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Europe’s Data Strategy: Promoting Innovation or Undermining Competition?

Chart of financial data.

[This is the fourth article in a series on policy priorities for transatlantic relations. Read articles onetwothree, and five.]

Ahead of the upcoming U.S.-EU leaders’ summit on June 15, opportunities for greater collaboration between the United States and Europe—along with potential policy challenges that could disrupt the robust commercial relationship across the Atlantic—are in focus. As the European Commission continues to propose sweeping industrial policy proposals designed to shore up its digital competitiveness, including the new European Strategy for Data, it’s essential that the potential impacts of these measures on international investors and exporters are taken into account. 

Data is Fundamental

Throughout the COVID-19 pandemic, with borders closed to international travel and supply chains for critical materials repeatedly disrupted, we have been frequently reminded that data is fundamental to the modern economy. Without data, and the ability to move it effortlessly across borders, we would have been unable to stay connected. International data exchanges also are key to driving innovation, as evidenced by the development, testing, and distribution of effective vaccines in record time. 

Recognizing that the ability to collect, analyze, transfer, and use data is key to success in today’s globalized economy, the European Commission is advancing an ambitious “Data Strategy” with an eye towards boosting its industrial competitiveness. To be sure, improving one’s competitive position is entirely understandable. Governments worldwide routinely encourage innovation, invest in emerging technologies, and partner with the private sector in order to bolster their economic fortunes. Given the EU’s focus on advancing the digital skillset of its citizens and its desire to build a more sustainable economy, this focus on encouraging more effective use of data makes even more sense. The question is how to channel that encouragement. Furthermore, the imperative is to ensure the European data economy remains globally interconnected. 

Among other things, the Data Strategy aims to incentivize companies to share data collaboratively. Yet companies already do this, often governed by contractual arrangements. Data sharing can also raise privacy considerations and in these cases is highly regulated. Most importantly, companies invest in data collection, and they use data to innovate and to build their own competitive position in the marketplace. In that context, data is effectively a property right, and companies are understandably hesitant to share data that their business has generated.  

Where data is owned by the government, opening such data sets at the national and European level creates potential opportunities. The European Union is a world leader in collecting weather and traffic data, for example. Letting companies access that information could yield significant benefits like limiting the time spent in traffic or predicting the impact of storm systems.

EU’s Data Strategy

It’s unclear where European policymakers will ultimately head with the Data Strategy. They clearly want to encourage companies to share data amongst themselves, to make government data more open and accessible, and to create sector-based “data spaces” to facilitate best practice sharing in sectors like health, agriculture, financial services, and transportation. However, there is a fine line between facilitating what is already happening in the market and creating a bureaucratic “top-down” approach that leads to mandating data sharing. Such a heavy-handed approach would disincentivize innovation and investment across Europe’s digital economy.  

The best approach would be to double down on the positive aspects of the Data Strategy—opening up government data and providing mechanisms for voluntary data sharing—while resisting any temptations to mandate sharing between competitors. 

Europe has already signaled that it wants to compel data sharing as part of its Digital Markets Act. As we’ve noted separately, that proposal would specifically target American companies, which is clearly unacceptable. It remains to be seen whether that heavy-handed approach continues to expand as the EU Data Strategy is implemented. 

What’s clear: European policymakers should focus more on helping European firms run faster, rather than trying to use regulatory policy to trip up their international rivals. Moreover, it is obvious that next generation policy debates around data governance must be on the agenda of any new Transatlantic Trade and Technology Council which is likely to be announced at the forthcoming summit. 

This post was originally published on this site

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