Saturday, September 20, 2014
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Europe’s Digital Reactionaries

BRUSSELS – Many European politicians praise the Internet. Unfortunately, their lofty rhetoric often rings hollow. While calling for a strong digital agenda in one breath, the same politicians, supported by protectionist interests at home, often argue for putting a brake on the Internet’s “disruption” by imposing strict new regulation.

Such double-talk is misguided. If Europe is to prosper in the twenty-first century, its newly elected leaders need to embrace a positive, concrete pro-Internet agenda. That means signing digital free-trade agreements and creating a true European digital single market out of today’s fragmented 28 national jurisdictions. Long-outdated copyright and licensing laws must be overhauled. New privacy rules must protect citizens and allow innovation; calls for mandatory data localization and local versions of the “Internet” must be resisted.

If carried out, this substantive digital agenda could provide what Europe needs most after the financial crisis: economic growth. According to the OECD, the Internet now accounts for up to 13% of economic output in the US. Every type of business now depends on the digital economy. With a few keystrokes, small companies selling Polish antiques, traditional Bavarian costumes, and Spanish shoes have burst out of their home markets and reached consumers around the globe.

By unleashing the Internet, financially strapped Europe can create new jobs without taking on new debt. European Commission figures suggest that Europe’s so-called “app-economy” workforce will rise to 4.8 million by 2018, from 1.8 million in 2013, with revenues more than tripling, to €63 billion ($86 billion). We also know that some 90% of jobs by 2020 will require workers to have skills in information and communication technologies.

Such success requires breaking down resistance by Europe’s market incumbents and embracing rather than blocking new entrants. Under the European Union’s current fragmented regulatory regimes, companies must obtain separate permission to sell in each of the 28 national markets. It takes even large companies like Apple and Google years of work to open local stores and launch new offerings. The growth of small European innovators, such as Spotify, has been stunted. Many new services that allow us to swap, rent, and share everything from taxi rides to second-hand designer dresses are struggling to get off the ground.

Internet skeptics could also scuttle potentially transformative transatlantic free-trade talks, launched with great fanfare last year. A growing volume of trade is conducted in bits and bytes that flow over the Internet. A new study by McKinsey finds that digital-driven, knowledge-intensive goods today comprise a full 50% of total global cross-border trade – and are growing at least 1.3 times as fast as other types of trade. If current trends persist, the volume of such goods could triple by 2025.

Yet many Europeans talk of imposing draconian privacy or data-localization rules as a precondition for signing any new free-trade deal. Such requirements would be diametrically opposed to the Internet’s founding principles of frictionless, borderless access to information. Like Russia and China, Europe would be blocked from the rest of the global Internet, because new services that are unable to build European data centers would be locked out.

In this context, the European Court of Justice’s recent ruling, which recognizes a “right to be forgotten” – and thus requires Google to remove search information, even when legal, on demand – represents a significant danger. By requiring every search service, including those of university libraries, to make it difficult to find legal information, we risk opening the door to large-scale private censorship.

Such unintended consequences pervade EU competition policy as well. European policymakers are considering a regulation that would require Internet platforms like app stores, social networks, search engines, and ecommerce sites to meet certain publicly specified criteria to achieve economic, social, or political ends. Such regulation, it is argued, would facilitate the emergence of European Internet platforms and guarantee “open access” to users.

In fact, these moves might create new barriers to entry, entrenching market leaders and undermining innovation. Internet markets are typified by dramatic change. Witness how Facebook overtook MySpace in social networks, or how Apple upended the market for smartphones – or how new services and markets are constantly being invented. Twitter has displaced no one; rather, it supplements and competes with all other modes of communication.

By contrast, EU competition investigations drag on and on. It took ten years to reach a settlement with Microsoft; it may end up taking that long with Google. By that point, the fast-paced Internet environment may well have evolved beyond recognition.

European authorities should avoid shackling digital progress. Europe’s consumers should be able to buy online songs, watch online video, and shop online for whatever products they choose, and Europe’s businesses should be able to benefit fully from the EU’s giant market. Indeed, letting the Internet blossom not only makes good business sense; it might also help to restore voters’ waning faith in the European project.

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  1. CommentedMarten Klein

    I think your recommendations for Europe are foolish for European policy makers and serve the agenda of the US digital establishment. The United States do not offer us a no-spy agreement and dared to spy even on super-toxic European SWIFT data, thus data localisation is the necessary defense. US governments and companies would not store their data in Iran either, there is a clear rationale. You cannot "fragment" the internet by that, because fragmentation is the essence of the internet protocol. In the past 15 years Europe pursued an open market strategy that led nowhere while the protectionist digital policies of Russia and China were quire successful, Europe would continue on an open market path but don't overstretch the good will.

    The mere respectless discussion of an ECJ ruling speaks for itself, that you misrepresent the substance of the ruling further undermines your credibility. The Court did not create a RTBF but ruled that it also applies to Google subsidiaries. That makes a huge difference.

  2. CommentedVal Samonis

    I presented at the Lisbon Agenda conferences and have seen lofty goals but no ways to implement them in the EU!

    Val Samonis
    Vilnius-Toronto

  3. CommentedStamatis Kavvadias

    The author, other than campaigning for EU "signing digital free-trade agreements," is right up to a point. The internet should be free and *transparent*. Policy-makers should not try to *form* the right behavior of companies and protect consumers in advance. They should require transparency of user agreements, so that the user is explicitly told the conditions that will apply for his private data. End-users are to decide if they want to use a service or not, sacrifice their privacy, create a fake digital identity, or not.

    There is another issue mentioned here. EU governments requesting data localization. Given current US law on instant access to US companies' data, this is a *very* legitimate claim. EU citizen data privacy is not in danger only by multinational internet companies, but also by the grip of the US government. Any EU citizen has the *independent* right not to collaborate in information gathering by the US government. We do not owe anything to the US, nor do we agree with their policies all the time (e.g., policies supporting Israel against Palestine and numerous wars they start or support). We need to be able *not to help* them. You can also base it plainly on the fact that we have no means of resisting any US law that may appear against our data privacy. We need our data in non-foreign jurisdiction.

    This is a problem for multinational companies minimizing their costs. The only exit from this is through international protection of data privacy, *above* national interest, and even claims of national security. Otherwise, we are stack and it is not a fault of European policy-makers.

  4. CommentedVelko Simeonov

    Since when does the opinion of official industry lobbyists count as an article that is worthy of being published here? Anyway the whole thing is flawed; the internet is a tool not an end result. This tool can have positive or negative effects on society, and what the guy argues here is that the negative effects shouldn't count (like completely loosing you privacy as a human being). All that is justified by the completely unproven notion that the more services gooogle and the likes are able to offer, the better it is for everyone (and not just for their corporate balance sheets)! Completely unconvincing, I am sure that the internet industry’s offshore profits can buy much better bang for the buck.

      CommentedAndreas Skouloudis

      @Velko: He is making a very interesting point though; the US legal framework is much for flexible than the European one. And this is a drawback for the digital economy which is an end and not a means for job creation.
      The point for antitrust is flawed in my opinion though; Microsoft / Google have created monopolies in the US, which due to their reasons US legislators have decided not to break down.

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