article EU Logos

The European Digital Single Market

The European Digital Single Market 16 octobre, 2017

For a few years now, the European Union has found an interest in unifying the different national digital markets and fostering a European data economy which would allow the free movement of data within the EU. A digital market is an economic concept referring to a market where the action of buying and selling goods is done through digital tools, such as the Internet. Data are also at the centre of this concept, since a typical online customer actually represents a set of data that is used by businesses and public services to improve their efficiency. Since 2015, the European Commission developed a Digital Single Market strategy (DSM strategy) which aims at uniting individual digital markets across the Union. The strategy encompasses 16 initiatives which have been divided up into three overarching pillars. Potential gains from a fully unified digital market have been estimated at €739bn by the Commission, which would represent a 4% increase in the entire EU GDP by 2020. Nevertheless, in order to achieve this stunning increase, all the objectives stated in the DSM strategy must be met.

The Digital Single Market strategy analysed

Therefore, the Digital Agenda composed by the three pillars that have previously been mentioned must be respected. Indeed, each of these pillars represent a stepping-stone toward a completely unified digital market. The first pillar, simply entitled “Access”, seeks to enhance EU citizens’ access to digital goods and services. It notably strives to coordinate the different national VAT regimes, overhaul and harmonize national copyright laws to reach smoother digital sales across borders, only to mention these. Moreover, the Commission wants to ease cross-border e-commerce, and it bolsters a new approach to competition between European businesses offering similar digital goods and services. This new method should be fairer and ensure trust between all partners. Fulfilling the conditions encompassed in the first pillar would offer both citizens and businesses a clearer understanding of how they can digitally buy and sell assets on a European scale. Thus, it could help generate more benefits and participate to the EU GDP’s 4% increase.

With the second pillar, named “Environment”, the Commission looks for improving digital networks and Internet services so that everyone can benefit from an equal access to services and goods available online. It also wants to create a suitable environment for digital businesses to thrive and offer their services to the largest audience. This should be achieved by rendering broadband connections faster at all national levels, by instigating public and private entities to invest in their development. There is also an entire section within the second pillar dedicated to personal data protection and cybersecurity partnerships, to ensure that all users of online services stay safe from malwares and hackers. Developing high-speed broadband and guaranteeing Internet users’ safety are therefore two main issues that the EU Commission is determined to tackle.

Finally, the third and last pillar – “Economy and Society” – stands for the EU’s wish to promote and grow its digital economy (also called data economy). This ultimate pillar might represent the most important aspect comprised within the DSM strategy. Indeed, this pillar includes an initiative which seeks to develop a new kind of freedom of movement within the European Union: the free movement of data. Currently, there are four kinds of movement, which are the free movement of goods, capital, services and labour. With this fifth one, digital data, which can be either personal or business-related data, will be freed from currently existing restrictions. These latter are geographical restrictions; for instance, access to new services is now limited because they might be located in another country than the one the individual who seeks to use them is. Removing these digital barriers will ensure that someone can have an equal access to goods and services, even though he is living in a different country than the one the provider of these goods is in. This will also work for job opportunities, as the Commission indicated its wish to develop an “e-government” action plan, which should be able to connect citizens and businesses across Europe. The establishment of a European Cloud service, that would allow citizens to save their data into a centralized European database, is also on the agenda. Fostering the European data economy through the freeing of data flows would truly permit the creation of a unique and single digital market between all Member States.

The Commission’s renewed vows toward a unified DSM

This year, in the State of the Union Address Jean-Claude Juncker gave on September 13th, the President of the European Commission reasserted the fact that the Commission was supporting the Digital Single Market plan, and even saw it as one of EU’s top priorities. Cybersecurity was also at the centre of his declaration, when he announced that:

In the past three years, we have made progress in keeping Europeans safe online. But Europe is still not well equipped when it comes to cyber-attacks. This is why, today, the Commission is proposing new tools, including a European Cybersecurity Agency, to help defend us against such attacks.”

Thus, developing the European digital market, as well as improving Internet services’ security were two main elements Juncker addressed during the State of the Union speech. He particularly put the emphasis on cybersecurity during his address, and tried to justify this choice by indicating that he thought cyber-attacks could be as damaging as any other physical attacks. While economic gains are one the main drivers for DSM to be implemented, the EU Commission has clearly voiced its intentions to increase cybersecurity, notably through the reinforcement of the European Cybersecurity Agency, also called European Agency for Network and Information Security (ENISA).

