Europe and Digitalization: The European Union is About to Enter a New Era

by Viktoria Loidl, MAEUS student

This blog post was written for the course "Dialogue on Europe" during the Fall 2019 semester.

Photo Credit: European Union Center,
University of Illinois, Urbana-Champaign

The time has come: The European Union is about to enter a new era. The digital economy has been on the rise for quite some time and the EU is finally catching up. Some countries are currently thinking about enforcing digital taxes to counter the actions and power of influential American tech companies in Europe. However, not only individual countries such as France are realizing the need for new policies but also the European Commission. In fact, former competition commissioner Margrethe Vestager has been so successful in her hunt after big American tech companies such as Google, Apple and Facebook, that her portfolio has been extended into the new Commission period. In her new position as the Vice President for Digital, Vestager will be bringing Europe up to speed to the demands of the digital era.  The EU is currently lagging digital innovation and trying to catch up to its competitors, China and the United States. Interestingly enough, one of Vestager’s biggest challenges will probably also be her own legacy. While her new role will come will certainly be more challenging as she will be required to work with a wider variety of (oftentimes uncooperative) actors, such as MEPs, national governments or industry groups, she will also have to balance two hats. Being responsible for both, digitalization and competition, she might sometimes have to deal with conflicting objectives. The topic of digitalization and improving Europe’s digital strategy is an EU-internal topic, whereas competition mainly affects powerful companies who enter the European Union.

The US and China have been dominating the digital world over the past few decades. As part of its new strategy from 2020-2024, the European Commission is intending to improve its competitiveness to be able to keep up with its most challenging competitors. China’s immense economic growth has been causing anxiety in Europe for a while. Add digitalization to the mix and it becomes even more problematic. Digitalization is omnipresent and growing as well as changing rapidly. Despite the EU’s largest economies’ efforts to keep up with the changes, it has been rather unsuccessful so far. Many EU officials call for a “comprehensive approach” to be able to tackle the great array of challenges that come with the digital economy. Most would agree that changes are necessary to further support Europe’s aim to become more competitive. However, it is crucial to notice that simply creating or changing EU internal policies might not be enough. Competition and digitalization is deeply entangled with external tools such as the EU’s trade competence and the exercise of its power abroad.

The EU has become a noticeable power in regulating the digital world, however, its been lagging in its own digital innovation. Exercising its power and forcing influential tech companies to follow its regulations has been a relatively easy task for the European Union. The main market of companies such as Facebook, is outside the United States, most often in Europe itself. Therefore, the EU has been able to enforce quite smoothly by offering access to its market in exchange for the acceptance of its regulations. The EU evolved to be a global policy maker, yet somehow failed to keep up its own innovation. The US and China’s innovation is far superior Europe’s innovation. While some claim that this might be problematic moving forward, others, such as Margrethe Vestager, are convinced that the EU is following a [European] value-based innovation approach.

In conclusion, the digital world is changing rapidly. The EU has finally jumped onto the train and decided to tackle this problematic area by creating a digital strategy as part of the new Commission’s agenda. So far, the EU has been following a regulatory approach and it has yet to be determined if it will continue this route or might become more innovative as well.