Podcast: Europe's Tech Battle

Transcript

Listen: The divide between the US and Europe is growing. This week, Ian Bremmer goes deep on the crumbling transatlantic alliance before sitting down with EU Commissioner Margrethe Vestager – a woman who strikes fear into the heart of Silicon Valley – to talk technology. Then on Puppet Regime, it’s time to play ball!

TRANSCRIPT: Europe's Tech Battle

Margrethe Vestager:

Things that seems to be for free, you still pay for them. Because if you do a Google search, you pay for the service with your data.

Ian Bremmer:

With your data, you're the product.

Margrethe Vestager:

You're the products. And the thing is that sometimes I think you get a bad deal.

Speaker 3:

We have to shape our common answers to the global threats we are facing.

Speaker 4:

We are declaring that America is in the game and America is going to win.

Ian Bremmer:

Dysfunction has a price. No, it's not something you need to discuss with your doctor. It's the transatlantic Alliance that may be on the fritz. I'll dig into it and then sit down with someone on the front lines of that divide. A woman who strikes fear in the heart of Silicon Valley. Then of course I've got your Puppet Regime. But first a word from the folks who help us keep the lights on.

Americans and Europeans. We've had a lot more to scuffle over since President Trump began shaking up US foreign policy. Let's break it down. Three points.

First, diplomacy. There was, for example, Trump's decision to withdraw from the Paris Climate Accord. A move that heartened his base as part of Trump's pledge to bolster American industry. Europeans didn't like it. Second economics, Trump ordered tariffs on European steel. Same deal. America first is a driving philosophy of this White House. Third, security. There was public doubts about the value of NATO, the US European Military Alliance and his charge that other members were pre rioting on American generosity. Of course, some argue that kind of criticism was long overdue. But here's the thing. All three come to a head when you're talking about Iran and that controversial nuclear deal.

In a couple of weeks, US sanctions will get much tighter. Their impact on Iran's economy probably mean that the deal is about to die, and that will only add to the growing bitterness in US European relations. The French, the Germans, and the Brits say they've spent years negotiating that agreement and it was working. They say this decision will make the Middle East more dangerous. They also seem to resent US threats on sanctions on the European companies that want to do business with Iran.

Trump isn't exactly happy either. He says Iran supports terrorism and destabilizes the Middle East, and he says he can force Tehran to accept a much better deal. Now, the US and Europe have had disagreements before. Don't mention the war. In fact, President Trump's current low approval ratings in Europe are virtually identical to those that George W. Bush had a decade ago. And we all remember how Bush's 2003 invasion of Iraq, united France, Germany, and Russia in opposition to the US.

But this time it really is different. Unlike President Trump, Bush never questioned the value of NATO. He didn't threaten a large scale trade war on European partners. More importantly, back then, Europe itself hung together. But the Cold War that bound the US and Europe was almost 30 years ago. Things change. Relationships age, nothing lasts forever, even among your family. And by many accounts, Russia is really enjoying watching a good fight. Later in this program, I'll speak with European Commissioner for competition, Margrethe Vestager. She'll help me break down this divide, how it impacts cyberspace and why Mark Zuckerberg may stop returning her calls. Jeff Bezos too.

Speaker 5:

Sorry. Are you asking if Cambridge Analytica's data could be stored in Russia?

Speaker 6:

In the words of the head of Google's search ranking team, Google is quote, "The biggest kingmaker on Earth."

Speaker 5:

My position is not that there should be no regulation

Margrethe Vestager:

The fine of 2.42 billion euros.

Ian Bremmer:

Margrethe Vestager has been called the world's most powerful regulator of your everyday tech companies. Think Facebook, Google, and Amazon. It's her job to ensure they follow European Union rules and she has the power to penalize those that don't. It is a cudgel she is not afraid to use. Now here's the rest of my conversation with European Commissioner for Competition, Margrethe Vestager.

