Monday, December 4, 2023

The virtuous circle of what’s needed to trigger Europe’s digital sovereignty

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Like a prism that changes according to the perspective through which it is observed, there are many possible interpretations of the concept of digital sovereignty. In the past few days, Italian Prime Minister Mario Draghi has provided some inspiration for the right way to look at it. During a joint press conference with French President Emmanuel Macron, and held after the signing of the Quirinale Treaty, Draghi referred to European sovereignty as the “ability to direct the future as we wish”.

In the digital domain, the power to be the author of one’s own destiny can be won with two tools: sound rules and technological investment. Only a balanced combination of them, however, can produce digital sovereignty to the benefit of European citizens. Much has been said in recent years about the so-called ‘Brussels effect’, the title of a successful book by Anu Bradford, the Finnish-born legal scholar based at Columbia University in New York.

Through the definition of a robust and ambitious regulatory framework, the European Union has managed to establish itself as the main global rule-maker, influencing the legislation of other countries and inducing non-European companies to take it into account not only for products and services sold in the old continent but also elsewhere. 

A meaningful case study is the GDPR, the European privacy regulation, which was approved in 2016 and came into force in 2018. One of the basic principles, that of privacy by design, i.e. already built into a product or service at the time of its conception, has become the mantra of many American companies in just a few years. While it is true that the US does not yet have a federal privacy law, California, which is home to most of the large American technology companies, passed a very similar one.  

Although many in Europe revel in the power of the Brussels effect, digital sovereignty exercised exclusively or predominantly by means of rules is nevertheless a lame duck. For two main reasons.

Firstly, if it is not accompanied by increased digital competitiveness, resulting in greater public and private investment, it risks becoming a mere prohibitory power and thus a protectionist weapon, to the detriment of consumers and businesses. In addition, the construction of increasingly stringent and complex regulatory systems risks, paradoxically, penalizing smaller European companies more than the American and Chinese giants, which have more human and financial resources to adapt to the new framework. This is the risk run by legislative measures such as the Digital Services Act (DSA), the Digital Markets Act (DMA) and the Artificial Intelligence Act (AI Act), the texts proposed last year by the European Commission and currently being discussed, with a view to approval between 2022 and 2023.

One of the reasons that prompted the Commission to intervene with such ambitious measures was the risk of fragmentation of the internal market, in the face of increasingly frequent interventions by the 27 members of the EU. And, of course, the need to deal with the risks of new technologies, which are undoubtedly present and sometimes already known for quite some time. These are two absolutely irreproachable factors, in relation to which the Commission has rightly taken action. 

However, while the new regulatory framework is necessary to address some of the critical issues arising from the rapid evolution of the market, it must be careful not to create unintended consequences, stifling innovation and, paradoxically, the competition itself. There is a risk that too many strings and ties will hold back the market, just as there is a risk that important innovations such as targeted advertising and recommendation systems, which many in the European Parliament are calling for, will be banned or restricted too strictly.

This is a perfect illustration of what is wrong with certain forms of digital sovereignty: in order to strike at American companies or to sublimate the concept of privacy, over and above the actual risks, innovative tools that increase the well-being of both companies and consumers are either banned or weakened. And which, for instance, avoid the latter being inundated with unnecessary advertising (or at least reduce the amount of advertising). At the same time, certain obligations or prohibitions towards the so-called ‘gatekeepers’, i.e. companies with strong market power in the different segments of the digital economy identified by the DMA, have to be balanced against the legitimate interest of users to have the integrity, security and quality of their purchased services protected.

In order to maintain a necessary balance between the different interests in the field, it is, therefore, necessary to provide for the DMA (but the principle is also valid for the other legislation in the field) a regulatory dialogue sufficiently articulated and dynamic between the Commission and the gatekeepers, but more generally the stakeholders, naturally in a manner as transparent as possible.  

However, as stated in a paper entitled “The multisided path to European digital sovereignty and the future of EU-US relations“, recently published by PromethEUs, a network of southern European think tanks coordinated by the Institute for Competitiveness (I-Com), in order to prevent European digital sovereignty from leading to undesirable protectionist positions, a fundamental role could be played by new forums for dialogue at international level such as the Trade and Technology Council, inaugurated at the end of September in Pittsburgh by the United States and the European Union. The paper does not overlook the many difficulties of this path, which derives from a very different history and positioning in the digital economy.

Europe’s ambition, however, must be to acquire greater weight on the global stage, partly through fruitful cooperation with other areas and countries of the world, starting with the United States, undoubtedly our main ally, as well as being the planet’s leading economy and the absolute leader in digital technologies. After all, everyone has a better classmate at school. But it certainly doesn’t help him/her or us that he/she is kicked out of class. A much better solution is to learn his or her best qualities and perhaps prepare together for the next test.

Metaphorically speaking, in addition to the rules, the bar must be raised on investment, in both quality and quantity. In other words, to achieve successful digital sovereignty, a virtuous circle must be created between regulation and investment. Thus, avoiding a downward European digital future.

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