Remarks for AmCham EU’s 3rd Annual Transatlantic Digital Economy Conference

Pastora, thank you for that introduction. And thanks to the superb team at AmCham EU, for all the excellent work you do to promote the interests of U.S. companies, and to help shape public policies that will allow companies to invest, innovate, and grow while meeting the needs of consumers and enterprise clients within the EU and beyond.

Like you, we at the U.S. Mission have been closely following the Commission’s Digital Single Market and the numerous public consultations related to the DSM, which I know have kept you all very busy.

I look forward to hearing your thoughts as to how we at the Mission can improve our efforts to support you and advance our shared interests as the 16 actions proposed in the DSM strategy are carried forward.

Taking a step back, it’s useful to keep in mind that cross-border data flows between the U.S. and Europe are the highest in the world-50 percent higher than the data flows between the U.S. and Asia.

In addition to being each other’s largest trading partners for digitally deliverable services, the U.S. and the EU are also the two largest net exporters of these services to the world. And demonstrating the interconnectedness of U.S. and European industries, 53 percent of digitally deliverable services imported from the U.S. were used in the production of EU exports, and 62 percent of digitally deliverable services imported from the EU were incorporated into U.S. exports.

The growth of the transatlantic digital economy is impressive and, with the right policies in both the United States and Europe, our digital economies can grow even more, particularly if we work together to promote flexible, interoperable standards, efficient cross-border data flows, expanded high-speed Internet access, and Internet-friendly trade rules.

We understand the DSM strategy is intended to create the regulatory and market conditions to help companies innovate, collaborate, invest, and grow while better serving and protecting consumers. This is a vision that we, of course, support.  Greater investment in networks and digital skills, digitalization of traditional industries through greater technology uptake, harmonization of regulations, and reduction of barriers to doing business across the EU’s internal borders are all worthy objectives because they would benefit consumers and companies, European and American alike.

At the same time, there are some parts of the DSM strategy in which we hope to engage with the Commission to clarify the nature of their proposals and to ensure the DSM will not inadvertently impose new market barriers. Some examples of these areas are the “duty of care” for online intermediaries regarding illegal content, geo-blocking, the promotion of a European cloud, possible changes to copyright rules, and possible revisions to the rules governing audiovisual media services, e-privacy, and telecommunications services.

And of course we are following closely the consultation process launched by the European Commission on internet platforms, especially because there have been calls in some Member States for internet platform regulation. What is frequently overlooked in the debate here is that there are many different kinds of internet platforms, each requiring separate analysis. All too often there is an assumption that there is need for new regulation. A recent report by the Information Technology & Innovation Foundation concluded as follows: “Given the value created and existing market constraints, there are few reasons to fear that Internet platforms pose a unique challenge to either the labor market or the product market in which they operate.” DG COMP believes that existing legal powers under competition laws are sufficient to deal with allegations of platform abuse. I think the burden of proof is on those who want to demonstrate otherwise.

This is not to say that there might not be useful steps to be taken in the areas of concern that I mentioned. However, we believe that broad and robust stakeholder consultations and thorough studies, including impact assessments, are an essential starting point – and we understand the Commission is committed to such a process under its Better Regulation Agenda.

I need your help to reinforce the message that the United States Government and U.S. companies look forward to being partners, not adversaries, as Europe’s governments and companies work to make the DSM a reality.

Many of the companies in this room can do more to raise public awareness of the roles they have played in fostering growth and job creation in Europe in collaboration with their broad ecosystems of European partners. We all need to do a better job of explaining how U.S. companies have helped Europe’s traditional businesses and SMEs to move online and reach new markets. Furthermore, we need to better demonstrate how your companies’ drive to innovate and seize the opportunities of digital technologies have led to a more vibrant marketplace, greater choice, and new offerings that European consumers clearly value. In prior speeches, I referred to facts and figures relating to how Apple, Google, Amazon and Facebook are contributing to European growth and prosperity by promoting an ecosystem of European entrepreneurs, and small and medium-sized businesses. I look forward to using facts and figures from other US companies represented here. Together we can change the narrative in the EU from an “us versus them” and zero-sum mentality to one that focuses on joint success.

We should also stress the point that success in the digital economy is not only about maintaining strong positions in the markets for search, e-commerce, and social networking. While these are high-profile, consumer-facing parts of the value chain, industrial, business-to-business, and back office digital services, and the hardware and infrastructure that support them, are no less important.

Unfortunately, in the unhelpful public debate over whether the United States or Europe is further ahead in the global digital marketplace, Europe hasn’t gotten enough credit for its noteworthy successes at both the front and back ends of the value chain. Europe has produced 30 technology companies worth more than $1 billion since 2000 – the so-called “unicorns”, comparing well with the United States, which produced 39 billion-dollar companies between 2003 and 2013.

