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Building a ‘Fortress Europe’ for the digital economy?


Building a ‘Fortress Europe’ for the digital economy?

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The European Commission’s Digital Single Market proposals, due out on 6 May, promises to remove barriers for a more robust Internet economy in Europe. However, it may actually create a new digital “Fortress Europe”, argues Dean Garfield.

Dean Garfield is President & CEO of the Information Technology Industry Council (ITI), an advocacy group acting as the global voice for the tech sector.

The European Commission is slated to announce its grand new plan to create a “Digital Single Market” and eliminate many of the barriers to a more robust Internet economy in Europe. Leaks coming out of Brussels, however, suggest that this initiative may actually create a new “Fortress Europe” for the digital economy. Imposing regulator barriers would be a grave mistake for Europe, and would have harmful effects on transatlantic trade and investment.

The Digital Single Market is a tremendous opportunity to turbo-boost both the EU and the transatlantic economy. As European Commission President Juncker has stated, “I believe that we must make much better use of the great opportunities offered by digital technologies, which know no borders … By creating a connected digital single market, we can generate up to €250 billion of additional growth in Europe.”

The potential of a digital single market to spur innovation in Europe is real. For instance, copyright rules today vary from country to country in Europe, making it hard for startups and online businesses to scale up; telecom markets are segmented; and digital skills lag behind many countries. These and similar problems should and can be addressed.

An important aspect of addressing these challenges is deepening the digital connection between Europe and the United States. There is much we can learn from each other. Despite recent spats, Europe and the US share common objectives with respect to an open Internet. In fact the US and EU governments noted last month they “are committed to a robust trans-Atlantic digital marketplace that sparks innovation, fuels economic growth and allows for the freedom of expression and the free flow of information across borders.”

Nevertheless, the Commission appears poised to instead use the mantle of the Digital Single Market to propose new regulatory barriers squarely targeted at US-based technology companies. As the Wall Street Journal reported last week, the Commission is considering imposing a new regulatory structure on the Internet, targeted at “Internet platforms.”

Ominously, in the past month, Digital Commissioner Günther Oettinger has spoken of the need to “replace today’s web search engines, operating systems and social networks.” In leaked Commission documents nearly all of the businesses identified as “platforms” needing special regulation are US-headquartered: an alphabet soup of the Internet economy, from Amazon to Yahoo! and many in between (Apple, eBay, Etsy, Facebook, Google, and Microsoft are among the others singled out).

Instead of enhancing integration, the Commission would in effect be creating a digital fortress around Europe – a move that would have devastating consequences for Europe’s efforts to spur innovation and technology by its own companies. In particular, under this rubric the Commission is considering new regulations that would:

  • Require special “transparency” of these platforms regarding their business practices.
  • Require platforms to change the design of their services to provide for ‘interoperability’.
  • Limit how platforms can use information.

Such measures are not only counterproductive, they are wholly unnecessary. US and EU law already protect against abuses in these areas. For example, when data is misused, regulators in Europe and the US regularly prosecute companies under consumer protection or similar laws. When a market actor allegedly abuses its dominant market position, antitrust/competition authorities investigate – as both the US and Europe have done in the digital space on multiple occasions. In contrast, Brussels appears poised to put government officials in charge of how hugely popular online services are designed and implemented. And it wants to do so without the suggestion, much less the evidence, that technology firms are doing anything to harm consumers.

It is worrisome to think that we are now taking the Internet economy for granted. It was not heavy-handed regulation that enabled the Internet’s success and vibrancy; it was the opposite.

Instead of jumpstarting the EU economy, these new rules would constrain Europe’s ability to attract the world’s greatest technology companies and to develop exciting new companies of its own. The regulations would also sour the US-EU relationship at exactly the wrong time. Our governments are engaged in a bold effort to strengthen the transatlantic relationship and open markets through the Transatlantic Trade and Investment Partnership (TTIP); this effort to impose new restrictions on some of the most innovative global companies pulls in the exact opposite direction.

The US and Europe should be standing together to create a leadership model for governments with a decidedly different vision of the Internet, like China and Russia. If the EU begins to impose new regulatory regimes on online actors, it will undermine the ability of our governments to stand together against similar efforts elsewhere in the world.

We have endured years of intractable disputes between the US and Europe over agriculture policy and aircraft subsidies. We hope that this pattern is not now repeated for the digital economy. That would deprive our people of the many contributions that technology and the pursuit of innovation have driven for job creation and rising living standards on both sides of the Atlantic.