Sunday, June 10, 2012

US pressure on EU tax

Will the EU airline emissions tax prevail, or will it fall under pressure from the US?   Opinio juris points us to this story:
(Reuters) – Senate lawmakers and the Obama administration on Wednesday stiffened their opposition to a European law that targets emissions from commercial jetliners and applied new pressure on Brussels and the United Nations to resolve global concerns. 
...The issue is especially important to the United States, whose airlines have a mature and lucrative transatlantic business. American Airlines, United Airlines and Delta Air Lines are looking to grow international travel.
The tax is described as a fee for permits to fly to and from EU airports.  That's not a tax at all really.  It's a toll charge.  Don't want to pay the toll?  Don't fly to or from Europe.  Why are toll charges for roads, or consumption taxes for that matter, perfectly uncontroversial but toll charges for flying a cardinal sin?  The answer is plainly that the airline industry wants to continue externalizing the costs of pollution on the public and the EU tax makes that harder for them to do, so the answer is to seek help from US government to stop that happening.  I call it a clear breach of the government's fiduciary to duty to the polity at large to help industry accomplish this goal (I've been reading Evan Fox-Decent).

Ku says: "The ECJ has held that the EU tax does not violate international treaties or customary law.  This seems plausible to me, but I wonder if the political pushback the EU is getting will ultimately force it to back off.  I'm betting yes."

I would like to think the EU can resist the pressure, but I fear that Ku is making the correct bet.  US industry lobbyists are very well funded and organized and have proved time and time again their ability to get US lawmakers to exert pressure on other countries to change their laws to suit US business interests.  In the case of India's controversial post-Vodafone tax reform, the lobbyists might not have been successful in preventing passage of the law, but they might have prevailed anyway if the law has little effect in practice as this story suggests.  The game theorists out there can comment on the strategy behind pushing forward with a formal law under the assumption that enforcement will be nil.  Sounds like Dodd-Frank, and it seems like an all-too common strategy for politicians, especially in tax, maybe in other regulatory areas involving lots of complexity and trickery.

One additional aspect of the Reuters story is that Transportation Secretary Ray LaHood is calling the EU an outlier, acting alone and unilaterally, and that the US needs to see "real signs of flexibility from the EU."  No mention of why they should be entitled to hold such expectations, why the EU should not be allowed to govern itself.  But a threat if "real signs of flexibility" are not seen:  "The administration has threatened unspecified action if a compromise is not reached, but LaHood said no decision had been made on possible steps.  He said discussions within the administration, however, are centered on the possibility of the United States filing a formal complaint to the United Nations."

After trying to stop the UN from doing something it doesn't like, the US might like the UN to help it stop the EU from doing something else it doesn't like.  I thought the US wanted out of the UN: it's a threat to freedom, it's neither wise nor neutral, etc.  There's a song for this kind of relationship.

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