Transforming Europe into a Digital World: Impact of Europe’s Digital Single Market on the Socio-Economic Issues
Disclaimer: This post was written in 2016 in response to the then proposed DSM
As the technology is taking over the world today and removing the existential physical and virtual boundaries, the European Commission (EC) launched a new strategy in May 2015 to create a fully integrated Digital Single Market to gradually overcome any possible obstacle and boost Europe’s economy by delivering sustainable economic and social benefits from a digital market. This proposed strategy raised several questions in everyone’s mind; the most crucial one being- Will the Digital Single Market successfully create an impact on the economy and markets in Europe? While many people are still trying to gain a deeper understanding of this strategy and fully analyze it at such an early stage, we analyzed the different ways how Digital Single Market will address current socio-economic problems and potentially provide a major boost to the EU productivity and growth by bringing down any obstacles to move from 28 national markets to a Digital Single Market to increase competition. Not only will this strategy be beneficial to consumers and businesses in their daily life and work, it will also create new jobs in different sectors.
Digital Single Market focuses on promoting the following pillars it is centered on- 1) consumer access to digital businesses, goods and services, 2) creating necessary conditions for digital networks and infrastructure to prosper, and 3) maximizing the growth potential in the digital economy and society. Digital Single Market is also expected to promote competition, enabling economies of scale and improving efficiency. Jean- Claude Juncker, President of European Commission, made Digital Single Market a part of his political agenda and launched a dedicated strategy to emphasize on importance of the Digital Single Market stating that “Europe needs to change to become competitive again” (Juncker) to overcome Eurozone’s economy slowdown which remains fragile and lackluster despite several measures taken by the European Central Bank in the year 2015.
The Digital Agenda Scoreboard published by the European Commission every year highlights increase in the number of EU citizens and businesses using online commerce and have greater confidence and skills in the Information and Communication Technology (ICT). Currently there are about 8 millions jobs in the ICT sector in Europe and it is expected to rise by 16 million by the year 2020 with the help of this strategy. According to the report The EU explained: Digital agenda for Europe published by the European Commission’s Communication Citizens information, about “90% of jobs will require basic information technology skills by 2015” and that the digital economy presents the EU citizens with surfeit number of opportunities but only “if citizens are ready to take them” and utilize it.
Europe’s current fragmented markets are bad for investment, innovation, and, most of all, consumers living inside and outside the EU. It limits Europe to make progress as entrepreneurs look for and take advantage of opportunities afforded elsewhere by industrial digitalization and the Internet of Things, big data, and cloud computing, a sector which still remains mostly untapped by the EU market. One of the most obvious indicator of Europe’s fragmented markets is the lack of cross-border online trade, the underlining consequence of which is the additional country-specific costs in addition to digital firms approaching each individual market separately for negotiations. The EU estimates that a fully functional Digital Single Market could add about €415 million every year to its economy, create hundreds of thousands of new jobs, and help EU online network and platform to grow and compete at a global scale.
The digital agenda devised by Jean-Claude Junker will also help the citizens in everyday lives. Each individual has to pay a lot more to order a product or commodity from a company that may be right next-door. Due to different laws, a very limited number of businesses can sell their products and services across the EU borders. This weak cross-border trade is also one of the reasons for slow increase in the e-commerce in the EU in comparison to the US. A comparison of available statistics made available by European Commission’s Special Eurobarometer 298, and Eurostat and US Census Bureau states the following:
“ [The] lack of cross-border e-commerce becomes even more pronounced takes into account that from 2006 to 2008 the share of Europeans who had purchased at least one item on the internet increased from 27 percent to 33 percent while cross-border e-commerce remained more or less stable” (European Commission)
“ [T]he EU is approximately four years behind U.S. regarding the use of the internet for buying and selling. In 2009, e-commerce comprised some 13 percent of EU firms’ turnover, a share which was reached in the US in 2005” (Eurostat and US Census Bureau)
With the help of digital agenda and Digital Single Market companies will overcome these laws to grow to scale and increase their regional and global competitiveness in addition taking advantage of the Internet of things.
The Digital Single Market will also benefit the consumers from lower prices of different product, variety of choice and higher quality products. The consumer will benefit in both short-term and long-term scenario. In short-term, the consumer will benefit from the increasing competition between firms that will lead to lower prices and higher quality of products, since most research point at lower pries online than offline, with the help of e-commerce. In long-term, the consumer will benefit since Digital Single Market will lead to improvising national and international policies that will boost competition in the long run. Thus, market scale and better regulation will encourage innovation leading to increase in the reachability of a great number of existing products to a new market, which would not be available to the consumers otherwise.
