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Digital economy and the EU: three topics to follow closely

Despite its aspirations to become a leader of today’s digital economy, the European Union (EU) still lags behind countries such as China and the United States where start-up ecosystems are thriving as much as investments in research and innovation (R&I).

Despite its aspirations to become a leader of today’s digital economy, the European Union (EU) still lags behind countries such as China and the United States where start-up ecosystems are thriving as much as investments in research and innovation (R&I). In 2017, only one in five European companies displayed a high or very high digital intensity index (1), and only 6% of ICT and professional service companies declared making a strategic and intense use of data.

To reverse the tendency, the EU established knowledge and innovation as key elements of its EU 2020 Strategy. The European Commission set up 7 flagship initiatives to support that transition, among which the Digital Agenda for Europe and Innovation Union.

The Digital Agenda for Europe recognised the lack of harmonised policy framework as the source of the problem for not fully tapping into the potential of digital economy. Its main objective is to develop a Digital Single Market to fulfil the priorities of the EU 2020 strategy.

As defined by the Commission, Digital Single Market is “one in which the free movement of persons, services and capital is ensured and where the individuals and businesses can seamlessly access and engage in online activities under conditions of fair competition, and a high level of consumer and personal data protection, irrespective of their nationality or place of residence”.

European ambitions to build the digital single market already led to concrete policies including the General Data Protection Regulation, the Regulation on cross-border portability of online content services and the Regulation addressing unjustified geo-blocking. And that’s only the beginning.

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Policy developments to follow

We expect three topics will increasingly draw policymakers’ attention:

  • Artificial intelligence (AI): Artificial intelligence raises many questions as much as it nurtures the wildest innovative ideas. Defining an appropriate ethical and legal framework for responsible technology development and use should hit the agenda of the European Commission. Policymakers will need to address the challenge of determining where liability lies in case of damages caused by AI-driven machines;
  • Taxation of digital companies: In March 2018, the Commission proposed a 3% tax on digital activities including online advertising, social networks and e-commerce platforms. While Ireland, Sweden and Denmark continue to oppose the digital tax which hampers the adoption of a text at European level, countries such as France, Spain and Austria went along with their own digital tax at national level. Hence, fragmentation of the market.
  • Increased investment in R&I: The €100 billion research and innovation programme, Horizon Europe, is expected to increase the share of EU-funded projects in the field of digital applications. The second pillar of the proposed framework entitled “Global Challenges and Industrial Competitiveness” foresees to dedicate €15 billion for digitalization and will tackle, for instance, the next generation internet, robotics, advanced computing and Big Data.

Such trends promise intense discussions and will most probably be high on the European political agenda in the coming years. Yet, open questions remain and will certainly drive the political debates: Should legislation remain technology-neutral? Is the market self-sufficient and capable to regulate itself?

Whether you are in the digital business or intensely relying on digital technology and tools, Hague can help you keep a close eye on what’s coming next and get your voice heard at national and European levels.

(1) A micro-based index that measures the availability at firm level of 12 different digital technologies

Aleksandar-Mihail Atanasov

“Corporate Affairs is the fundamental bridge between business, society and government”

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