These tech companies, which have been some of the biggest cases that you've been launching, are very fast moving. They're very fast changing. Governments in particularly when we think about the European Union, European Commission not so fast moving. How do you effectively regulate? How do you effectively launch cases in an environment that is so incredibly fluid?

Margrethe Vestager:

Well, I think for any law enforcer, there is a inbuilt asymmetry. If you are looking to break in a house, may take five minutes. But it may take five months to find the person, to prove the crime, to get he or she convicted and put away. And that goes for everything. It takes no time to break things. It take a lot of time to do the case work actually to bring justice. And the thing is that we can never compromise on due process. It's a union built on the rule of law. You have the right to defend yourself to see the evidence we hold against you to answer for yourself. That of course is an inherent thing in everything we do. That being said, we are speeding up. Both in the way we do case work, in the way we ourselves digitalize in order to do that. And of course, also trying to look ahead.

Ian Bremmer:

Now there's clearly a very different perspective on privacy and data in Europe compared to the United States and compared to China. Do you think that Europe is driving a set of regulations around data and privacy that will become the standard across the West, including here in the United States?

Margrethe Vestager:

Well, that remains to be seen. But it has the scale to fulfill that. And since these rights are very fundamental... that you own your data, that you can take them, you have the right to take them from one provider to another provider, that you have the right to be forgotten. These are things that I think they ring a bell with most people. That I have a right to what I create and I have a right also to be myself. And in that respect, of course we hope not... Well, we want to set a standard in Europe, but we also hope to inspire others.

Ian Bremmer:

When you look at the cases that you've launched thus far, what are the landmarks that you feel proudest of, where you feel like you've really changed the landscape for the average European?

Margrethe Vestager:

Oh, that that's like asking someone to choose among children.

Ian Bremmer:

Yeah, well.

Margrethe Vestager:

I would never-

Ian Bremmer:

You can't say it publicly, but privately we all have preferences.

Margrethe Vestager:

No, no, no, I would never do that. But I'd say that cases are different. We have this prohibition of harmful subsidies. Which means that you cannot give an ailing company a very cheap loan that they couldn't get in the marketplace. That you cannot hand out building lots or cash, but you cannot hand out tax benefits either. And in order to have a level playing field, well everyone will have to pay their due taxes. And I think the tax work that we have been doing, I think that's important. Because that also shows all the businesses who pay their taxes. And that's a majority. It shows all the people who work in businesses who really, really have to work hard to make a profit, to pay their taxes. For people who go home and then pay their taxes on their income. That is for everyone.

Ian Bremmer:

This is the Apple case in particular.

Margrethe Vestager:

That's Apple case in particular.

Ian Bremmer:

Why don't you walk me through that for just a moment, because this was an enormous settlement.

Margrethe Vestager:

I think no one would like to have the tax man coming to collect 13 billion euros. It is a lot of money.

Ian Bremmer:

Which they've now paid.

Margrethe Vestager:

Which they have now paid. They also appealed our decision, so the money will stay on a closed account and wait for the court to finalize their readings. But the thing was that we found that Apple had enjoyed a couple of tax rulings in Ireland that allowed them to take profits made in Europe, North Africa, I think all the way to India and put them in part of the company that had no premises, no activities, and no employees. And it was a tax-free company. And basically this is not where the value is created. And if you then put the profit where the value is created, you find that here is actually a taxable presence and therefore you have to pay your taxes.

Ian Bremmer:

And how did you first become aware of the fact that they were doing this?

Margrethe Vestager:

Well, this is the interesting part because it has never been a secret that you have to pay your taxes just like anyone else, that you cannot enjoy these selective advantages that is for you only. Never been a secret.

Ian Bremmer:

But we all know that the tax rate is one thing and what people actually pay is something very different.

Margrethe Vestager:

But this is because the way this business was organized, that was a secret. And the reason why my predecessor learned about this was question being asked in the US Senate. The US Senate started asking question about how Apple was organized. And on our side of things, we realized something is wrong here. He opened the case and I could finalize it. And that initiated many more investigations.

