Startups call for pro-innovation immigration policy
When his original grading and evaluation platform wasn’t getting any bites in the world of higher education, Ali Aldubaisi and his co-founder, Ali "AJ" Aldjaei, ended up pivoting to the training of law enforcement. Today, Kaiden AI is used in police academies across the country to train recruits on how to de-escalate high-pressure scenarios. We sat down with Ali to discuss his software, selling to government organizations, and founding a startup in northern Virginia.
A federal program to boost broadband — a necessary component of startup founders and users ability to access the startup ecosystem — in states across the country is facing headwinds and delays as policymakers move the goalposts and risk making progress on closing the digital divide.
Timing the sowing and watering of crops is as important as ever in agriculture. Jessi Korinek and her co-founders at Nave Analytics are developing a software that uses satellite data to help farmers cut down on water costs for irrigation. We sat down with Jessi to discuss her product, the impact of tariffs on the agricultural industry, and the challenges she faced in receiving federal research and development (R&D) grants.
The Big Story: Recognizing the contributions of immigrant entrepreneurs. Throughout the month of June, we celebrate Immigrant Heritage Month and recognize the impact of the immigrant community in the U. S., including on the country’s startup ecosystem. As the nation reflects on the significant contributions of this community as a whole, it is important to acknowledge and uplift the stories of immigrant entrepreneurs and recognize the challenges these founders face.
The Big Story: G7 tax deal reached, but faces uncertainty in U.S. Congress. This week, the finance leaders of the G7 countries came to an agreement on a global minimum corporate tax rate of at least 15 percent, which could hinge on the withdrawal of unilateral digital services taxes that disproportionately impact U.S. tech firms. The deal, which comes after years of negotiations in an effort to revamp international taxation, represents a first step in redrafting the rules in how multinational corporations are taxed.
The Big Story: Transatlantic data deal a priority ahead of U.S.-EU summit. Ahead of the U.S.-European Union summit later this month, President Joe Biden is renewing the administration’s focus on negotiating a new deal to let U.S. companies, especially startups, that operate in Europe store and process EU users’ data in the U.S. The two governments must address policy-related obstacles to transatlantic digital trade, including the invalidation of the last data flow deal as well as likely impacts from other EU proposals around digital taxes, artificial intelligence, and online platforms and marketplaces.
The Big Story: Lawmakers consider SHOP SAFE Act despite outsized impact on e-commerce startups. This week, lawmakers examined the recently reintroduced SHOP SAFE Act, which would place high compliance burdens on e-commerce startups with the goal of deterring trademark infringement. The bill was the subject of yesterday’s hearing held by the House Judiciary’s Subcommittee on Courts, Intellectual Property, and the Internet.
TLDR: As federal officials hold hearings on potential action against countries that have enacted their own digital services taxes (DSTs), U.S. startups remain concerned that they could be affected by the digital levies in the form of higher costs for needed services, or even subjected to the new taxes themselves. Rather than imposing unilateral DSTs that harm startup growth, countries and global officials should work to reach a uniform digital tax framework that provides certainty for Internet companies of all sizes.
The Big Story: Biden unveils infrastructure plan with broadband, tax proposals. President Joe Biden announced an ambitious $2 trillion proposal this week that would rely on a combination of spending and tax credits to upgrade and expand the nation’s infrastructure. In addition to devoting billions of dollars towards upgrading schools, improving roads and bridges, and spurring a shift towards clean energy sources, the plan would also allocate $100 billion towards the expansion of broadband to narrow the nation’s digital divide. In a speech on Wednesday announcing his infrastructure plan, President Biden said the connectivity funding would “make sure every single American has access to high-quality, affordable high-speed Internet.”
TLDR: As federal officials seek public input regarding the response to countries that have enacted digital services taxes (DSTs) on U.S. Internet companies, the startup community remains concerned that they will be affected by the levies in the form of increased costs for the services and products they rely upon. While the Biden administration and global officials work to reach a uniform digital tax framework, it’s critical that countries—and even U.S. states—refrain from imposing their own digital services taxes that could harm startup formation and success.
In a new Medium post, Engine announced the launch of our Startup Agenda 2021, which outlines the policy priorities of the U.S. startup community. The Startup Agenda 2021 covers a range of policy issues that include capital access, connectivity, intellectual property, privacy, and more. As we explain in our post below, there are startups in every state and congressional district across the country, and their perspective is especially critical if policymakers hope to craft rules and regulations that boost innovation and competition.
