The digitalization of human activities, from social interactions to industrial processes, has led to unprecedented levels of data collection. New data is constantly being produced, driven by the rise of user-generated content, the digitalization of industries and services, and the improvement of both machine to machine communication and data storage. As recognized in the Commission’s Communication “Towards a data-driven economy”, this trend “holds enormous potential in various fields, ranging from health, food security, energy efficiency to intelligent transport systems and smart cities”. Indeed, data has become an essential resource for societal improvement.
However, despite the obvious benefits of the digital age, there is a growing tendency towards data nationalism and digital border-checks. Several governments have sought to restrict or control the flow of data by introducing a greater number of data localization requirements. A recent study by the Brussels-based European Centre for International Political Economy (ECIPE) shows that over five times as many requirements are in place now compared to 2000.
Data analytics can be disruptive, and the risk of abuse is well-known, partly justifying the impulse to control these flows. But an adequate balance needs to be found. As we have said before, data access can only be meaningful if users can trust that their fundamental rights are protected. Indeed, if rules on privacy and security are effective (e.g., GDPR, NIS Directive), there is no reason to keep unnecessary restrictions on the flow of data.
A few European countries, namely France and (until recently) Germany, have fought hard to keep these barriers in place. What they have failed to account for with their digital protectionism, however, is the likelihood that these restrictions will backfire, leading to losses in productivity and the competitiveness of their economy, without achieving any of the intended objectives.
At a time when the European economy is moving on from its traditional model and becoming progressively more digitalized and data-driven, the economic gains to be achieved by removing these obstacles are impressive, representing around 52 billion EUR per year (0.37% of the EU’s GDP) according to ECIPE’s study.
Regrettably, the EU still lacks a future-proof regulatory framework on data. The European Parliament and at least 14 Member States have called for the removal of forced data localisation requirements. The European Commission has a clear mandate to propose progressive measures to remove these obstacles. Given this, it is disappointing that the recently adopted Communication on “Building a European Data Economy” seems to waver from the Commission’s stance on banning data localization.
The communication does promote free movement of data, but its impact is much more limited that an actual legislative tool, as it represents no more than a non-binding declaration of intentions. Moreover, it seems that consensus around this issue is also faltering, with new alternative methods to reduce barriers being suggested. One such idea floating around the upper levels of the Berlaymont is to instead rely on infringement procedures against Member States which disproportionally limit Single Market freedoms.
But such methods take a long time, and hardly ever create the necessary conditions of certainty and precedent which would enable us to enjoy the level of data flows we want and need. The European Commission needs to stand firm against digital protectionism, or risks perpetuating our current position, to the edge of the podium.