The EC’s latest talking shop plans scupper the European data economy


The European Commission’s plans to get governments back round the table for more talks are delaying and undermining the Data Economy at a critical juncture.

flags-1412277European Union (EU) ambitions to have build a ‘data economy’ aren’t delivering. What’s needed to change that? Well the European Commission has decided that what’s needed is more talking among member states.

There’s a lot at stake here. The EU estimates that the data economy was worth €272 billion in 2015 (annual growth of 5.6%) and could employ 7.4 million people by 2020.

But this is being held back by what that Commission calls the “requirements of national data localisation that constrain the entire EU data market”.

But rather than take legislative action to undo the roadblocks to a Digital Single Market, the Commission has decided that what’s needed is another round of consultation and talking shops. To that end, it says it intends to:

  • Engage in structured dialogues with Member States and stakeholders to discuss the proportionality of data localisation restrictions. The goal is also to collect further evidence on the nature of these restrictions and their impact on businesses, especially SMEs and startups, and public sector organisations.
  • Launch, where needed and appropriate, enforcement actions and, if necessary, take further initiatives to address unjustified or disproportionate data location restrictions.

It also wants to hear from interested parties views on possible policy and legal responses regarding:

  • Data access and transfer, on the basis that wide use of non-personal machine-generated data can lead to great innovations, startups and new business models born in the EU.
  • Liability related to data-based products and services, on the basis that the current EU liability rules are not adapted to today’s digital, data-driven products and services.
  • Data portability, on the basis that portability of non-personal data is currently complicated, for example, when a business wants to move large amounts of company data from one cloud service provider to another.

Andrus Ansip, Vice-President for the Digital Single Market, said:

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.

All talk, no action

That’s all good and well in principle, but that’s what’s been said since March 2015 when the Commission started talking about the Digital Single Market. Since then, progress has been limited and heavily centred around using the incoming General Data Protection Regulation (GDPR) to encourage free flow of data between EU states.

But the Commission seems to have finally woken up to the fact that GDPR does not cover non-personal data when they are industrial or machine-generated – hardly ideal in an age of AI and Internet of Things – or obstacles to the movement of personal data based on other reasons than the protection of personal data, e.g. under taxation or accounting laws.

In the UK, industry lobby group techUK said that the latest proposals fall “a long way short”. It goes further and suggests that rather than empowering digital development, the Digital Single Market has ended up putting more barriers in the way of Europe’s digital economy, not fewer.

In a statement, techUK argues:

The European Commission has rowed back from its commitment to take legislative action to end inappropriate, misplaced and unjustified data localisation restrictions that prevent businesses from deploying more cost effective data infrastructures across Europe. This is despite its own Impact Assessment that concluded that removing these restrictions would add €8 billion to the European economy every year.

Instead the European Commission is merely announcing a further consultation on data localisation, while proposing new legal concepts and policy measures on data ownership, access, reuse, and liability, and the creation of a new data producers right which digital business see little justification for. The very businesses who are supposed to benefit from these proposals have consistently argued these issues are better addressed through business contracts and see little merit in additional one size fits all regulation.

The European Commission has repeatedly failed to present convincing evidence of a market problem that needs to be fixed. Many data-driven businesses are concerned that these proposals will stunt Europe’s digital ambitions rather than help them to scale, grow and flourish in Europe.

Something needs to change, says Anthony Walker, deputy CEO at techUK:

European politicians keep asking why Europe doesn’t have a major competitor to the big global internet companies and then they put more barriers in the way to that ever happening. European Member States need to think hard about whether the proposals released today will help then grow their digital economies. Unfortunately, Brexit won’t shield UK businesses from the negative impact of these proposals. All businesses exporting goods into the EU post-Brexit will need to be compliant.”

EU Member States need to wake up to the fact that the European Commission is getting the Digital Single Market (DSM) strategy wrong and consider the impact of these proposals, and others such as the Copyright proposals and the proposed E-Privacy Regulation on their ambitions to grow their economies in a digital age. Unfortunately the DSM has effectively been an exercise in levelling up regulation rather than in re-thinking what effective and appropriate regulation should look like in a digital age. This is a missed opportunity for Europe.

The latest developments inevitably have global ramifications in terms of Europe’s ability to compete with other trading blocs, most notably the US tech industry. But the Commission, while conceding this matters, is adamant that this is a separate issue to the internal flow of data and must be addressed as such:

Unjustified data localisation is also part of discussions between the EU and its trading partners, given the increasing importance of data and data services in the global economy and potential attitudes of third countries towards this question. The EU data protection rules cannot be subject of negotiations in a free trade agreement. As explained in the Communication on exchanging and protecting personal data in a globalised world dialogues on data protection and trade negotiations with third countries have to follow separate tracks.

Beyond this, as indicated in the Trade for All Communication, the Commission will seek to use EU trade agreements to set rules for e-commerce and cross-border data flows and tackle new forms of digital protectionism in full compliance with and without prejudice to the EU’s data protection rules.

My take

I find it hard to disagree with a single word of what is a welcome robust pronouncement from techUK. The global digital economy moves fast and the last thing Europe needs is another round of talking heads and vested interests chipping in with their views.

This latest round of consultation – aka not getting on with the job at hand – will also take place as Article 50 committing the UK to Brexit negotiations kicks in. For the UK government, the question will become about whether to diverge from EU rules and go in search of new non-EU markets or remain harmonised with them on the basis that Europe is currently the largest export market for UK digital businesses.

And across the Pond, the new discussions will co-incide with the first 100 days of the Trump administration and its undefined stance on transatlantic trade with Europe.

Just the time to be sitting around looking inwards – NOT!


Image credit - Zacharzewski