For once, no — it’s not China. Just across the Atlantic, the European Union wants to build a Digital Single Market (DSM) to challenge the Valley’s dominance in technological entrepreneurship.
What do they mean by DSM?The EU currently has a single physical market that allows the free movement of goods, services, capital and people across 28 countries. But it seems to have realised that the same borders are much more difficult to scale online. This led it to unveil on Wednesday proposals for the digital single market, which will be a common market for digital goods, capital, content and services.
Something they think the US is reigning over?Exactly. The European Commission has released data showing that over 40 per cent of businesses in the EU region don’t use digital technology. The EU’s competition commissioner Margrethe Vestager has said that cross-border e-commerce in the region is also low. Half of all Europeans do some amount of shopping online, but only 15 per cent bought something from another country in the EU. Vestager calls this ‘geo-blocking’, where sellers set different prices for the same products in different EU states.
Not really. Europe has traditionally been strong in businesses such as automotive, manufacturing and networking infrastructure. With the emergence of new technology, like the Internet of Things, connected cars or cloud computing, all hardware in your life will be linked virtually. Europe is afraid to lose the digital edge at its core businesses. Besides, DSM will also prove to be a policy push encouraging European businesses to sell more, hence hauling the economy out of the doldrums.
According to some reports, the European Commission expects a successful DSM to add €340 billion to Europe’s combined GDP, create nearly four million jobs, and reduce the cost of public administrations by 15-20 per cent.
How does Europe expect to build DSM?For starters, Europe plans on settling cross-border differences in contract law, taxes, copyright rules and consumer protection laws. For instance, complicated VAT rules between EU nations tend to be a disincentive to sellers to sell across the border. Prices for parcel delivery across the border are also uncompetitive. According to the European Commission, the region has a potential customer base of 500 million people, whereas the US has 350 million, but differences in laws hold European firms from growing to their full potential.
What else is on the cards?Data storage is high on the priority list, along with how it should be processed, encrypted and transferred across borders so as to allow for free movement of data. Most importantly, however, experts believe DSM will seek massive telecom reforms, especially when it comes to selling radio spectrum and enabling 4G.
So will the EU stop picking fights with Google and Apple?While the EU does hold that DSM won’t hamper the growth of US tech firms in Europe, one of the key pillars of the new strategy is to build a level playing field for online companies and do away with opaque pricing, use of personal data, and targeted advertising — common accusation among large US firms. So no, that battle might continue for a while.
A weekly column that helps you ask the right questions