more fully, even though fundamental differences on privacy, taxation and data flows remain unsolved. "It would be a very strong thing if we could come together, discuss exchange of data, how to do that in a safe way, how to make sure that privacy is guaranteed no matter where you are in the two jurisdictions and a number of things," Vestager said at Web Summit.

At the end of November, Europe reached out to Biden to see if the US would be willing to strike a new alliance on tech, in particular via the creation of an EU-US Trade and Technology Council, which would coordinate joint positions on tech issues.

"Our shared values of human dignity, individual rights and democratic principles make us natural partners to harness rapid technological change and face the challenges of rival systems of digital governance," the EU said.

Talks have taken place privately, but Biden hasn't responded publicly to the EU's offer. His team didn't answer questions on the matter when offered the opportunity.

Wherever Europe and the US ultimately land on tech issues, there will inevitably be disagreements along the way and Vestager has acknowledged as much. Still, she sensed "there's a different debate" and that cooperation might be possible.

With no public reciprocation and with little of Biden's presidential campaign focused on foreign policy, it's hard to say where he stands on many of these issues -- although his considerable experience in diplomacy, both domestically and internationally, may play to his advantage.

Europe has shown its hand and extended an olive branch. We'll find out in 2021 if Biden's America accepts it.