Europe's Data Strategy
March 13, 2020
Last month, the EU took steps to flesh out their emerging digital strategy with the release of two white papers, one on AI regulation, and the other on a European data strategy. In a previous post, we looked at the EU’s plans for AI regulation, and the lessons the U.S. should be taking from their approach. In this post, we turn to the EU’s data strategy, which lays out an action plan for the EU as it works to take advantage on the opportunities presented by the data economy.
Most of the proposals included in the EU’s white paper stick close to what are by now familiar themes for government digital strategies: the opening of high-value public datasets for private use, investment in building digital skills among individuals and SMEs, the promotion of new technical standards to improve interoperability, and the strengthening of governance mechanisms to facilitate the flow of data across and within sectors. But two of the strategy’s goals reveal more ambitious plans by the EU.
The first of these is the proposal to construct a common European cloud infrastructure. Europe’s motivations for wanting its own cloud infrastructure are twofold. The first is the EU’s long-standing concern over the level of privacy protections afforded to European customers whose data is held by U.S.-based cloud services. The EU has been particularly wary of the dominance of U.S. cloud providers in the EU market since the passage of the U.S. Cloud Act in 2018, which they fear will require American firms to comply with law enforcement requests for communications data when served with a warrant, regardless of where that information is stored. The EU has become concerned that localization requirements will no longer be enough to prevent foreign nations from trying to exert their own rules and authorities within Europe’s digital ecosystem. The EU fears that these and similar moves by the U.S. and others will result in Europe losing control over what happens to its citizens’ data.
The second reason for the EU’s interest is quite simple: Europe does not want to miss out on the investment opportunities and the revenue that would come from having a robust domestic market of cloud providers. The EU sees the U.S. and China beginning to carve out territory in the cloud landscape, and does not want to be left behind. Europe realizes it is starting at a disadvantage, but hopes that the strategy’s proposed investment of €4-6 billion in infrastructure and tools will allow it to create a cloud ecosystem capable of challenging the current bipolar digital environment.
This decision by the EU was likely unavoidable. Europeans are not the first to realize that it is no longer enough for a sovereign state to simply control what happens to its citizens within its physical territory. Today, what happens to citizens data has grown almost equally important, a fact that helped motivate the EU to pass the GDPR several years ago. Now, European nations have realized that achieving full digital sovereignty will impossible without also gaining control over the computing infrastructure that mediates the data economy. Whether Europe will succeed and at what cost is still uncertain, but it is at least clear that the attempt to create a European cloud is the latest harbinger of a very different digital geopolitics than what we have known so far.
The second notable point in the EU’s data strategy is its goal to create common European data spaces for strategic sectors and public interest domains like healthcare, manufacturing, finance, and the environment. These data spaces would serve as pools of high-value data—along with associated technical tools and infrastructures—that could be readily accessed by any organization within the ecosystem to help promote new innovation.
To create these data spaces, the EU proposes an amalgam of measures to help improve the sharing of data, including regulatory clarifications around privacy and competition law, measures to promote interoperability, incentives for data sharing by the private sector, and in some cases even legal requirements that companies disclose the data they own. The goal of these measures is both to help unlock the value of data which had previously been held in private stores, and to help SMEs compete with larger, more entrenched firms.
The EU’s focus on using data spaces to improve the competitiveness of SMEs is driven, at least partially, by Europe’s anxieties over its competitiveness in the digital economy. The largest technology firms in the world are all American or Chinese. As these companies have grown, they have managed to accumulate massive amounts of high-value data about their customers and the world they inhabit. Because of the way modern AI systems rely on large sets of high-quality data for training, these proprietary data sets have become one of the most significant competitive advantages for firms building digital services.
By creating new ecosystems where companies have more equal access to the relevant data, the EU hopes to level the playing field for European SMEs who may not otherwise be able to compete with their larger cousins. This could threaten to damage the dominant position of many U.S. technology firms—particularly if they are forced to hand over the data they collect—but if managed correctly could also prime these ecosystems for new innovation.
This is the second purpose of the EU’s plans. Companies are naturally resistant to the idea of openly sharing the data they have so carefully and expensively compiled. But if more of this data were held in common, it could allow companies to develop new and more powerful services to solve shared problems. And while some barriers to the sharing and reuse of data may be overcome through encouraging voluntary coordination by companies—the model pursued by the U.S.—the EU has decided that in some sectors the barriers to creating the data spaces they envision will be too high to overcome without more concerted action by the government. Finding the optimal balance between promoting openness and preserving incentives for firms to invest in data collection will be a difficult task, but the EU for its part is willing to bet that the optimal balance lies far more towards openness than what we have now.
With its data strategy, the EU has shown that it is willing to consider bold steps to position itself for success in the data economy. These movements represent a challenge to the status quo of an open internet dominated by American tech giants, and while their success remains highly uncertain, the U.S. must recognize the way they signify the internet’s shifting future. If there is one lesson to be learned from this data strategy, however, it is that Europe is thinking strategically about how a digital industrial policy can advance its interests. On the other side of the world, so is China. If the America hopes to retain its technological leadership, we may have to become similarly ambitious.