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Bill Virgin: EU’s Apple smackdown could ultimately sting Washington state trade

European Union Competition Commissioner Margrethe Vestager speaks during a media conference at EU headquarters in Brussels on Tuesday, Aug. 30, 2016. The European Union says Ireland has given illegal tax benefits to Apple Inc. and must now recover the unpaid back taxes from the U.S. technology company, plus interest.
European Union Competition Commissioner Margrethe Vestager speaks during a media conference at EU headquarters in Brussels on Tuesday, Aug. 30, 2016. The European Union says Ireland has given illegal tax benefits to Apple Inc. and must now recover the unpaid back taxes from the U.S. technology company, plus interest. AP

Ever open a jigsaw puzzle box to find someone has carelessly, or fiendishly, dumped pieces from two different puzzles into it?

The European Union’s proposal to whack Apple with a $15 billion back-tax bill is the equivalent of that, except that pieces from five or six different puzzles have been tossed in. There’s at least that many issues at play, but the Europeans may figure that those goofy Americans, distracted by sports the rest of the world doesn’t play, won’t take the time to figure out what’s going on.

But we can do this. Let’s sort out the pieces and assemble them in their proper places. We’ll even do it without staring at the pictures on the box. We’ll start with an easy one.

It’s about the money: When is it ever not about the money? Big American corporations are famously cash rich these days, especially tech companies, such as Apple. The EU must figure that a company with more than $233 billion in global revenue (for fiscal 2015) and $61 billion in cash and short-term investments (as of the June quarter) won’t really miss $15 billion, or whatever amount is eventually settled upon to make this case go away. The Apple case and ensuring settlements also can be used as cudgels against other American companies against which the EU has filed tax cases. The money will come in handy; all those bureaucrats in Brussels aren’t doing volunteer work.

Tax incentives and economic development: Underlying the obvious matter of money are issues like using subsidies and tax breaks to encourage companies to put facilities, and jobs, in the country or state or city offering them. Folks around here will pick up on this one quickly. It’s the same issue that has figured in the continuing trade fight between the U.S. and Europe over The Boeing Co. and Airbus.

Both parties are guilty of the practice. Boeing gets lavish help from the state of Washington, the justification being that the state benefits from direct employment and spending and all the spinoff economic activity that results from having Boeing here. The Europeans have their own approaches for subsidizing Airbus.

Apple’s tax break was granted by an EU-member nation, Ireland, which decided giving the company special tax status was to its benefit. It still thinks that way, given initial protestations from the Irish government that it doesn’t want the money.

Why some people get these breaks, just how effective they are and whether government ought to be in the business of rewarding a select few are long-standing philosophical debates we’ve had in this space in years past, and will continue to do so as long as governments continue to hand out those breaks, which they will.

Tech competition: It’s tempting to classify this Apple-EU fight as a replay of Boeing v. Airbus, as we just did. Here’s where the comparison breaks down. Boeing and Airbus are relatively equal competitors in commercial aviation. American tech companies such as Apple, Google, Facebook and Amazon, however, are competing against one another, and with emerging entities from Asia. Europe is largely a no-show in the arena.

While the competition angle was downplayed in this case, the Apple tax fight is part of a larger effort by the Europeans to push back against what it sees as too much American domination of the tech sector. Americans would answer, with some justification, that if Europe wants its companies to be tech players, what’s stopping them? It’s one of the easiest business sectors to break into and to grow a good idea into a big company.

Anti-Americanism: Then again, if there’s a big unlovable target like a big U.S. corporation, why pass up the opportunity to play to the home audience?

Asserting authority and political control: The European Union is a political animal and it’s now in need of political damage control and image bolstering. Having been told by the British electorate to go away, the EU needs to make sure that no one else gets any funny ideas about walking or questioning who really runs things in Europe. If that means using one of its own as an example, too bad for you, Ireland.

So why way out here in our corner of the map should we care? Trade policy already is an increasingly heated topic, with the current presidential election doing its part to heighten tensions, and there’s a threat of global trade relations devolving into a Three Stooges-style poke-and-slap fest of suits and retaliations, affecting everything from airplane orders to agricultural commodity shipments to port operations.

And when the puzzle pieces go flying off the table in that melee, guess who gets the job of picking them up and reassembling them?

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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