How the EU can avoid digital protectionism

We are now living through history’s second big turning point on digital trade. Since the early 2000s we have seen the progressive digitalization of commerce, starting with production processes, electronic communications, and the widespread use of computers. This phenomenon has only been growing, to the point that in two years’ time more than 60% of global GDP will be digitalized. And these figures are from before the pandemic.

Covid has catalysed this trend, and we will have to get to the end of it to appreciate its long-term results. This crisis has doubtlessly accelerated the digital revolution and the so-called remote economy. It suffices to observe how much our public discourse is focusing on e-commerce, e-learning, and e-services. Digital services allowed the economy to cope with the pandemic and remain as open as possible.

Today, that economy is dependent on international dataflows. This was already true before Covid, but now the matter’s importance has greatly increased. McKinsey described it as 10 years of e-commerce growth packed in just three months. Of course, as politicians who are trying to regulate this environment, this is a very challenging period for us. Personally, for instance, I think that physical stores should not be afraid of becoming obsolete, but we will not be reverting to how things were before.

However, I also think that the pandemic triggered a protectionist revival mentality. Herein Brussels, there has been a lot of discussion on “strategic autonomy.” As a liberal politician, I fear what this concept might mean in practice. I am afraid that the term is being increasingly used as a euphemism for a “Europe first” strategy, which would be very dangerous for the EU’s future.

There is still so much to do in the field of digital trade, where significant obstacles remain on matters such as transport regulations, governmental intervention, and data localization. We need to make sure that this issue has not become a hostage of protectionist thinking in Europe.

We must take advantage of the opportunity that this historical moment has presented us with by conducting the necessary analysis. The European Commission is about to prepare the trade policy review, and I believe that digital trade should feature as one of the key priorities of the updated EU trade strategy.

We also have incoming legislations on AI and data, and we are keeping in contact with like-minded partners such as Australia and the US, which hopefully will help us to push forward the trade agenda on the global level. There are a lot of issues that we must discuss with other partners, too, like taxing digital services and privacy issues. And since we are diving into this new model of economy, we need to facilitate cross-border digital trade, as that is becoming increasingly important.

At the same time, we must also push for the liberalization of data flows in our bilateral agreements, so I hope for a very comprehensive digital trade approach in our trade deals.

The next stage –and chance –is to improve the EU’s single market. We need to double down on the digital divide and the gaps between the States in terms of digital trade, which have grown dramatically during the pandemic crises. We need to focus on cybersecurity threats, and the need to have better and increased connectivity in Europe.

Indeed, there is a lot on our plate, across the local, European, bilateral, and global levels. It is vital to maintain the momentum of this discussion, to receive from and push on the stakeholders, and make sure that whatever we decide on digital trade will fit the purpose.

This article appeared in Formiche #164 and was translated from the original Italian by Otto Lanzavecchia