Furthermore, due to different copyright laws in different EU states, a lot of digital content is geoblocked. Digital content that is available in one EU state is or might be unavailable in another state, which further creates obstacles in fee flow of digital data sharing. Digital Single Market will also modernize such copyright laws and help making digital content available to about 100 millions citizens who would like to get this digital content but cannot because of geoblocking.
Information and Communications Technology still remains an untouched sector with seamless potential. With the help of the Digital Single Market people will be able to take more advantage of ICT that can contribute to better standards of living and higher quality services for health and social care. According to The EU explained report, “The introduction of information and communications technologies and telemedicine alone is estimated to improve the efficiency of healthcare by 20%” and also elaborates on better management of health by users of every age group while maintaining the affordability and accessibility of healthcare at the same time. Europe’s fragmented is also the reason for low Information and Communication Technology investment in the EU that can be changed with the success of Digital Single Economy.
Digital Single Economy will also have several compelling employment effects since it will increase flexibility, competitiveness and innovation, leading to increase in employment in the EU and changing the employment structure towards jobs that will require higher skills. This further increases job-content for low skilled labor since the paradigm shifts to the one with higher productivity. It is estimated that Digital Single Market will generate about 30,000 jobs per year in EU.
However, it is vital that EU’s digital agenda does not inadvertently or intentionally erects new barriers to digital trade and investments between the United States and Europe. It will be interesting to see the impact of this strategy on the negotiations over Transatlantic Trade and Investment Partnership (TTIP). Miriam Sapiro in her research article Forging an EU Digital Single Market emphasized on the critical nature of the EU’s Digital Single Market by stating that during an event at Brookings organization at Washington D.C with Andrus Ansip, the EU’s VP for Digital Single Market assured the audience that “the commission would tear down regulatory barriers, not create new ones or erect a ‘Fortress Europe’. It is important that Oettinger takes the opportunity during his visit to reinforce this commitment” (Sapiro).
The TTIP negotiations play a crucial part in the functioning of the Digital Single Market. Successful conclusion of the TTIP negotiations is vital for reducing tariff and non-tariff based barriers for a better transatlantic negotiation, which can help reduce unfair competition from state-owned enterprises and inadequate labor and environmental standards. To create an ideal digital single market it is very necessary to secure “strong outcomes on a number of issues that overlap” (Sapiro) that will help TTIP to thrive. Many such problems include elevating trade in digital products and services while conserving the free flow of information. It will be beneficial to have a commitment to “resist data localization and local content requirement” that undercut the benefits of cloud-based services. Currently, TTIP lacks many methods to boost regulatory cooperation on e-commerce. The US will not agree with any attempt at reducing TTIP’s ambition in the digital sector that could affect the culmination of the negotiations. There are huge opportunities but also considerable challenges as the EU moves ahead to shape a new digital single market, ideally in collaboration with its transatlantic neighbor and largest economic partner.
It is also important to stress on the fact that the Digital Single Market is not a cure-all for all the problems faced by European Market, but is a critical element to overcome many problems through the powerful use of digital networking and technology in the current global environment. With over $1 trillion in goods and services flowing between the US and the EU, and $4 trillion invested in transatlantic economies, it is important to further create dialogue with Digital Single Market policy makers and addresses any issues.
Many different sectors have welcomed the European Commission’s ambitions to dissolve any unnecessary barriers and unravel the Europe’s potential. The EU risks falling behind if these barriers to a Digital Single Market are not taken care of. The digital agenda launched by the European Commission through Digital Single Market create sustainable jobs and trigger economic growth to overcome the economic slowdown. Europe also has to keep up with its global competitors such as the US, Japan, China and South Korea which are focusing on the digitalization of their economies to increase productivity and innovation without risking missing out on a major boost to competition.
“Digital Agenda in the Europe 2020 Strategy — Digital Agenda for Europe — European Commission.” Digital Agenda for Europe. N.p., n.d. Web. 14 Dec. 2015.
“Digital Single Market.” — European Commission. N.p., 24 Sept. 2015. Web. 14 Dec. 2015.
Kharpal, Arjun. “US and EU in Data Privacy Clash: What You Need to Know.” CNBC. N.p., 07 Oct. 2015. Web. 14 Dec. 2015.
Sapiro, Miriam. “Forging an EU Digital Single Market: Difficulties and Opportunities.” The Brookings Institution. N.p., 22 Sept. 2015. Web. 14 Dec. 2015.