While everything seems easy enough to accomplish on paper, a lot will need to be accomplished to achieve a completely unified Digital Single Market. Andrus Ansip, the European Commission vice-president as well as EU’s digital chief, is in charge of tackling the issues that might appear along the road to setting up this new single market. He stressed on several occasions his wish to move forward with the 16 initiatives and to make progress after the 2015 Commission’s strategy. He notably said that:

Data should be able to flow freely between locations, across borders and within a single data space. In Europe, data flow and data access are often held up by localisation rules or other technical and legal barriers. If we want our data economy to produce growth and jobs, data needs to be used. But to be used, it also needs to be available and analysed. We need a coordinated and pan-European approach to make the most of data opportunities, building on strong EU rules to protect personal data and privacy.

Once again, it can be underlined that when they refer to the Digital Single Market, EU officials usually link it to cybersecurity issues and the protection of personal data. However, the freeing of data flows should not harm Internet users’ privacy in any way. It should on the contrary help businesses and customers get in touch more easily and help transferring data across borders, according to the EU Commission’s plan.

To this day, a few stages have already been achieved toward the DSM, that were incorporated within the Commission’s strategy. The most notable ones are the end of roaming charges that has been adopted in the EU Parliament the 15th June 2017, and the discussions that are currently going on in the Commission for an EU Cybersecurity Strategy. Concerning roaming charges, the Commission had pledged to make telephone operators stop paying among them for network services abroad. In other words, when a user would go in another EU Member States and use his mobile phone, he would most likely have to pay additional fees on his bill at the end of the month. This was the result of EU operators having to pay for these services among themselves, therefore echoing the price difference on the customer’s bill. To remedy this issue, the Commission proposed a legislation back in 2013 to end roaming charges, which led to a co-decision between the Parliament and the Council to set up the 15th June 2017 as the deadline to end them. Since then, European mobile phone users can use their devices in every single Member State without having to pay that extra fee for roaming.

In terms of cybersecurity within the Digital Single Market, the DSM strategy is mainly focused on stopping data fraud or theft, by regulating different aspects of digital transactions. In this case, cybersecurity has been defined by the EU as:

“the safeguards and actions that can be used to protect the cyber domain, both in the civilian and military fields, from those threats that are associated with or that may harm its interdependent networks and information infrastructure. Cybersecurity strives to preserve the availability and integrity of the networks and infrastructure and the confidentiality of the information contained therein”.

According to the World Forum in its Global Risks Report of 2016, data fraud and theft are both among the most likely global risks that are looming over Europe and the world. Moreover, the EU itself has registered more than 4000 ransomware attacks in 2016 only, showing the urgency of the situation and the need to take action against cyber-attacks. Thus, if the EU truly seeks positive externalities out of the Digital Single Market, putting the emphasis on security and cyber protection of data truly is an essential element.

Following Juncker’s declaration on cybersecurity, the European Commission unveiled its new cybersecurity strategy to the public on September 19th. Again, economic and security issues are intertwined in the Commission’s plan. In fact, one of the first proposal put forward by the task force which is in charge of tackling cyber issues, led by Andrus Ansip, Julian King (European Commissioner for the Security Union) and Mariya Gabriel (European Commissioner for Digital Economy and Society), is to combat fraud and counterfeiting of digital means of payment. In addition, as mentioned earlier, a reorganization of the current European Cybersecurity Agency, ENISA, should be underway soon. This will mainly affect the number of employees within the Agency, which should double, and broaden the type of missions undertaken by this organism. ENISA will also have to come up with “cybersecurity certificates” for digital products and services. The certificates will need to ensure that there is no threat in using these products and services, by labelling them as if they were usual goods. Alongside this reshaping of the European Cybersecurity Agency, the Commission has planned to create a European Cybersecurity Research and Competence Centre by 2018. Its role will be to work with EU Member States and help them develop the most advanced countermeasures to cyber-attacks, ensuring the protection and security of millions of Internet users at the EU and national levels. The last most important measure announced by the Commission about cybersecurity is related to cooperation among EU countries. A proposal has indeed been presented, asking both Member States and the EU to swiftly react to large-scale cyber-attacks, and on a more coordinated manner than before.

A difficult legislative process

After two years trying to fulfil its initial 16 initiatives, the Commission also appeared to have met some issues along the way. Even though it already managed to implement some major elements, bringing the EU a bit closer to a functional and fully unified digital market, there still are problems which need to be resolved.

