The US and EU must work together on digital policy to spark innovation
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The legendary Sammy Davis Jr. once sang, “When an irresistible force such as you meets an immovable object like me, you can bet … something's gotta give.” The song could serve as background music this week when the European Union’s top competition regulator, European Union Competition Commissioner Margrethe Vestager, visits Washington’s corridors of power.

She arrives at a time of considerable political uncertainty on both sides of the Atlantic. Normally this kind of visit would be a friendly, diplomatic confirmation of the importance of the transatlantic digital relationship to innovation, job creation, and economic growth on both sides of the pond. Instead, it will be crucial for Commissioner Vestager to hear the U.S. perspective on the unfortunate trajectory that Europe’s digital policies are taking, and that innovation, workers, and entrepreneurs in both Europe and the United States stand to suffer as a result.

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This message must rise above the noise because among the most concerning EU policies are those that Vestager oversees directly — from using competition enforcement to target ratified tax practices by U.S. companies, to proposing new regulations, to targeting U.S. based online platforms.

 

In August, Vestager departed from long-established international tax policy norms, finding that Apple’s treatment under Ireland’s tax laws amounted to impermissible “state aid” and seeking some $14 billion of retroactive penalties. The decision reverberated on both sides of the Atlantic and left businesses wondering how complying with the laws of an EU member state could put one out of compliance with the rules of the EU.

The European Commission is also approaching competition investigations in ways that appear targeted at U.S.-based technology companies, suggesting, for example, that regulators should have additional tools to address (unspecified) harms created by companies’ use of “big data.”

The negative direction of Europe’s digital policies extends well beyond tax and competition, including to the EU’s Digital Single Market (DSM) strategy. Initially seen by many, including technology startups and companies, as an historic opportunity to reduce regulatory fragmentation and turbocharge growth and innovation in Europe, the DSM strategy has (to date) proven, at best, unambitious and, at worst, counterproductive.

The Commission’s effort to “modernize” EU copyright law has really resulted in picking winners and losers by crafting proposals that favor traditional news and other publishing companies, raise costs for internet companies, and render innovative startups — including European startups — simply unable to operate.

In addition, the EU’s stated desire to break down data localization measures to stimulate data flows over the internet has run into a brick wall, as France, Germany, and other Member States have sought to create virtual dams that hold data within individual Member States. And while the Commission has so far resisted the urge to create new and controversial regulations governing “online platforms” (think Google, Facebook, Twitter, etc), it has done little to assure that these incredibly innovative companies — many of which happen to be U.S.-based — will be able to compete fairly in Europe.

Now Vestager is questioning algorithms — the mathematical formulas underlying all search engines, software, and artificial intelligence — by assuming (with no evidence) that these brilliant innovations of American and other developers create harmful market distortions.

Our lives and our economy are digitally dependent and benefit enormously from technology. Misguided digital policies such as these have significant, adverse consequences for the U.S. economy and American workers. Technology companies in the United States (including many who have their headquarters overseas) employ over 6.7 million Americans — 5.7 percent of private sector employment — and account for 7.1 percent of U.S. GDP.

Yet technology is not merely an economic sector; it is an engine that enables opportunities for growth across the economy.

U.S. manufacturers depend on technology products and services to increase production and boost exports of everything from automobiles to aircraft to machine tools. Professional services such as U.S. accounting firms and insurance companies rely on cross-border data flows to sell their services in overseas markets. And many budding entrepreneurs and U.S. small business owners depend on technology platforms to reach new customers all around the world.

The benefits of technology aren’t just limited to the United States. The EU’s policies also impede Europe’s efforts to increase growth and innovation within its Member States. The EU and United States are together the world’s largest exporters of digital services, with digital trade surpluses of $168 billion and $150 billion, respectively. Technology products and services breathe new life into static industries, allowing European companies in all sectors to do their work more effectively and productively, including by investing more in the United States and deepening their relationships with American firms and workers.

And the impressive cadre of would-be entrepreneurs and upstarts in Amsterdam, Lisbon, and Warsaw — many of which I have seen first-hand — also need easy, inexpensive access to online services and new markets if they are to grow, compete, and thrive.

The EU and United States have the deepest and most integrated economic relationship in the world, a relationship that has only served to continually lift their people’s high standards of living. The two sides now need to recommit to that partnership by ensuring that their digital policies enable cross-border data flows, treat firms from all countries fairly, and stimulate rather than impede innovation.

Dean Garfield is president and chief executive officer of ITI, a trade group representing 59 of the leading tech companies, including Apple, Amazon, Google, Facebook, Intel, Microsoft, and Samsung.


The views expressed by contributors are their own and are not the views of The Hill.