Europe has navigated from crisis to crisis in the past couple of years. Only this year, the Russian invasion of Ukraine, the energy crisis, and the increased cost of living have occupied front page headlines. This has had an impact on the EU’s digital agenda as well, and while competition policies and building a fair and strong digital market have benefited from a window of political opportunity to become priorities, lately, the economy and technology have come to be viewed more and more in the light of geopolitics. Strategic autonomy, digital sovereignty, and cyber resilience are some of the new buzzwords in Brussels and issues such as supply chain security for digital devices or the vulnerabilities of digital infrastructure have risen as priorities. Therefore, it has become necessary to include the idea of a future of regional technological independence in the grand scheme of a strong digital Europe.
But what does it mean to create this strong digital Europe amid geopolitical awakening? Does this mean that the EU has given up previous notions on how to achieve this goal?
In the broader context of the Covid and Russian invasion crises, the leitmotif of European collaboration has been solidarity. Under the auspices of the EU, the member states have made important efforts to act in terms of humanitarian and financial aid and also revitalized ideas of broader political cooperation. This was and continues to be highly necessary for a stronger Europe in the future. But so are a series of strategies and actions that the EU began to propose and put into practice at the beginning of the current political cycle in 2019.
The past decades have shown that the economic and normative relevance of the Union on the global stage were its drivers through times of prosperity as well as those of crisis. Therefore, working on creating a future resilient economy, and in particular a digital economy, should remain the ambition that accompanies the current political efforts of the European community. In the long term, this combination of strategic autonomy and a prosperous economy in the digital world might be Europe’s bulwark against future challenges, which will safeguard its relevance in the coming global order.
What was the EU’s perspective at the beginning of the current political cycle in 2019? The European Commission made it very clear that the EU’s digital strategy, “A Europe fit for the digital age”, was a political priority of its mandate. Since then, it has worked to build the framework for a series of actions to be initiated between 2019 and 2024, ranging from market regulations to creating a European Digital Identity for EU citizens or ensuring the EU’s cybersecurity.
As the reality of the recent years unfolded, the Commission’s priorities were evidently subjected to the influences of the ongoing crises in Europe and abroad. Although the tech backlash had already been in the air since scandals like Cambridge Analytica and Mark Zuckerberg’s hearings in the U.S. Congress and in the European Parliament, the Covid crisis drove Europe and its citizens to pay even more attention to the dynamics of the digital world. It brought closer to the center of the public and political debate issues related to illegal content online, data sharing and privacy flaws and the unbalanced market power of a handful of companies.
This pushed the Commission to put on the legislative table regulations related to digital services, digital markets, and data governance. 2020, 2021 and the first half of this year were crucial periods for the birth, negotiation and adoption of these acts. However, the series of international crises that have emerged due to the Russian invasion of Ukraine in the beginning of the year have nudged the European Commission to readjust its focus on ongoing digital actions to concentrate on the security of our continent instead.
But what does this mean in terms of the EU’s digital future? Will Europe manage to navigate these international crises while at the same time seizing the opportunity to build a successful digital future?
First, it is important to understand the state of the current digital strategy and why this has created a window of political opportunity to act and ensure a strong digital Europe. During the first half of its mandate, the Commission focused on the enhancement of existing digital markets and the creation of new ones, in order to provide long-term resilience to the European economy. Therefore, on the one hand, the EU aims to ensure fair competition in digital markets and thus has picked a fight with U.S. big tech companies, while on the other hand, the Commission has paved the way to harvesting the benefits of the data economy, by configuring the future of a Single Data Market.
The Digital Services Act (DSA) and the Digital Markets Act (DMA) are two of the main pillars of legislation that the Commission has brought forward. While the DSA aims to reshape online content and to protect consumers and their fundamental rights online, the DMA is a competition law determining clear rules for how large online platforms (called “gatekeepers”) can operate.
After an intense period of interinstitutional negotiations and heavy lobbying by the gatekeepers, both acts have been adopted this autumn. However, the key to determining the degree of success of these pieces of legislation and whether the actions of the EU will make a difference in the future lies in the implementation and enforcement part, which will commence in 2023 and 2024 respectively. Thus, the implications and possible outcomes are worth discussing.
Insights from the regulation reveal that a key feature of the DMA is the significant amount of new resources that will be needed to enforce this act among the tech giants and that this task will fall to the European Commission. The institution is exclusively empowered to initiate proceedings, take infringement decisions and other measures under the DMA.
Although competition is indeed an exclusive competence of the EU, the European Commission played a power card when it chose regulation as a legislative instrument, because this makes the institution the leading actor in implementing the act. This implies that the European Commission is responsible for the success or failure of the implementation of the DMA and that, to a large extent, this will hinge on the proper allocation of resources. Consequently, the Commission faces a test whose outcome could determine whether the institution will keep pursuing similar policies in the future: It will either seize the opportunity to become a stronger institution within the EU and lead the mission of achieving a European Single Digital Market and more European digital sovereignty, or the future will depend on member states to further implement digital policies and reinforce trans-Atlantic dependency on U.S. companies.