First, it seems that the extent of the reforms that imply the DSM have been underestimated by the European Commission. Indeed, the different projects initiated by the latter to homogenize national legislations, especially in terms of copyright laws and security regulations, sound rather complicated to settle upon. For instance, the General Data Protection Regulation (GDPR), which is one of the cornerstones for the entire DSM project, has been debated and adopted by EU policymakers on the 14th April 2016 in the European Parliament. The aim of this regulation was to replace independent national regulations on personal data protection, to unify them and introduce a simplified version at the European scale.  Nonetheless, the running of this legislative proposal through both the EU Parliament and the Council of the EU has known a lot of turmoil. Thousands of amendments have in fact been put on the table during the parliamentary sessions, and even though the regulation has been adopted, it has been intensely criticized for creating additional limitations on new information and communication technologies (ICT). Every step of the way, it seems that difficulties and unexpected issues have come up and hampered the Commission’s strategy for a unified Digital Single Market.

Second, while the intentions to create a Single Digital Market appear noble, and the DSM strategy that was initially proposed feasible, some observers have pointed out that what has come out of the legislative process so far seemed more complicated than it needed to be. For others, it is distinctively off-course to what the Commission had originally intended. For example, several measures are thought to be inadequate, or imposing too much restriction especially on companies thriving on e-Commerce, only to mention these businesses. The EU’s legislative work has already been criticized for creating new regulations which may not be appropriate to a given situation in the past, and it is now creating new rules which are obstructing several enterprises’ competitiveness. With DSM legislations, some experts have denounced the burden some measures would represent for several companies across the Union, which will need to adapt to these new EU regulations, and will therefore lose potential customers because they would have to set the same prices in all EU Member States. However, it is widely known that incomes are unequal among EU citizens, who would still have to pay the same price for a product or service bought on the Internet. The reason behind this price standardization is linked to the Commission’s wish to end price differentiation between EU countries, which is achieved by online retailers which can locate where a customer is, and accordingly adapt prices to his location. If this trend goes on, it might even lead to opposite outcomes to what was initially intended, according to these same observers.

Finally, one of the main concerns that has been raised about a fully digitalized and technologically advanced single market is related to job opportunities, more precisely job losses. Indeed, entire industries and employment sectors are currently being reshaped because of digital technologies and automation, which is furthered by digitalization. Automation is accentuated by new means of communication and the fastening of data transfer from point to another. In terms of employment, the DSM should be creating new opportunities for qualified workers, but digitalization itself threatens jobs which do not require as much skills as other tasks do. According to the last Bruegel think tank’s estimations, which dates back to 2014, 40 to 60% of jobs within the EU Member States might be endangered because of digitalisation-induced automation. It could also lead to job reallocations all around the world, rendered easier by cloud technologies that make data available everywhere in Europe. These concerns do not make policymaking any easier, as policymakers sometimes need to overregulate businesses and international companies so that jobs can be saved. This however appears to be a temporary solution, as digitalisation looms large over the entire world, not only Europe. We will need to be ready for it, particularly by developing the DSM framework, which will need to tackle tomorrow’s challenges efficiently.

Potential gains highlighted

In terms of employment, a Digital Single Market might also bring new job opportunities in the EU. If the Digital Single Market is truly managed the way the Commission forecasted in its 2015 strategy, technological advancement should be able to create millions of jobs, and balance out job losses digitalization and automation will engender. On the one hand, technology is going to create new products which were not on the market before, then developing new offers and demands which will produce economic gains. Alongside the development of these new products and services, labour will be required to meet customers’ demand. Jobs will thus be created, especially in terms of digital entrepreneurship, IOS and apps developing, industries which barely existed a few years ago. On the other hand, these new jobs will require new machines and infrastructures in order to develop, which will have to be produced by workers, generating new jobs as well. Finally, thanks to new technologies, and by using them properly, economies of scales can be realised, lowering the cost of production to build one product. As a result, competitiveness is increased in the sector in which those economies of scale are achieved. Increased competitiveness also means lower prices for products and services, and again new jobs should spawn out of it. It has been projected that around 8.5 million new jobs should be created after the DSM is fully functional. In an official study for the European Parliament, it has been pointed out that most newly created jobs will require knowledgeable and high-skilled workers, such as managers, technicians and engineers. It has also been estimated that other kinds of job which are more less demanding in terms of high-skilled workers should increase by about 2 million.