Ian Bremmer:

The idea that 15 billion wasn't paid with buildings that literally had no employees. Obviously Apple is fully aware of the fact they're doing this in your view. Yes?

Margrethe Vestager:

Oh yes, of course.

Ian Bremmer:

Was this executive decision at Apple? Was this the accountants that came in and said, "Here's the way we think you can..." Did you dig into that?

Margrethe Vestager:

Oh no, we don't. The motives we don't dig into. But of course we say, "Well, if you pay one year 0.05% in tax, well, probably this is too good to be true." And it was.

Ian Bremmer:

Now when Starbucks came out and said, "Actually, we recognize we're probably not paying as much we should pay more." What's the response of you as commissioner to that kind of a statement?

Margrethe Vestager:

Well, I think that is good. But the thing is that the amount of taxes that you pay shouldn't be a voluntary contribution to society. This is not corporate social responsibility. This is the law.

Ian Bremmer:

But did that make you suddenly say, "Wait a second, is there a regulatory issue here?" "Were they breaking the law before?" Did that set off an internal investigation to look into Starbucks?

Margrethe Vestager:

No, it was not their own statements. We were looking at that in the first place.

Ian Bremmer:

I see. Let's talk a little bit about the other issues of... monopoly issues over data, for example. So many of these new tech companies really do dominate the fields they're in. They grow so quickly. And I guess there is an open question about the difference between a company that dominates the sector because literally nobody else could remotely develop that scale and one that abuses that.

Margrethe Vestager:

Exactly.

Ian Bremmer:

Where do you find the abuses in scale of big tech today?

Margrethe Vestager:

I think the important thing to understand about Europe is that we really want you to be successful. No matter the flag you're flying, no matter your kind of ownership. If you have products, services that consumers like, well go girl. You're more than welcome to grow. But the thing is that if you grow and you become dominant, you get a responsibility. Because if you're 90% of the markets and the next guy is 5% and the third guy is 5%, obviously competition is weakened. There are a responsibility on your shoulders. And this we found in the two Google cases, that they did not live up to this responsibility. They misused their dominant position. In the Android case actually to close down on innovation so that customers were denied their choice.

Ian Bremmer:

And that happened how?

Margrethe Vestager:

What happened was that they bought the Android operating system, which is open source, and they still publish the code for everyone to use. That's a great thing. But the thing is that if you are producers of phone, then you want your customers to be able to download apps. You need the Play Store. And Google would say, "Yes, you can have the Play Store, but then you will have to take Google Search and Google Chrome and you will pre-install that so that the out of the box experience would be a Google experience. But not only will you pre-install it, we will also pay you so that it's exclusively us you pre-install. And thirdly, if you do anything else, you will lose both the payment and the right to use our services. If just on one of your phones you will do something else, we are just out of here."

And that of course, made it impossible for people who produce this phone to accommodate people who say, "Oh, but I have the new search, I have the new browser, I have the new best thing would you carry that for potential customers actually to see it?" And this is how innovation was hampered and consumers were denied of choice.

Ian Bremmer:

Tell the people watching this show why this should matter to them.

Margrethe Vestager:

No one wants to be cheated on. I think most people want to be respected also as a customer that the business respects that if you don't find the prices are right or the service is rubbish, then you go to the next guy and you'll place your business there.

Ian Bremmer:

Now you know a lot of Americans look at Europe and they say they're all socialists over there. And here I am talking to you and you say you want more competition. Is this just a bad rap? Do you need to work on the view from across the pond?

Margrethe Vestager:

Well, I wouldn't know that. But what we see is that competition serves Europeans very well. For instance, when it comes to mobile subscriptions, a lot of choice and very different prices I think for everyone's purse in a European context. There's a lot of things that works because competition drives not only prices down, but also for you to actually choose what is it that you really need. What is this that you want? One more thing where you should care is that things that seems to be for free, you still pay for them. Because if you do a Google search, you pay for the service with your data.

Ian Bremmer:

With your data, you're the product.

