| Opinion
With Trump’s trade policies becoming apparent, China has emerged as enemy number one. Meanwhile, other trading partners – particularly smaller ones - are being pressured to introduce concessions with advantages for the US. A key question for the rest of the world is what economic fallout to expect from this trade war. EconPol researcher Daniel Gros suggests that the US will attempt to put similar pressure on the EU, but it is unlikely that this pressure will succeed. But with the US expected to pursue its policy of trying to isolate China with other smaller trading partners, the political and systemic costs of the Sino-US trade war could be considerable in the long run. ...Details
| Opinion
A 3 percent tax on digital turnover, recently proposed by the European Commission, will stifle digitization in Europe and will only encourage other countries to take countervailing measures, says EconPol expert Clemens Fuest. The Commission justifies the new tax with the observation that companies like Apple or Google sell their goods and services in Europe but pay almost no profit taxes here. This overlooks that current international tax agreements do not stipulate that companies pay profit taxes in the countries where they sell their goods. Profits should be taxed where these goods are developed and produced. In the case of the global internet giants, this is the US. Whether or not the US exercises its right to tax these profits is not a concern for the EU. Countries where the goods are sold do collect value added tax. Europe could of course try to change international tax rules. But that would mean it loses the right to tax the profits of its exporters - their profits would be taxed in China or the US. Instead of introducing new digital taxes Europe should promote digitalisation and focus on creating a European internal market for the digital economy. ...Details
| Opinion | Working Paper
The European Commission’s proposals for the post-2020 Common Agricultural Policy (CAP) are under discussion, and these cautious reform ideas have set the parameters for upcoming negotiations. CAP will continue to have a two-pillar structure of direct payments and rural development, with a seven-year budget of €365 billion. As before, almost three-quarters of the budget - €265 billion - is reserved for direct payments to farmers. However, ‘European added value’ must be urgently applied to CAP, say Friedrich Heinemann and Stefani Weiss, who summarise their recommendations to justify direct payments in their latest opinion piece for EconPol. ...Details