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Will the EU Digital Single market become a powerhouse of smart, sustainable and inclusive growth on the global stage?

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Europe is becoming digitized at an unprecedented rate. After the launch of the Digital Single Market in 2015, the EU countries are moving toward a foreseeable future in which newly digitised industrial processes and a skilled workforce, combined with a fast-growing startup ecosystem, will transform markets, businesses and society.  All the sectors of the economy are currently being shaped through digitization and many market-leaders in finance, entertainment and even government are recrafting themselves as “digital”.

For a few years now, the European Union has found an interest in unifying the different national digital markets and fostering a European data economy which would allow the free movement of data within the EU.

A digital market is an economic concept referring to a market where the action of buying and selling goods is done through digital tools, such as the Internet. Data are also at the center of this concept, since a typical online customer actually represents a set of data that is used by businesses and public services to improve their efficiency.

Since 2015, the European Commission developed a Digital Single Market strategy (DSM strategy) which aims at uniting individual digital markets across the Union. The strategy encompasses 16 initiatives which have been divided up into three overarching pillars. Potential gains from a fully unified digital market have been estimated at €739bn by the Commission, which would represent a 4% increase in the entire EU GDP by 2020. Nevertheless, in order to achieve this stunning increase, all the objectives stated in the DSM strategy must be met.

Major Digital Market pillars include boosting e-commerce all over the EU, advancing digital services and ensuring better access for businesses and consumers. To achieve the objectives of these three pillars the EU has overcome a number of challenges related to unjustified geoblocking, copyright standardization, legislation gaps, lack of digital skills and different level of digitization of member states and of course cyber security issues which mostly concern personal data protection.

Geoblocking is an issue related to unjustified blocking of some digital content which users may not access if they are abroad. Digital Single market aims to reduce barriers to consumers who wish to purchase digital content from any member state, and to access digital content purchased in their home country when they travel to other EU countries. Abolishing of geoblocking will come at a cost for some businesses which in such a way protect their digital content. However, in 2017 the EU Commission have undertanken a milestone regulation which obliges member-states and businesses in the EU to ban geoblocking for the EU online sales of three specific services: goods without physical delivery; electronically-supplied services; and services provided in a specific physical location. The decision has come into force in April 2018 and is perceived as one few successes of the EU DSM.

While geoblocking and copyright challenges of the EU DSM receive the most attention the biggest obstacle to advancing the creating of EU DSM is the low interest of European in whole-EU online commerce. Such factors are market familiarity, local language and geographic proximity push Europeans to shop locally. Furthermore, ‘high delivery costs, the cost of returning goods and long delivery times also are formidable obstacles that may are beyond any governmental mandate’ which cannot push businesses to change their scheduling patterns due to potential financial losses they may incur. This may reduce the number of businesses involved in e-commerce that would impede the essence of the EU DSM aimed at expanding cross-border commerce.

Copyright standardization remains a stumbling block of the whole idea of DSM. Even though copyright rules differ at member states which impedes EU common approach to the issue copyright infringement remains a global issue. Punishment for online copyright infringement has proven be ineffective not only in Europe. Geographic reach of the internet makes copyright infringement a global issue where privacy coming from non-EU member states will not be controlled by the EU laws. Possible EU solutions regarding copyright are thus limited. However, investment in raising awareness on online privacy threats may have a long-term impact on the reducing the number of cases of copyright infringement.

Cyber Security

Even though online commerce is proven to be sufficiently safe in Europe, 20% of EU citizens who shop online prefer to do it locally because they feel more protected within their borders. Furthermore, recent scandals involving personal data breach for different purposes keep almost half Europeans away from online commerce. However, as part of its strategy for a Digital Single Market, the Commission is working to boost digital trust. The new EU regulations on the protection of personal data (GDPR) will come into force in May 2018, accompanied by new rules on privacy and electronic communications. The aim of reforming data protection is to strengthen the rights of individuals, make those who process data aware of their responsibilities, and give the regulation credibility through enhanced cooperation between data protection authorities. Those bodies will then adopt common decisions once data processing becomes transnational and sanctions are increased.

Lack of digital literacy

Digital literacy in the EU countries are regarded to be most developed in the world is stunningly low. ‘60 million Europeans have never used the Internet, indicating that they have no need for it or that it is too expensive’. Majority of those who never used internet are aged 65-80, have low income and poor education. Together with users who use internet rarely due to lack of digital skills the digital literacy is estimated to constitute only 45% in Europe.  According to the prognosis of the EU Commission 90% of all jobs will require digital skills in a few years. ‘Almost half of Europeans (44%) still lack the basic digital skills to use an electronic messaging services, use publishing tools, or install new devices.’

Different level of digitalization

While the EU is making progress in reducing the digital gap between its member-states according the 2017 Digital Economy and Society Index (DESI), the issue remains a major concern. Andrus Ansip, Vice-President for the Digital Single Market rightly pointed out: “Many countries need to step up their efforts to reduce the digital gap as we do not want a two-speed digital Europe.”

Overall the EU has progressed and improved its digital performance by 3 percentage points compared to last year, but progress could be faster and the picture varies across Member States (the digital gap – between the most and least digital countries – is 37 percentage points, compared to 36 percentage points in 2014). Denmark, Finland, Sweden and the Netherlands lead the DESI index when Poland, Croatia, Italy, Greece, Bulgaria and Romania, are lagging behind in their digital development compared to the EU average.

 

Results and future steps

The recent trend in using internet shows that majority of Europeans already access the Internet through mobile devices. Mobile also is available in more rural areas than fixed broadband. Thus, the EU DSM is to be based at increasing mobility rather than on home or work placed computers or gadgets.

One of the most recent successes of the EU DSM apart from abolishing of geoblocking is the introduction free roaming in all 28 EU member-states which allows customers and businesses to save a fortune when traveling within the EU.

EU copyright framework has also been updated by the 2 sets of legislative proposals adopted in 2017 on fostering cross-border online services portability and giving better online content access throughout the EU.

The Marrakech Treaty regulation were adopted in 2017 as well. People with visual impairments will now be able to access more e-books in accessible formats to ensure that the rights of people with disabilities are adhered to.

The challenges which the EU DSM face very much depend on political decisions agreed upon consultations with the member-states. This fact demonstrates to which extent the EU DSM success or failure is dependent on member-states and political decisions taken in the EU. Policy makers should thus remember the context in which digital market operates that is hard to predict, never certain and constantly evolving.

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