TLDR: As intergovernmental organizations and countries continue to discuss implementing their own digital services tax (DST) frameworks on multinational Internet companies, France has notified large online platforms that they must begin paying the country’s levy this month while Canada recently announced plans to impose its own DST. Although most DSTs under consideration—as well as those that have already been implemented—target large, mostly U.S.-based tech companies, the startup community remains concerned that the burden of the taxes will be passed on to smaller companies and users in the form of increased costs for products and services.
As the COVID-19 pandemic continues to cripple economic growth across the globe, the United States Trade Representative (USTR) and policymakers need to be prepared for trading partners seeking to recoup lost revenues through new international taxation measures. Specifically, more nations are considering implementing or have implemented digital services tax (DST) frameworks that would largely discriminatorily target U.S. tech companies to help cover budgetary shortfalls.
As negotiations continue on a trade deal between the United States and the United Kingdom, it is crucial that policymakers push for balanced and commonsense intellectual property frameworks around the world so that startups can grow globally. This July, the U.S. and the U.K. entered the third round of negotiations on an expected trade agreement, following the U.K.’s withdrawal from the European Union earlier this year. While a number of topics are on the table, including critical digital trade provisions, the intellectual property provisions will prove essential to U.S. startups.
The United States-Mexico-Canada Trade Agreement (USMCA) signed by President Donald Trump this morning is a welcome step for startups looking to innovate and grow on a global scale. USMCA has been hailed as a template for future trade agreements between the U.S. and other countries, and we’re pleased that the deal includes startup-friendly provisions that defend IP rights and promote intermediary liability protections.
Engine submitted comments this week to the United States Trade Representative addressing the potential U.S. response to France’s enactment of a Digital Services Tax. The retroactive three percent tax would be levied on certain large firms providing online intermediation services and digital advertising sales with a revenue of 750 million euros globally and 25 million euros in France.
When the United States negotiates trade agreements, it has the chance to give startups a similar legal framework abroad that they rely on domestically. This is critically important for smaller companies looking to effectively compete in an increasingly global ecosystem. While Congress still has the ability to update that digital legal framework as it sees fit, the inclusion of digital trade protections in trade agreements gives startups the certainty they need to compete globally.
Section 230 of the Communications Decency Act has been privy to the ire of politicians at both ends of the political spectrum in recent weeks. That misplaced bipartisan disdain isn’t limited to the 1996 law, however. As the USMCA approaches formal consideration in Congress, attacks on the agreement’s Article 19.17, which mirrors the language of Section 230, have ramped up as well.
In a Ways and Means Committee hearing on trade policy earlier this month, Rep. Linda Sánchez (D-Calif.) showed clear animus towards the article in a terse exchange with U.S. Trade Representative Robert Lighthizer. Running over her time, the congresswoman asked why the U.S. intermediary liability rules were included in the agreement, saying she had “significant concerns regarding the USTR’s stance on CDA 230.” Ambassador Lighthizer defended the CDA 230-like language, saying “it’s U.S. law” and that the digital trade chapter is “a way for small internet companies to grow and use their advantages.”
The Ambassador is right. Article 19.17—and the digital trade chapter of the USMCA—will lead to greater innovation domestically and among our trading partners. As Santa Clara Law School professor and leading Section 230 scholar Eric Goldman points out in a letter signed by Engine, Article 19.17 is critical to this end because it lowers barriers, strengthens markets, and advances liberty.
Immunity for content generated by third parties on their platforms allows startups can get off the ground without exposure to potentially crippling lawsuits. It facilitates consumer trust by enabling third-party reviews, a hallmark of Internet commerce that would not exist without such protections. Finally, Article 19.17 expands free speech opportunities through increased access to platforms.
Unfortunately, Rep. Sánchez isn't alone in her criticism of the liability rules. Her Republican colleagues, Reps. Paul Gosar (Ariz.) and Matt Gaetz (Fla.), also oppose Article 19.17, attacking the U.S. liability rules that have fostered the internet we know today.
The House Democrats’ nine-member working group is focused on reconciling their issues with the USMCA in four areas: drug pricing, enforcement, labor, and the environment. While it appears unlikely that agreement will come to a vote with just 12 work days left before Congress enters its six-week recess, that list of issues need not be expanded. Going forward, the USMCA doesn't need another roadblock. Especially not one that needlessly picks apart the novel and innovation-advancing digital trade chapter.
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