The UK seemed to make good on its promise to take advantage of its Brexit freedoms. In a rapid succession, trade deals have been concluded with a range of partners. Most recently, the UK and U.S. announced their Economic Prosperity Deal (EPD). Observers, such as the economist Olivier Blanchard dismissed it as a “nothing burger” At first glance, that seems fair: a few tariff tweaks in terms of goods trade threw a lifeline to battered UK car exporters and some market access wins for U.S. beef and ethanol. With the looming threat of reciprocal U.S. tariffs by July 9, German Chancellor Merz is pushing for a quick deal with the US, EU officials are skeptical, calling German hopes for similar car tariff exemptions as delusional.
A key strength of the EPD lies in its bold ambition to slash non‑tariff barriers (NTBs). There is much to applaud in this domain. By digitising customs, enabling paperless trade, interoperable systems, and traceable supply chains, the deal aligns with strategic imperatives in a post‑Ukraine world, where sanctions enforcement demands data accuracy. These technical solutions are not only desirable—they’re essential. Europe should replicate this focus—but not as part of a trade package that undermines other vital policy areas.
Yet, France in particular may be rightly wary that certain language in the US/UK agreement may have significant implications for ongoing multilateral efforts to rewrite cross‑border tax rules for the digital era. So what are these concerns?
It may well be in the agreements “ambitious digital trade provisions“. These are left explicitly vague in the five page document. Yet, past U.S. trade agreements, such as the USMCA, the U.S.-Japan and the IPEF agreement suggest that, for the U.S., these provisions may be interpreted as meaning that they bind participating governments to permit
- no restrictions on cross-border data transfers
- limitations on data localization mandates
- limitations to requirements for source code disclosure
- non-discrimination in digital services and products (think: localization quotas)
This could strip EU states of the ability to require local storage or processing of sensitive data, even if such was deemed necessary to enable legal and regulatory oversight. It could also undermine efforts to redistribute taxation rights around digital services, which, the recent G7 cave in seems to suggest this is on the radar.
This may not be sound during a period of rapid technological progress in generative artificial intelligence should invite all parties to not be rushed into an agreement that may have wide-ranging consequences as whole industries are being upset. For example, it is not clear how provisions around intellectual property rights hold up. European officials have already suggested that in a potential trade escalation with the US, the U.S. trade surplus in services with Europe may well become a target. A potential form of retaliation is in the suspension of intellectual property protections in certain domains as a strategic response which, in turn, may aid European tech sector development. This could be increasingly pragmatic: artificial intelligence is already weakening traditional IP protections, large language models trained on vast corpuses of possibly copyrighted material without consent or subject to generous fair use interpretations. Given the rapid pace of technological progress it may seem short-sighted to accept language that could significantly limit the development of an EU tech stack. Since there is a scenario where IP protections are becoming functionally unenforceable, limiting ones’ own governance space in a critical area seems short sighted.
The potential implications on limits of local data control are also not arbitrary. Local data storage requirements empowers European courts and regulators to enforce GDPR, pursue cybercrime, tackle financial crimes, and uphold sovereignty. Removing this could mean evidence, taxes, and even citizens’ data move beyond EU reach. The fact that the EPD sidesteps digital services taxes (DSTs) is also a potential red herring. This issue seems to have resurfaced in the US-Canada negotiations. Recent attempts to weaken a threatened new U.S. withholding tax, widely seen as a US leverage tool to be deployed if countries adopt their own digital services taxes, may be an olive branch from the U.S. in this domain. In return, it seems that the G7 cave in is the quid-pro-quo. The European members of the G7 may well have made the calculation that such a withholding tax, in net, would hurt “European interests” by virtue of many EU citizens and financial intermediaries being heavily invested in US tech companies. This is the simplistic interpretation. A more subtle interpretation may link this with geopolitical alignment of EU, Middle Eastern, Indian and American interests around the IMEC corridor as part of a containment strategy vis-a-vis China.
Yet, it is hard to not see the US push as a multipronged strategy for the US to maintain its overwhelming superiority in the digital services domain through its tech companies which, with the roll out of digital identity may give the US in the future an unprecedented vector to project power. And many indicators point towards further dismantling of the OECD accord. The OECD accord is lacking U.S. ratification, and with Trump extending the 2017 tax cuts and continuing threat to lower U.S. corporate tax rates to the envisioned 15% minimum rate under OECD accord Pillar 2, this effectively undermines the multilateral OECD efforts entirely.
While Europe champions regulation—DMA, Data Act, AI Act—the U.S. pursues lighter-touch rules, and India builds open digital infrastructure. The EU’s model is rooted in privacy, oversight, and competition. Locking into a U.S. playbook risks freezing EU regulation and weakening its role as a global standard-bearer.
The EU should absolutely pursue a trade deal that digitises customs and enforces supply‑chain transparency for security and climate goals, cuts paperwork and streamlines technical barriers, but should be wary of language that may imply limitations to sovereignty such as ban data localization where legal or sectoral needs exist, or even constrain EU policy space on digital taxation or IP flexibility.
This is a moment for strategic clarity: digital trade cooperation, yes—but only within multilateral guardrails, and with sovereignty-preserving safeguards.