Can we save Europe from digital mediocrity?
The years 2016 and 2017 will
determine whether Europe creates a digital roadmap to support competitiveness
and growth, or slips into digital mediocrity.
The centrepiece of this
agenda will be the Digital Single Market, which is one of the priorities of the
European Commission as led by Jean-Claude Juncker. But the broader question is
whether Europe dares to embrace accelerating technological change or fights a
rear-guard action by overly focusing on data privacy and protecting national
industries and ICT champions.
Creating a Digital Single
Market could add €340 billion to the EU economy per year, according to
estimates from the European Parliament. The opportunities are plentiful. Today,
only 15% of online shopping in Europe takes place across borders. The various
EU member countries still differ greatly in terms of digital infrastructure,
business environment, regulation and skill levels.
More
choice, new industries
If barriers to
cross-border business came down, consumers would benefit from greater choice
and the quality of products and services should improve. Intensified
competition would force European companies to speed up their digitalisation and
transformation efforts, which, in turn, would help them grow. Europe’s
innovative start-ups, which now frequently decamp to the larger US market to
reach scale, would enjoy more growth opportunities at home. New industries
could develop and expand. Cloud computing, for example, has the potential to reach
€174 billion per year in Europe by 2020.
Removing barriers to
cross-border digital business will not in itself be enough. Digital content and
services will only flow more freely across borders if differences in consumer
protection, copyright laws and VAT systems are evened out.
Over €80 billion will have
to be invested to build fast broadband networks across Europe. Much of this
will have to come from the private sector, which will require stable and
forward-looking regulation. Massive efforts will be needed to train the
engineers, programmers and innovators needed for the digital economy.
The ITC skills gap in
Europe already means 900,000 people lack the tools they need to succeed today.
As important will be using technology to upskill and reskill the 32% of the EU
population in work but lacking basic digital skills.
The EU will also have to
push forward its Capital Markets Union project to provide more seed funding and
venture capital to innovative start-ups.
Access to talent and
customers are vital to build tomorrow’s European digital champions. In
parallel, the EU will also have to push forward its Capital Markets Union
project to provide more seed funding and scale-up capital to innovative
start-ups. Compared to the US and Asia, non-bank financing is still
underdeveloped in Europe. The lack of pan-European funds with the size and
expertise to finance the growth of digital ventures into global champions is
becoming a major hurdle.
Data, the
currency of the new economy
Much of Europe’s digital
future will be determined by its approach to data: the currency of the new
economy. The free flow of data is required for everything from pan-European
value chains to the sharing economy, and it should be at the heart of the
Digital Single Market. Data is becoming more and more important to the way we
shop, work and live. Yet much of the European debate has focussed on consumer
privacy and security without addressing adequately what industrial data can do
to improve growth, jobs and competitiveness. In the next two years, we will
need agile regulation to handle cross border data flows, consumer privacy and
the growth of the industrial internet of things.
Europe needs it to reap
the benefits of Big Data. Therefore, the European Commission should ban or
strongly deter all data localization requirements within the European Union.
Data localisation requirements are protectionist measures that go against the
essence of a digital single market.
Though the Privacy Shield
agreement, which governs how US companies handle the data of EU citizens,
answers some of the concerns stipulated by the European Court of Justice, it
risks being cancelled again. This could lead to a questioning of all other
current standard mechanisms of data flows between Europe and the US. The
fundamental difference in perspective on data collection is unfortunately
expected to remain a major roadblock in the creation of free data flow between
the US and Europe.
Another area that will be
critical for Europe’s digital future is how it deals with online platforms,
which, in the definition of the European Commission, comprise everything from
online auction houses and shops to search engines, sharing sites, social media
and internet-based payments systems. The growth of international (mostly US-
based) platforms in European countries will test policy-makers’ ability to
balance opportunity and risk and to create a legislative environment which is
more flexible and able to adapt to the speed of technology change.
If Europe is to break the
1.5% annual GDP growth barrier over the next decade, a vibrant digital economy
will be critical. Our EU institutions will need to provide positive leadership
at a time when fear can often overwhelm opportunity.
This
essay is drawn from the Global Agenda Council on Europe's report, Europe: What to
watch out for in 2016-2017.
Source: WEF
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