190724 big tech
The US domination of digital is facing a global backlash... but will the digital tax planned by the UK or France level the field? Image for illustrative purposes only. Image Credit: Supplied

The world’s transition into the industrial age began, as is well known, in Europe, leading to a revolution that changed life on earth. This revolution, however, is gradually losing its lustre due to the one led by digital changes, and the leadership of which has shifted from Europe to the US.

It is plausible to say the US is leading the world in the way towards a new era that is completely different from the industrial age, which has drained its potential in the industrialized countries, and the US in particular. It might be difficult to explain this in detail as there is not enough space, but even the industrial sector in developed nations is becoming more dependent on the digital revolution and artificial intelligence.

If we look, for example, at similar manufacturers in the US and an Asian or African country, we will see a significant mismatch in the number of workers, even as high as a 10:1 split to do the same tasks.

The rest of the world, including in China, is stuck in the middle of these two cases. In fact, this development is not only affecting the industrial sector, but all economic activity, such as trade, transport and financial services. E-commerce in the form of Amazon has become a real threat to commerce in all countries, which still do not know how to deal with this rapid digital transformation that contributes significantly to the transfer of funds and profits to institutions outside of their borders.

US dominance

This is done through giant US companies that dominate almost all global markets using internet as their chosen medium. This has prompted influential countries and blocs, such as the EU, to take actions to limit the activities of these companies, as well as to limit the exit of their wealth. Or at least keep a small part of it within their own borders.

In this regard, France and Britain have taken practical measures to impose a digital tax on American companies, believing that this measure will yield fruitful results in the internet age, and change its status from domination by one party.

Tariff stick

It was not long before the US administration led by President Donald Trump threatened to raise the tax on Washington’s imports of cars to 25 per cent, which would inflict damages to the European car industry that is already suffering from low sales.

We again come to the point mentioned earlier - the conflict between traditional industrial sectors spawned by the industrial revolution and led by Europe and the digital age led by the US. This contradiction will indeed determine the progress of economic and trade developments - and conflicts - in the coming years.

Following US threats, France had to revise its decision to impose a digital tax on US companies and save face by saying that it decided to postpone the implementation until December. Meanwhile, British Finance Minister Sajid Javid, whose judgment might be different on these challenges, said Britain will proceed with the tax as of April, even though this decision is expected to change in light of the American counter-measures.

Although Europe and US are highly likely to reach a middle ground, things will take time and affect all nations, including China, Russia and those making up the European Union.

As for small countries, which are the most affected, there is no practical solution, although they are trying to find some local alternatives. E-commerce, for example, entails large markets and expensive technical capabilities, and whose economic feasibility is not appropriate for small markets.

This is in fact one of the most pressing challenges, with their inevitable repercussions reflected on the distribution of wealth and living standards among the different countries. This is so especially the transfer of wealth among countries. This is the challenge that the world must collectively be ready for despite the difficulties.

- Mohammed Al Asoomi is a specialist in GCC’s economic and social affairs.