The Big Story: France’s digital services tax could harm startups. U.S. tech companies told the Office of the U.S. Trade Representative (USTR) this week that they support retaliatory tariffs in response to France’s new digital services tax that would impose a three percent tax on online platforms with a global revenue of over 750 million euros and 25 million euros in France. The Trump administration has threatened to impose tariffs of up to 100 percent on certain French imports, such as champagne and cheese, in response to the tax.
During the USTR’s public hearing on Tuesday, Rachael Stelly—policy counsel at the Computer and Communications Industry Association—told officials that the administration should “use remedial tools at its disposal to deter France and to send a strong message to other countries who are finalizing or have proposed a similar national digital tax.” French Finance Minister Bruno Le Maire said earlier this week that the two countries have given themselves roughly two weeks “to try and find a compromise” before officials meet during the World Economic Forum later this month.
Ahead of the hearing, Engine submitted comments to USTR expressing concerns about the potential trickle-down impact of the digital tax on U.S. startups. As we explained in a blog post, the tax “has the potential to stifle American innovation across the board” by spurring large U.S. companies to pass the additional administrative burden and tax liability costs to their users—including startups that rely on services provided by these large companies such as web hosting and advertising.
Policy Roundup:
House passes 5G bills. The House passed three bipartisan 5G bills to provide government support and resources to companies developing the next generation of wireless technology. In a statement, House Energy and Commerce Committee Chairman Frank Pallone (D-N.J.) and communications subcommittee Chairman Mike Doyle (D-Pa.) said the bills “are important for securing America’s wireless future.”
FBI asks Apple for help unlocking shooter’s iPhones. The FBI asked Apple for help unlocking two encrypted iPhones that belong to the gunman responsible for killing three people at a Florida naval base last month. Despite Apple saying it provided the FBI “all of the data in our possession,” the case marks the latest instance of law enforcement pushing tech firms to break their encryption protections—a step that would be especially risky for startups looking to use strong security and privacy protections as a way of differentiating themselves from their larger competitors.
Deepfake ban not enough for some lawmakers. A Facebook executive announced in a blog post that the platform is banning deepfakes, digitally manipulated videos that “would likely mislead someone into thinking that a subject of the video said words that they did not actually say.” Despite the new policy, House lawmakers said during a Wednesday hearing that the ban did not go far enough in combatting misleading or deceptive content, and several lawmakers mentioned amending Section 230, a foundational Internet law that protects platforms of all sizes from ruinous litigation.
Progress on Chinese trade pact. President Donald Trump announced that he might reach the second phase of a trade deal with China after the 2020 presidential election, an agreement that would eliminate tariffs that have been particularly harmful to startups and founders. The president previously announced plans to sign the phase one trade agreement with China on Jan. 15, which will require China to end forced technology transfers and encourage stronger intellectual property protections.
Trump administration announces new autonomous vehicle guidelines. Transportation Secretary Elaine Chao announced the federal government’s latest proposed voluntary guidelines for self-driving vehicles during the annual CES trade show, saying that the new principles recognize “the value of private sector leadership in AV research, development and integration.”
U.S. government limits export of AI software. The Trump administration’s new rules limiting the export of artificial intelligence software went into effect on Monday, with U.S. companies now required to apply for a license before sending sensitive technologies overseas. The measure, which excludes Canada, covers any U.S. tech company—startup or otherwise—that produces AI software that can be utilized by sensors, drones, and satellites for automated targeting purposes.
India’s proposed intermediary rules would weaken encryption. Twenty-seven encryption and security experts signed an open letter asking India’s Ministry of Electronics and Information Technology to reconsider proposed amendments that would weaken the country’s intermediary liability protections for online platforms, citing how the changes would “limit the use of end-to-end encryption and encourage others to weaken existing security measures.”
Startup Roundup:
#StartupsEverywhere: Beaumont, Texas. KegSafe, a new startup venture based in southeastern Texas, is using ultrasonic technology and software to help beer distributors keep tabs on their inventories by providing up-to-the-ounce data on keg lines. We recently spoke with Mark McCoy, KegSafe’s CEO, to learn more about the startup’s work.
J.D. Vance launches VC firm to fund startups between the coasts. Investor and author J.D. Vance has launched a venture capital firm, Narya Capital, to invest money in startup ventures in rural and underserved cities across the country.
