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**MAY 24, 2023**

Kuttner on TAP

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**** The Global Race to the Bottom

Will the Biden administration help Big Tech undermine consumer
regulation by the EU and Asian nations?

Critics of corporate-led globalism aptly point out that it usually
creates a race to the bottom. Examples include trade deals that
deliberately weaken the capacity of nation-states to regulate
capitalism; competition to cut tax rates to attract multinational
business; proliferation of tax and regulatory havens; invention of new
concepts such as investor rights against states; and anti-consumer
rights of tech companies in trade agreements.
Once in a while, however, globalization seems to create a regulatory
race to the top. Consider the EU's recent actions on data privacy,
where the EU has better standards.

This week, the EU levied a 1.2 billion euro fine (about $1.3 billion)
against Meta, the parent corporation of Facebook, because of
Facebook's practice of transferring European user data back to the
U.S. without the safeguards required by European privacy laws. The
actual order came via the Republic of Ireland, where Facebook's
European operations are based for tax purposes (neatly illustrating the
race-to-the-bottom flip side).

The Irish Data Protection Commission directed Meta to cease all
transfers to the U.S. of all personal data belonging to users in the EU.
The commission held that Meta's data practices violated the EU's
General Data Protection Regulation (GDPR) rules, which go far beyond
data privacy protections in the U.S.

Ideally, Europe's consumer protections would prod the U.S. to
reciprocate. But in March 2022, President Biden helped Big Tech by
issuing an executive order

****trying to implement a preliminary deal
<[link removed]>
with the EU for a "Trans-Atlantic Data Privacy Framework." This adds
some new protections, but also undercuts the EU's ability to regulate
unilaterally. The deal does not yet have final approval of the EU.

Facebook is a serial offender when it comes to data privacy violations.
In 2019, the FTC fined Facebook $5 billion
<[link removed]>
for violating an earlier 2012 FTC order requiring the company to cease
deceptive practices that misled users on privacy settings. According to
the FTC, these tactics allowed the company to share users' personal
information with third-party apps that were downloaded by the user's
Facebook "friends." This was during the Trump administration when the
FTC had a Republican chair.

While the Biden administration deserves great credit for reviving
antitrust enforcement, in many respects the EU has been the tougher
antitrust regulator, blocking some mergers that had not been blocked by
U.S. authorities. The EU has tough new rules on platform "gatekeepers,"
<[link removed]> designed to apply to
Apple, Amazon, Google, Meta (Facebook), and Microsoft.

Today, trade ministers are meeting in Detroit to negotiate more details
of the pending Indo-Pacific Economic Framework (IPEF)
<[link removed]>, which was cooked up by the
U.S. The deal includes digital provisions written by Big Tech
specifically to use a trade agreement to circumvent national consumer,
privacy, and competition regulations.

Granted, no national governments have totally clean hands. The EU has
its own nationalistic reasons for wanting to hold U.S.-based tech giants
to a higher standard of accountability. But to the extent that we get
good regulation at all, it is national. Bad deregulation tends to be
global.

The idea of "national champions" has been resurrected as part of
Biden's industrial policy, which also demands that beneficiaries of
government subsidy have decent labor standards. As tech giants based in
the U.S. are in the role of national champions, our government needs to
make them clean up their acts, and not collude with Big Tech in
weakening foreign consumer and antitrust regulation.

~ ROBERT KUTTNER

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