The Digital Trade 'Surplus' Should Not Be Driving Europe’s Digital Agenda

Stephen Ezell July 13, 2015
July 13, 2015

The European Commission's ambitious digital single market (DSM) is a plan to forge a more cohesive marketplace for digital products and services by streamlining the continent’s tangled mesh of consumer protection laws, contract laws, copyright policies, telecommunications rules, and cross-border taxes. These are unquestionably constructive steps toward a more innovative and prosperous European economy. Yet some of the underlying motivations for the Commission’s vaunted strategy are fundamentally misconceived and could easily steer the project in the wrong direction, argues Stephen Ezell in EurActiv. Chief among these missteps is the desire to close a purported digital trade deficit with the United States, which the Commission says allegedly stems in part from unfair competitive practices on the part of America’s digital giants. But the truth is that any European digital trade deficit is vastly outweighed by massive EU trade surpluses with the United States in other industries, like automobiles. If an American digital trade surplus exists at all, it is not a result of unfair business practices. European concerns over digital trade deficits miss the central point that Europe's real policy goal should not be to spur greater production of information and communications technologies (ICTs), but to encourage companies’ use of them, because that is what generates the lion’s share of new value in modern economies. The Commission must embrace the concept of comparative advantage and encourage the use of ICTs if it wishes to forge a successful Transatlantic Trade and Investment Partnership agreement.