Europe is also well positioned to seize on the huge opportunities that digitalization offers in financial services, insurance, healthcare, manufacturing, heavy industry, design, and engineering. Industry in Europe has tremendous assets to build on, but as some European stakeholders try to push for policies intended to weaken the market positions of a familiar list of leading U.S. tech companies, there is a risk that the new regulations they propose might not only unfairly tilt the playing field against non-European companies. They could also stifle the development of the data flows and platforms that Europe needs to seize the huge opportunities of Industrie 4.0, FinTech, e-Mobility, Smart Grids, e-Health, e-Government and, yes, the sharing economy that has vast consequences for the nature of work and the use of assets.

The calls from some Member States to promote “digital sovereignty,” discriminatory regulation, or forced data localization will not help Europe to maintain and extend its leadership in the global digital economy. I recently read a report by the Information Technology and Innovation Foundation entitled “The False Promise of Data Nationalism” that I would recommend to those of you who haven’t seen it. We have thus far been encouraged to see the Commission resist such proposals as data localization.

The creation of new barriers to the free flow of data both within and across Europe’s borders, could squander the potentially enormous benefits of Big Data analytics, the Internet of Things, digitalization of industry, cloud computing, and the preservation of an open, dynamic, and interoperable Internet.

Several months ago Carl Bildt articulated well what the vision behind DSM should be: “The right way to bolster European business is not to legislate to disadvantage their rivals. It is to encourage the culture of innovation and entrepreneurship that has produced the US companies that many now fear…Digital mercantilism…can only hurt Europe’s ability to innovate, compete and succeed in this new world.”

The underpinning of a dynamic single digital market in Europe is not just new regulation (although it may be required to eliminate barriers); it must include greater investment to ensure that European citizens can fully exploit the potential of data and the digital economy. A recent study by the Lisbon Council concluded that if France, Germany, Italy and Spain had the same level of digital density [defined as the amount of data used per capita] as the United Kingdom, their level of intangible investment [patents, copyrights, TM, technology, goodwill etc] would rise by roughly 200 billion euro per year, equivalent to a 2 per cent improvement in overall national output. Digital intensity needs to be an important part of the DSM.

Privacy and data protection are, of course, also key to the long-term success of the DSM. Consumers will only have the confidence to use digital services if they trust the Internet and believe that their data is protected. Restoring public trust is also essential to ensure that U.S. technology companies do not continue to suffer negative commercial consequences abroad.

I want to assure you that we are making every effort to address this issue. Let me make clear that we fully respect EU legal processes. But it was highly disappointing that the ECJ arrived at its decision on Safe Harbor without being able to take into account all of the information that has been made publicly available by the United States Government and competent independent review bodies, relying instead on inaccurate, incomplete and outdated information about U.S. intelligence practices.

It is vital to both the U.S. and European economies that we rapidly conclude a replacement to the Safe Harbor framework that will provide renewed certainty to businesses while protecting privacy, and we are working closely with the European Commission to do just that. Once we announce Safe Harbor 2.0, we – that includes the companies in this room – will need to undertake a significant effort to explain the importance of the agreement.

In the context of T-TIP, it should be clear to all of us that a 21st century trade agreement cannot neglect the importance of the free flow of data to industry, trade, and investment. In fact the Trade Promotion Authority bill requires us to negotiate a number of provisions in our trade agreements with regard to free flow of data. U.S. and EU companies have built the most robust cross-border data network in the world. We have a shared interest in ensuring that T-TIP strengthens this critical dimension of our economies. Legitimate public policy goals, such as protecting personal data, can be achieved without creating unnecessary barriers to trade.

Before concluding I would like to take a minute to mention a very different way that the U.S. Mission is encouraging collaboration between the United States and the European Union in harnessing the possibilities of new technologies: a joint U.S.-EU exchange program called Fulbright-Schuman. A few weeks ago, I announced the creation of the Fulbright-Schuman Innovation Grants, a new tool to help future leaders on both sides of the Atlantic reap the benefits of cutting-edge technologies while effectively addressing the policy challenges they create. The first American and EU grantees of the program will start in 2016, looking at the nexus between technology and policy related to data privacy.

We need your help in getting this program off the ground and investing in the next generation of innovative transatlantic leaders. Our goal is to raise $150,000 in the coming months, with a final goal of $300,000 by January 2017, supporting the first 10 to 12 American Fulbright-Schuman Innovation Grantees. Strengthening the transatlantic relationship takes more that U.S.-EU high level dialogues, or working level dialogues for that matter. It takes real, people-to-people connections, and Fulbright-Schuman is an important part of this. My staff and I would be happy to speak to you more about this exciting new initiative and the role your companies can play.  

Our good friend Vice President Ansip has said that his aim is “to make sure that Europe – its citizens and businesses – get the best of the online world in the safest and most open environment possible. That means openness and opportunity. Not obstacles.” We share this vision and look forward to collaborating in its implementation.

Thank you again for inviting me to exchange views with you on these important topics. I look forward to continuing the discussion.