Europe has launched a strategy for a Digital Single Market in all of its member countries. This strategy’s success depends on how well European legislators and politicians can remove barriers to digital trade and create an environment that fosters the growth of digital platforms and the skills needed to support a rapidly growing digital economy.
Others, particularly the US, are likely to view the Digital Single Market Strategy as a pretext for regulating and restricting the popularity and reach of foreign companies such as Google, Amazon, and Facebook. The European Commission must demonstrate that it is focused on enabling rather than just protecting a future sector.
One of the “pillars” is the removal of barriers to online international trade. It means that “geo-blocking,” which limits content to certain countries or imposes extra costs for those who access these services outside of those boundaries, must be eliminated. This will require that countries level their differences in value-added tax regimes, laws on consumer protection, copyright, and other commercial and legislative idiosyncrasies.
54% of e-commerce in Europe involves services in the US, while only 4% is traffic from one European country to another European country. It is great to create a Digital Single Market, but it will be less effective for Europe if the benefits are mainly derived from US-based companies.
The fear of the US that the Digital Single Market in Europe will try to restrict the dominance of US Services in Europe is not without foundation. It is a simple fact that these firms are successful because European consumers demand them. The EU still benefits from making it easier for these services to operate in Europe. This is because it allows firms like Amazon and Apple to run more smoothly across Europe, which helps to keep costs low.
In order to truly reap the benefits of the opening up of the digital markets in Europe, it is necessary to implement this strategy worldwide. The Digital Single Market Strategy contains many valid points that can be used to remove barriers to online trading. The strategy’s limitation is that it only reaches Europe’s borders. However, the Internet, which underpins online trade, does not recognize any such boundaries.
In order for a Digital Single Market in Europe to succeed, it would be necessary to agree on tax-avoidance strategies that US companies use when they do business internationally. Ironically, the practices are used in Europe to leverage different Transfer Pricing schemes within their companies set up in various countries. It is one thing to allow foreign multinationals to dominate a local market, but it’s another to lose or not collect tax revenue for business done in a particular country.
The main objective of the Digital Single Market Agenda proposed by the European Commission is to create a platform for digital entrepreneurs to flourish and grow new businesses in Europe. Silicon Valley is a success story that has inspired the entire world to create innovation centers that foster startups. It’s a problem that, despite many cities trying to emulate the success of California, they are still unable to make the same ingredients. Not enough money is being invested in seed startups. Startups in London – the most successful European startup location – still receive only 6% of the funding that Silicon Valley startups do.
In the normal life cycle of a tech company, many successful companies produce wealthy individuals with a set of specific skills for creating tech startups and the money to invest in their projects or others. Stock markets and an insatiable appetite to buy tech stocks created the conditions that led to this. To replicate this elsewhere will take time, money, and a willingness to accept failure. Unfortunately, all of this is not part of the European Digital Single Market Strategy. Even if their agenda is successful, the benefits will be far off.