Apple’s EU Fine Is a Global Political Problem

Apple is a nation by another name.

As of 4 p.m. Tuesday, the U.S. Treasury had $273 billion of cash and marketable securities on hand. At the close of business on June 25, the most recent date for which we have figures, Apple had almost as much, $232 billion of cash and marketable securities on hand.

Those figures are typical — there are days when Apple has more than the Treasury — and they’re one indication of a new era for the companies that dominate the digital economy. It’s one that requires new skills from their leaders, as they’ve become world leaders, in some ways playing in the same league as presidents and prime ministers.

The latest sign of the new era is Apple’s tax dispute with the EU, which threatens relations between the U.S. And the EU, the world’s two largest economies, and may well influence their tax codes and economic growth. U.S. Treasury Secretary Jacob Lew has already attacked the EU for declaring that Apple owes $14.5 billion in back taxes to Ireland.

Apple CEO Tim Cook understands the game he’s in. He quickly released a letter disputing the EU’s declaration, pointing out its “wide-reaching implications.” He says the EU “is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been. This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe.” Two entities plan to appeal the ruling: Apple (AAPL) and the government of Ireland.

This fight is just the most recent example of what will increasingly come to pass as the digital economy enables companies to attain the scale of nations on some dimensions.

Apple’s recent market cap ($570 billion) is greater than the GDPs of about 165 of the world’s 190 countries. Facebook’s 1.7 billion active monthly users exceed the population of any country. Alphabet (GOOGL), through the data generated by Google users, has better real-time knowledge of what’s going on in the world than any government, and can predict disease outbreaks and stock market movements with remarkable accuracy.

Then there’s IBM (IBM), which through its Weather Company business has more weather data than any government. And Bharti Airtel, an Indian telecom that most Americans have never heard of, has more customers than America has people.

These are not strictly comparable measures, but they suggest the scale at issue.

Cook cited “the obvious targeting of Apple” in his letter, and he has a point. Apple’s size is clearly an issue for the EU, which is cracking down on the biggest U.S. Technology companies — Alphabet, Amazon (AMZN), and Facebook (FB) — in addition to Apple. China, the biggest economy after the U.S. And EU, has also targeted Apple.

This is more than just business. It’s international relations, global politics at the highest level. The leaders of the world’s largest economies will meet next week at the G20 Summit in Hangzhou, China. How much longer before Cook, Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Alphabet’s Larry Page, Alibaba’s Jack Ma, and their peers get invited?

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