Margrethe Vestager:

You're the products. And the thing is that sometimes I think you get a bad deal, you pay too much compared to the service that you get. For instance, I've stopped having loyalty cards because with a loyalty card, you give the business all the details about what you buy, when you buy it, the quantums you buy, all kind of stuff. And what I get in return is a discount on a washing powder that I don't use. I get nothing in return for all my data.

Ian Bremmer:

But it's voluntary, right?

Margrethe Vestager:

Yeah, but the thing is that when you do things, it's very nice that there is an actual price tag. And I think we are moving into a world where it will be much more obvious that we have a value, that we create value and we can do much more with it than just hand it over for services that may not actually live up to the value of the data that we hand over.

Ian Bremmer:

If it was up to you, would these companies be paying you for the data that you're holding out?

Margrethe Vestager:

Oh, that could be one solution. It could also be a solution that you have data brokers that will allow you to sell off packages of the data that you have created to third party so that others can benefit from the data that you actually own.

Ian Bremmer:

Where do you see emergent monopoly positions in technology today?

Margrethe Vestager:

Well, one of the things that we are looking into... and this is very early days, we haven't opened a case, we're just trying to understand what is going on. That is with Amazon, because they have this dual role that on the one hand side they are hosting small shops to do e-commerce. At the same time they're themselves a giant when it comes to e-commerce. We want to understand how they use the data that they get from hosting the little guy and enabling him to do e-commerce, payment system, distribution, the logistics of doing e-commerce, how that data is being used on the one hand side to improve their own services towards the little guy. Or if that's also being used to basically say, "Well, oh, now we know what is trending so we basically take over the business that we see that all the little guys are doing."

Ian Bremmer:

Now we see very clearly that in the world of big tech right now, and certainly we talk cutting edge AI, you've got dominant companies here in the United States, mostly Silicon Valley, you've got dominant companies coming out of China. You don't have dominant companies in Europe. Emmanuel Macron, the French president certainly said that he wants to really invest much more. That Europeans can have a third way. What do you think has prevented that? And do you see your role in part as being a supporter of a European policy that builds those companies?

Margrethe Vestager:

If you're a competitive at home, well then it's much more likely that you are also competitive abroad, that you can really make it. It's not the cuddled favorites that makes it on the big scale. It's those who have the competitive culture that are able to do that. And I think one of the important things about the change in Europe now is that there's been created a much more vibrant entrepreneurial environment and ecosystem. Go to Paris, for instance, to see this and you will feel the buzz. But what we're still building up is, for instance, a capital market that supports that. Because back in the days, if you were an entrepreneur, you would always have to go to the bank. And you would create more debts instead of going to a capital market and get capital on board and new competencies and all it takes to grow a business because it takes more than just a very clever entrepreneur. And that is changing right now. And I think that's a very positive development.

Ian Bremmer:

How is that going to get resolved?

Margrethe Vestager:

Well, the first thing I have learned in my working life is that if there's something that you want, you should say it so that people are not... say, "Oh, but we didn't know, so we did something else." That's the first. And the second thing that I have learned is that you should be careful to plan too much because very often the next thing comes here in the corner of your eye and planning sometimes work as blinders.

Ian Bremmer:

Do you see a future in Danish politics irrespective of another term here or not?

Margrethe Vestager:

Well.

Ian Bremmer:

You've been a minister with portfolio, been there for a while.

Margrethe Vestager:

Yes, I have a couple of times but... I would like to be at least 90 and that gives me 40 more years. And if I want-

Ian Bremmer:

You have just told everyone what your age is on television. I want you to know that.

Margrethe Vestager:

Yes. Well, but I'm proud of it at long last. If I ever wanted to, I think I would have time also for Danish politics if that would be the case.

Ian Bremmer:

Very good.

Margrethe Vestager:

It was my pleasure.

Ian Bremmer:

Commissioner Vestager. Thanks so much.

Margrethe Vestager:

Thank you for having me.

