Countering digital protectionism
According to the IfM Bonn, the Federal Government should, during its EU Council Presidency from 1 July, support the inclusion of „freedom of data traffic“ as the fifth fundamental freedom of the internal market.
„Although the increasing protectionism through protective tariffs is being discussed in public, hardly any attention has been paid to the steadily increasing digital protectionism with which countries around the world have been hindering the internationalisation of foreign companies for some time,“ explains Prof. Dr. Friederike Welter (IfM Bonn/University of Siegen). Digital protectionism includes, for example, censorship of online content and blocking of e-commerce platforms, but also the targeted obstruction of companies from storing and processing product-related data and the prohibition of transferring usage data to the manufacturer’s home country. In some countries, companies are also forced to disclose their source codes.
In the European Union, the four fundamental freedoms – free movement of persons, goods, services and capital – ensure that companies can benefit from the great advantages of the European Single Market despite the continuing existence of obstacles. „The national border closures during the Corona pandemic crisis have clearly shown what it means for small and medium-sized enterprises in particular if these fundamental freedoms are restricted: For them, their most important export market collapsed,“ the economist points out.
At the same time, the crisis has also shown the increasing importance of the digital transformation for small and medium-sized enterprises: The severely restricted freedom of movement of persons could be partly compensated for via video conferencing. Various product-related service activities could be carried out via remote control. Irrespective of the freedom of data traffic, Prof. Dr. Friederike Welter therefore also considers it necessary to build a modern digital infrastructure throughout the EU and to invest in cyber security. The official inclusion of „freedom of data traffic“ as the fifth fundamental freedom would also underline the importance of the large digital European internal market. So far, the EU has only set a framework for the free movement of non-personal data within the internal market.
„It would also send a clear signal to countries outside the EU if the freedom of data movement were declared the fifth fundamental freedom of the European internal market. After all, digitisation enables diverse cross-border economic relations and business models. However, there are hardly any binding rules for digital economic activities. This can quickly create an incentive for individual governments to use digital barriers to trade to give preference to their own providers and to keep foreign competitors out,“ says Prof. Dr. Friederike Welter.