Cutting red tape essential for a functioning Single Digital Market

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OPINION Digitalisation enables faster growth and jobs creation. But the EU could miss this opportunity if the EU Commission Digital Single Market Strategy turns into a long list of demands on businesses, writes Carolina Brånby, Legal and Policy Advisor for Digitalisation at the Confederation of Swedish Enterprise.

Carolina Brånby bild 2014

Carolina Brånby

Europe can do better. With its Digital Single Market Strategy, the EU Commission want to ensure the EU can take full advantage of the benefits digitalisation can bring. This should provide the over 500 million consumers in the Union wider access to goods and services. This will promote entrepreneurship and innovation and thereby growth and jobs.

But on this one-year anniversary of the strategy's introduction, the question remains whether the EU 28, the European Parliament, and the EU Commission will be able to capture the greatest benefits of the digital economy. The new Data Protection Regulation to take effect May 2018 will bring significant costs and be difficult to live up to. As well, starting in October 2015, the EU has lacked a binding agreement with the USA covering personal data transfer, which represents a serious obstacle for trade relations and the global competitiveness of European businesses. As it stands, the EU Commission's Digital Single Market Strategy risks becoming a long list of demands on businesses. But shouldn't business and trade be helped by increasing the availability of goods and services?

Being able to utilize the enormous potential of information technology requires the free flow of data, and practical regulations for e-commerce of goods and services. Soon, over 70 percent of the world's population will have access to a smartphone. This digital access creates new possibilities for production, consumption, education, healthcare, and providing services.

But, digitalisation also involves certain challenges that must be addressed. The necessary digital infrastructure must be secure and fully developed for use by individuals and businesses. The regulatory framework must promote entrepreneurship, innovations, and consumer confidence in digital services. As an example, personal data protection must match the digital world that consumers want participate in. Companies need fair competition and copyright regulation that accommodates the interests of creators, rights holders and users. A basic consideration in this regard, for both individuals and small scale businesses operations in the sharing economy, is easily applied and technology neutral regulation.

This requires harmonisation in several area, including VAT and consumer laws. The current regulatory burden weighs heavily on the EU digital market, making it of little interest to most businesses. We believe that a quarter of all Swedish businesses sell their goods and services over the Internet. Of this, some eight percent conduct e-commerce with another country. Many companies are local and have no desire to grow internationally. But more harmonized regulations for cross-border trade would significantly facilitate for these businesses to step out and broaden their market reach.

The proposals currently discussed for the Digital Single Market Strategy appear to increase red-tape. VAT regulations, online sales, and prohibiting geo-blocking are legislative considerations within the strategy that appear complex and unclear. Differing rules are proposed for goods and services depending on whether these are sold on or offline. This differentiation fails to address modern, digitalized business. The market is not separated into one for digital content and one for physical goods. Many companies sell both. These companies use omnichannel sales, which involves selling to their customers through digital market platforms, their own websites, and physically in brick and mortar stores.

Information technology offers enormous possibilities for small businesses and large multinationals. Technological developments offer smarter, more environmentally friendly, and cheaper products. 500 million citizens of the EU would become a solid home market for European businesses. What is needed now, is for regulators and policy-makers to balance new legislation to ensure businesses can practically sell their goods and services in all the ways digital technology enables them. Cutting red-tape and limited legislative burdens are the foundation for a functioning Single Digital Market where consumers can benefit from a growing offering of goods and services.

Carolina Brånby, Legal and Policy Advisor for Digitalisation.

This article was originally published in Swedish 9 May 2016

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