In terms of industrial policy, the successful implementation of the DSA and DMA translates into the curtailment of market domination by the U.S. big tech industry, thus making way for other firms to stand up in the European market. One question that often pops up in analyses is: Will this lead to more so-called European champions, or will the market transform into a more international landscape? Critics argue that the DMA is specifically targeting U.S. firms in a discriminatory way with its thresholds established to define “gatekeepers”, intended to create a more competitive digital market and allow room for European companies to grow. However, at the same time, the regulation is paving the way for Chinese firms to further penetrate European markets until they reach the same thresholds. According to the critics, this consequence of the DMA might be interpreted as a strategic error on the part of the EU, considering its international relations.
Others argue that fostering European champions should not be seen as the goal of the DMA. In the first part of the current political cycle, the regulator’s intention was rather to create a level playing field and a competitive environment in the digital domain in which European SMEs would thrive. This has been the narrative for the DSA and DMA and it is reiterated (although nuanced) in the case of the data economy.
Similar to the DSA and DMA, the EU’s initiative of creating a single market for data has gained momentum. The roots of the single market can be traced back to the origins of the EU, so the mission and evolution of the Union have always been shaped by this priority.
Enhancing the internal market has been a lifelong EU objective, as the Commission especially strives for regulatory harmonization and integration of the member states by using its normative instruments in the economic domain. The European single market for data is only one of the latest steps in achieving further integration. The time has come to respond to critical questions concerning the data economy, such as who is in control of data produced by data generators in the EU, how is data “transacted”, shared, and who benefits the most from these processes.
The current and expected developments in the data economy and their foreseen benefits for the European economy have prompted the European Commission to start building an internal market for data. Replicating the model of construction of the existing single market, the Commission has proposed a series of regulations guided by the principle of free movement of data.
The existing barriers to creating a unified economic area are gradually being lifted through various interacting policies. The DSA and the DMA contribute to the removal of market distortions related to competition, and to harmonizing the Union’s legislation. At the same time, policy initiatives on improving labour quality are aimed at enhancing the digital skills of Europeans. Lastly, the Commission’s Data Strategy is designing and enacting the European single market for data.
In the framework of the Data Strategy, the Commission has proposed three regulations so far, namely the Data Governance Act, the Data Act, and the regulation to set up the European Health Data Space (the first of nine common European data spaces envisioned). These legislative acts are the skeleton, the circulatory system, and the flesh of the European Single Data Market.
The Data Governance Act entered into force this September and will become applicable in a year, thus creating the fundamental governance architecture and rules for data-sharing systems.
Complementarily, the Data Act clarifies who can create value from data and under what conditions. It focuses mostly on industrial data, the Internet of Things and cloud sectors, by designing the public-private relationship in such a way as to make more data available and to make data transfers more transparent. Specifically, in the cloud services sector, the Data Act is after Microsoft and Google with the aim to break their monopolies, similarly to the DMA.
Lastly, the European Health Data Space is the first common EU data space in a specific area to emerge from the European strategy for data. The regulation is a health-specific ecosystem comprised of rules, common standards and practices, infrastructures and a governance framework. With this strategy and in particular its regulations, the EU wants to provide a trustworthy data ecosystem for European companies to develop, and thus to prevent the monopolization by U.S.-based companies of various domains within the European Single Data Market.
The Commission expects that the Data Act, as one of the most far-reaching regulations in this field, will help generate data flows to data intermediaries — which it hopes will, in turn, fire up data-driven innovation across the bloc as part of its overarching goal of driving digital transformation as a strategy to boost economic growth. However, the negotiation, decision-making and implementation processes take years. The Data Act and regulation regarding the European Health Data Space, even if ambitious in the form proposed by the European Commission, are in the first stages of the EU’s ordinary legislative procedure and will be subjected to changes and intense lobbying until a deal is struck on them, probably by the end of the current EU political cycle (the first part of 2024). Hence, the evolution of the broader geopolitical situation will likely influence these regulations and their place on the EU’s agenda.
Increasingly, digital sovereignty has become more important to European strategic autonomy, and this has been reflected in the shift of priorities on the EU’s digital agenda. The EU had enough political momentum to push through the previously discussed pieces of legislation, which are crucial to the future of digital Europe, but in the context of the current crises, the political wind is changing.