The current EU data economy’s value, taking into account all digital sales and services, has been estimated at about €300bn. In the case the flow of data would be freed from the main cross-borders restrictions, notably localisation restrictions, the European data economy could phenomenally increase to more than €739bn by 2020. This growth would be similar to the increase which was expected from the establishment of the Single Market in 1992. On a broader level, the DSM is also a key element in what is called the “High Growth Scenario” of the European economy. Fulfilling all that has been promised in the DSM strategy should take Europe a bit closer to this case scenario, where the main drivers for economic growth are innovation, digital technologies and ICT. Adequately framed, these elements could steer the EU’s economy toward more investments and an even bigger increase in the EU’s GDP. However, before ending up at this point, all the guidelines set up by the Commission must be respected by the Commission itself, which should not drift away from its original intentions. Then, the Commission’s proposals must go through the two co-legislative bodies of the EU: the Council of the European Union and the European Parliament.

                                                          Raphaël Moncada

Find this article on our partner’s website: EU Logos

For further information:

 European Parliament, “The cost of Non-Europe in the Single Market”: http://www.europarl.europa.eu/RegData/etudes/STUD/2014/510981/EPRS_STU%282014%29510981_REV1_EN.pdf

European Parliament, “Employment and Skills Aspects of the Digital Single Market Strategy”: http://www.europarl.europa.eu/RegData/etudes/STUD/2015/569967/IPOL_STU(2015)569967_EN.pdf

European Commission, “Facilitating cross-border data flow in the Digital Single Market”: https://ec.europa.eu/digital-single-market/en/news/facilitating-cross-border-data-flow-digital-single-market

European Parliament, “Performance-based Full Policy Cycle for the Digital Single Market”: http://www.europarl.europa.eu/document/activities/cont/201307/20130701ATT68944/20130701ATT68944EN.pdf

Audrius Puksas, “Interaction between big data and competition law in digital single market”: https://www.researchgate.net/profile/Andrius_Puksas/publication/309090791_INTERACTION_BETWEEN_BIG_DATA_AND_COMPETITION_LAW_IN_DIGITAL_SINGLE_MARKET/links/5803d86408ae23fd1b68a0ca.pdf?origin=publication_list

European Commission, “A digital single market in Europe: Bringing down barriers to unlock online opportunities”: https://ec.europa.eu/commission/priorities/digital-single-market_en

European Commission, “Cybersecurity in the European Digital Single Market”: http://www.cybersecobservatory.com/wp-content/uploads/2017/05/UE_sam_cybersecurity_report.pdf

European Parliament, “Ubiquitous Digital Single Market”: http://www.europarl.europa.eu/aboutparliament/en/displayFtu.html?ftuId=FTU_5.9.4.html

European Parliament, “Digital Single Market: boosting e- commerce and combatting consumer discrimination in the EU”: http://www.europarl.europa.eu/RegData/etudes/STUD/2016/579003/IPOL_STU%282016%29579003_EN.pdf

European Commission, “E-Communications and the Digital Single Market”: http://data.europa.eu/euodp/en/data/dataset/S2062_84_2_438_ENG

European Commission, “What does Economic Research tell us about Cross-border e-Commerce in the EU Digital Single Market?”: http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=6079

Herbert Zech, “A legal framework for a data economy in the European Digital Single Market: rights to use data”: https://www.researchgate.net/publication/306040809_A_legal_framework_for_a_data_economy_in_the_European_Digital_Single_Market_rights_to_use_data

European Commission, “SMART 2013/0063 European Data Market”: https://ec.europa.eu/digital-single-market/en/news/smart-20130063-study-european-data-market-and-related-services

European Commission, “A Digital Single Market Strategy for Europe – Analysis and Evidence”: https://ec.europa.eu/digital-single-market/en/news/digital-single-market-strategy-europe-analysis-and-evidence-swd2015-100-final

European Commission, “Why we need a Digital Single Market”: https://ec.europa.eu/commission/sites/beta-political/files/dsm-factsheet_en.pdf

EUobserver, “Clock ticking for EU to fix the digital single market”: https://euobserver.com/opinion/137956

European Commission, “State of the Union 2017 – Cybersecurity: Commission scales up EU’s response to cyber-attacks”: http://europa.eu/rapid/press-release_IP-17-3193_en.htm

European Commission, “Questions and Answers on the Communication on a Fair and Efficient Tax System in the EU for the Digital Single Market”: http://europa.eu/rapid/press-release_MEMO-17-3341_en.htm

Share and Like :