Oct 20, 2015 - 10:30am

U.S. and the EU: Shared Interests in a Global Digital Economy

Executive Vice President and Head of International Affairs, U.S. Chamber of Commerce

NOTE: The European Commission in May launched a strategy entitled the Digital Single Market (DSM) – a plan to create “better access for consumers and businesses to digital goods and services across Europe,” along with leveling the playing field in the digital economy and maximizing its growth potential. The Chamber will be running a series of guest commentaries – including those from players like Microsoft, Google and Intel – to take a closer look at the initiative.

The commercial relationship between the United States and the European Union is without peer, with trade in goods and services topping $1 trillion (€878 million) annually. Even more impressive is the transatlantic investment relationship: U.S. firms have invested $2.2 trillion (€1.9 trillion) in the EU and European companies $1.6 trillion (€1.4 trillion) in the United States. Almost all of this trade and investment is dependent on some form of digital services, whether through direct interactions with customers over the Internet, intra-company HR management, or a New Yorker using a credit card while on holiday in Rome.

The United States and the EU are also global leaders in digital trade, which generates over $8 trillion (€6.9 trillion) a year. Three quarters of the value created by digital trade accrues to firms not usually viewed as “Internet companies,” such as manufacturers, retailers and banks. Today, every successful business operates digitally in some capacity, often with those operations spanning borders in a global economy, which is why getting the Digital Single Market (DSM) initiative right is critical to the European market and to European firms’ global competitiveness.

Europe’s approach to the single-market is always most successful when it aims to remove trade barriers between the Member States and not to limit competition in a misguided attempt to support the single-market. The removal of internal Member State barriers and enabling firms — of any nationality — to adhere to a Europe-wide regulatory environment not only lowers the cost of doing business but more importantly allows European consumers to enjoy competition among products and services.

Historically, American businesses have benefited from these reforms. Indeed, the Commission’s initial DSM communication recognized the ultimate end goal will be to “make the EU an even more attractive location for global companies.”

Unfortunately, since announcing the DSM as a priority, the initial “win-win” framing of the exercise has faded as some European officials have sought to use the DSM to handcuff the competiveness of U.S. companies. For example, a former French minister went so far as to claim that EU sovereignty was at stake, saying, “We don’t want to be a digital colony of U.S. Internet giants.”

Overall such statements seem aimed at scoring political points rather than identifying real problems and putting forward policy proposals for debate. This anti-American tone at times reflects an intellectually sloppy critique of government surveillance programs that lumps in unrelated private business activities; at other times, it betrays a misunderstanding of the best practices required to build domestic industry. In any event, it is important that the DSM remain focused on keeping Europe open for business within Europe and connected to the rest of the global economy.

“Circle the wagon” statements shortchange the immense wealth of talent and creativity that exist in the EU. European startups like Spotify, Soundcloud and Skype didn’t grow due to protectionist policies but because they offer real value for consumers with their products and services. Market forces in the fast moving digital economy have consistently demonstrated that it is quality that trumps all other factors. The path to creating a competitive playing field doesn’t begin by pulling companies down but by figuring out ways to allow innovation to flourish.

In the end, American companies have a steadfast commitment to the European market and are pleased that the DSM communication from the EU Commission specifically calls out the importance of the international dimension, stating that “the openness of the European market should be maintained and developed further.” It further highlights the importance of various collaborative international approaches.

The Chamber is further encouraged by statements of Andrus Ansip, the EU Commission vice president in charge of the DSM, who has pushed back against notions that the DSM will be used for protectionist purposes, explaining that “our doors are open, not closed.”

As the DSM strategy moves from aspiration to implementation, it is critical to remember that digital products and services shouldn’t be seen as a zero sum game. The EU can create thousands of jobs by continuing to serve as a leader in development of industrial Internet technology as well as develop globally successful European tech firms, and U.S. business can similarly benefit from ancillary products and services built using EU-born cutting-edge technology, thus allowing the benefits of the digital economy to flow to all sectors.

U.S. and EU firms already support hundreds of thousands of jobs in one another’s markets and are poised for more growth. For most companies, the transatlantic market represents a natural place to do business due to our shared values. This is why American companies have long supported the European goal of a single-market.

But in given how integrated our two economies are, it is critical that we not divide ourselves with policies that limit the potential of the digital economy and that, in turn, give rise to emerging markets to make policy choices that further fragment the global potential of a digital economy. The Chamber looks forwarding to working with our members and EU policy makers as the DSM strategy moves forward.

About the Author

About the Author

Executive Vice President and Head of International Affairs, U.S. Chamber of Commerce

Myron Brilliant, executive vice president and head of International Affairs the U.S. Chamber of Commerce, drives the global business strategy of the organization.