The State of the Union address, given by Ursula von der Leyen, was delivered in light of recent events, and fewer than usual technical details on the Commission’s political priorities were announced. However, as the Commission’s Work Programme (CWP) shows, headlines about the EU’s efforts in the digital chapter in 2023 will focus mostly on the lower levels of the European stack. These include actions on developing critical raw materials regulation, which means boosting the semiconductor capacities of the EU and limiting dependency on China in this segment of the supply chain, and pushing through the Chips Act, which would ensure the EU’s independent industry of chips and its global relevance as a player in this market. In addition to this, there will be some emphasis on single market emergency mechanisms, according to the CWP. The momentum is shifting, somewhat understandably, to protectionist policies by which the EU aims to secure these lower levels of the stack.
Furthermore, the rhythm of development of the single data market, and in particular its data spaces, has slowed down, as the only new data space that the policymakers will begin working on in 2023 is the mobility one. However, the policy initiative for this data space is non-legislative in contrast to the one dedicated to health. Moreover, the DSA and DMA implementation dates are rapidly approaching and the possible allocation of scarce resources for this stage of the policies raises concerns about the effectiveness of enforcement.
Nevertheless, a strong digital economy for Europe in 2030 is most likely to be realized with a functional single data market with all nine common European data spaces enabled, that in turn would fuel economic growth and technological innovation. Additionally, the data economy engine could strengthen the EU and sustain its global position as a powerful ally to the U.S., with a strong position in trans-Atlantic relations, and as a strong competitor for China and other future contestants.
What will happen then, if the window of opportunity for development in these areas closes, and what could be the possible opportunities for 2030 if the EU manages to balance its priorities in the digital agenda?
When put in perspective, the current changes in the EU’s agenda are set to shape Europe’s digital future. The crises of the moment place us at a crossroads between the following possible scenarios for the digital Europe of 2030. On the one hand, losing the momentum to build an acquis communautaire for the economic paradigm of digital Europe would expose the Union to a number of risks: the danger of indefinite decision postponement on current files (e.g. Data Act, AI Act) as has happened with the ePrivacy Regulation (proposed by the Commission in 2017, intended to accompany the GDPR, not agreed upon at the time of writing); weak implementation of the DMA and DSA, which would preserve the U.S.’ big tech market domination, thus pushing Europe into an even more dependent position in the EU-U.S. relationship; failure to reap the benefits of using industrial data for the benefit of EU citizens and failure to provide a fair and competitive ecosystem for European companies to develop in areas such as cloud technologies, the Internet of Things, or quantum computing. Therefore, 2030 Europe would see a divided Union, with less and less relevance in the global competition.
On the other hand, if the EU is agile in achieving the economic agenda targets, and successfully combines them with the policy agenda priorities for achieving strategic autonomy, there will be a plethora of opportunities down the road. Rapidly building the Single European Data Market would have a spill-over effect beyond achieving strictly digital targets, facilitating a twin transition, improving the Union’s sectors such as health and mobility. Moreover, the EU would be better equipped in terms of digital sovereignty while also being a globally competitive player that is prepared to influence the development of technologies like AI, Web 3.0, and the metaverse, and a stakeholder that exports its regulatory standards and establishes and promotes human rights in the digital world.
In a recent visit of the Commission’s Executive Vice-President Margrethe Vestager to Maastricht University, I asked her how she sees the future of digital Europe in light of the current events shaping the agenda. In her response, the commissioner in charge of the digital portfolio acknowledged the risk that ongoing crises are pushing the digital agenda away from its initial configuration. However, she also argued that through these times of crisis, we have European values as our compass, meaning we will end up in a strong digital Europe and manage to keep these values at the core of all our efforts and initiatives.
It is the moment to safeguard our values and gain strategic autonomy in the digital domain, but also to be a global standard setter that inspires democracies worldwide to develop technologies and legislation around similar values.
If we want stability, a resilient economy, and military defense, we don’t merely need more political cooperation and integration, but a reliable and strong digital economy as well. Paradoxically, looking backward, this economic focus is exactly what has made Europe “weak” from a geopolitical point of view. Yet, going forward, a strong digital economy will remain a prerequisite for future political cooperation and the geopolitical ambitions of the EU. Just as it was naïve to think that economic integration would automatically lead to more political integration, it would be equally naïve to think Europe as a sovereign and cyber resilient superpower will guarantee a strong digital economy.
Thus, what should we expect heading into 2023? The political cycle is in its final half and in order for the EU to achieve its targets in ongoing initiatives, the European Commission will reduce the flow of new proposals. However, this should not translate into steering away from European values, curbing the debate on competition and the internal market to exclusively concentrate on a protectionist and strategic autonomy paradigm as history repeats itself. The focus of the EU’s institutions should be on combining both pathways by making the best of tabled legislation, robustly enforcing adopted acts, and keeping both strategies center stage among the public as well as politically, not only with elections in mind but with an eye towards the future that the EU is trying to create.