Mustafa Ali:

Yes. My name's Mustafa Ali. Given the 2016 election and Russia meddling in our business, what will we do to prevent that for the upcoming election?

Ian Bremmer:

Mustafa, there actually has been some efforts to ensure state by state that the electronic ballots are themselves more secure. It's not nationwide regulation, but it still hopefully will matter. But the real issue is not that the Russians are trying to break our ballots, it's more what they do in the run-up during the election. It's the buying of ads and it's the fake news and it's the bots and fake accounts. And there it's mostly about self-policing of the companies themselves, the Facebooks, the Twitters, Googles. What are they doing to try to ensure that their algorithms are not effectively hijacked by people that aren't who they say they are, and they are incented to not be caught unawares in the midst of this election a second time.

But that's very different from saying we're not going to have the problem. And if the Russians do hit the Americans in ways that we consider unacceptable, how do we respond? So far no common view on that either. Either between the Americans, the President, his own administration and Congress, and also in terms of what kinds of tools are really available. We're going to hit him back in cyber and delegitimize their elections. Not exactly a democracy. What are we going to do and put more sanctions on them? We're doing that. It isn't having much impact. No one really thinks that there's a military option. I wish I had a better answer for you. I think the reality is this is a tough one to police.

Andrew:

Hi, I'm Andrew, and I'm interested in the Israel-Palestine conflict and where the US allies stand in it.

Ian Bremmer:

Andrew, Israel-Palestine used to be one of the biggest priorities both in the Middle East and even globally for a lot of American allies in national security. It's just not today. You go and talk to them about what they think matters for their relations with the United States and Israel-Palestine almost never comes up. It's true that the Europeans in particular were angry at the Americans for deciding to move the US Embassy from Tel Aviv to Jerusalem. That was a controversial measure that makes it much harder to come to an understanding what the Palestinians on the disposition of Jerusalem itself and some future two state solution.

But no one believes we're moving to a two-state solution. Negotiations between Israel and Palestine are basically still born at this point. And although the Palestinians are doing very poorly economically, it's not like there's open conflict that feels like something American allies need to respond to, unlike say, Yemen or Syria or Iran. In that regard, there are big differences in their perspectives, but not differences that are going to amount to much in the relations between our countries.

And with the World Series approaching, Americans are getting ready for a little baseball. Of course, these days, not everyone has the same ideas about sports, especially not in the land of make believe. It's Puppet Regime right here on GZERO World.

Hi folks. The baseball playoffs are in full swing and I'm at the ballpark with President Trump who has a big announcement about our national pastime.

Speaker 9:

That's right, Ian. I have decided to rename the World Series, the America Great series. We are taking our series back.

Ian Bremmer:

But there are tons of players from other countries.

Speaker 9:

Well, actually those countries have treated us very unfairly and we're going to put a stop to it. Okay? The Japanese, Venezuelans, Mexico, other countries like the Dominican Republic and Puerto Rico.

Ian Bremmer:

Puerto Rico is American.

Speaker 9:

Well, people are saying, there are both sides, Ian. Okay?

Ian Bremmer:

There aren't both sides. Mr. President, 30% of players are foreign born who will take their place?

Speaker 9:

Me, Ian. I will take their place. All of their places will be taken by me.

I'm going to sit this dog down. And I'm going to knock this low IQ chump out of here. Time, time out, time. What is that? That guy's kneeling. Why is he kneeling? It's a total disrespect.

Speaker 10:

Mr. President. That's the bat boy. He kneels with the bats until-

Speaker 9:

All right, all right, all right.

Speaker 10:

Now play ball.

Speaker 11:

Trump comes set. And here comes the pitch.

Speaker 10:

Foul ball.

Speaker 9:

What? This is a totally rigged disgrace. I can't even believe... This is just...

Ian Bremmer:

And that is our show this week. We'll be right back here next week. Don't you miss it. Don't even think about missing it. It's important that you stay. Not the whole week, but come back I mean. In the meantime, if you like what you've seen, check us out on gzromedia.com.