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Open Up: How to fix the flaws in the EU’s Digital Single Market

The EU has launched a blizzard of digital initiatives recently – including a wide-ranging Digital Single Market (DSM) strategy, new data-privacy rules and several antitrust cases against US tech giants – with the latest announcement due on 11 January. But what if these EU initiatives don’t add up – or would actually make matters worse?

In a ground-breaking new study for OPEN, Open Up: How to fix the flaws in the EU’s Digital Single Market, Hosuk Lee-Makiyama and Philippe Legrain argue that the EU’s DSM strategy and associated initiatives are not fit for purpose. They are corporatist, protectionist and anti-innovation.

  • The EU’s digital initiatives contain hardly any liberalisation; while Europeans should be allowed to order online from another EU country without being blocked and roam with their Netflix account, that won’t make a big difference to the economy as a whole.
  • They would impose many new undue regulatory burdens on firms that trade and operate online; it’s absurd to want to regulate WhatsApp as if it was a telecoms provider.
  • Instead of boosting competition and enterprise, they seek to protect analogue-age corporate dinosaurs, notably in Germany and France, and Europe’s digital flops.
  • That innovative online services such as Stripe, BlaBlaCar and Skype are exposing ossified offline sectors to competition is not a problem; it’s progress.
  • Explicitly targeting American online platforms such as Google and Facebook is protectionist and would harm all the European digital start-ups and consumers who benefit from their services
  • The EU’s digital initiatives amount to a jumble of outdated and counterproductive industrial policies that favour producers over consumers, big companies over small, traditional incumbents over digital start-ups and EU firms over foreign ones.
  • It’s protectionist to ban data flows to countries with high levels of data protection, such as Japan, Korea and Australia, simply because their approach isn’t identical to the EU’s.

The DSM strategy can still be salvaged, but it urgently needs rethinking. To unleash economic growth, stimulate digital enterprise and enhance consumer welfare, the EU needs to turn the DSM project into a true Single Market project – an Open DSM.

  • This would be based on four key principles: non-discrimination, appropriate deregulation, data openness and dynamic competition.
  • It would keep EU digital markets open to the rest of the world, not fragment the global internet.
  • It would reframe the “threat” of online competition as an opportunity to open up offline markets – and thus create a genuine single market in services.
  • At the very least, the EU should not impose discriminatory regulatory burdens on online businesses.
  • The EU also ought to subject all existing market rules, both EU and national, to a searching examination of whether they are fit for purpose in a globalised digital age.
  • The top priority should be addressing the lack of dynamism in services sectors key to the internet, such as retail, consumer financial services, telecoms, transport and distribution.
  • An EU-wide ban on local storage and processing requirements would improve efficiency, bolster integration and act as a ratchet against future protectionism as services move online.
  • The EU ought to protect data privacy in a way that keeps markets open and Europe’s services exporters competitive.
  • EU competition policy also needs rethinking in the digital age.

Read the executive summary

Read the full report

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