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EU can be €2 trillion better off by 2030 if cross-border data transfers are secured

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DigitalEurope, the leading trade association representing digitally transforming industries in Europe and which has long list of corporate members including Facebook are calling for an overhaul of the General Data Protection Regulation (GDPR). A new study commissioned by the lobby shows that policy decisions on international data transfers now will have significant effects on growth and jobs across the whole European economy by 2030, impacting Europe’s Digital Decade goals.

Overall, Europe could be €2 trillion better off by the end of the Digital Decade if we reverse current trends and harness the power of international data transfers. This is roughly the size of the entire Italian economy any given year. The majority of the pain in our negative scenario would be self-inflicted (around 60%). The effects of the EU’s own policy on data transfers, under the GDPR and as part of the data strategy, outweigh those of restrictive measures taken by our major trade partners. All sectors and sizes of the economy are impacted across all Member States. Data-reliant sectors make up around half of EU GDP. In terms of exports, manufacturing is likely to be hit the hardest by restrictions on data flows. This is a sector where SMEs make up a quarter of all exports. "Europe stands at a crossroads. It can either set the right framework for the Digital Decade now and facilitate the international data flows that are vital to its economic success, or it can slowly follow its current trend and move towards data protectionism. Our study shows that we could be missing out on around €2 trillion worth of growth by 2030, the same size as the Italian economy. The growth of the digital economy and the success of European companies is dependent on the ability to transfer data. This is especially so when we note that already in 2024, 85 per cent of the world’s GDP growth is expected to come from outside the EU. We urge policymakers to use the GDPR data transfer mechanisms as it was intended, namely to facilitate – not to hinder – international data flows, and to work towards a rule-based agreement on data flows at the WTO." Cecilia Bonefeld-Dahl
Director General of DIGITALEUROPE
Read the full report here Policy recommendations
The EU should: Uphold the viability of GDPR transfer mechanisms, for example: standard contractual clauses, adequacy decisions Safeguard international data transfers in the data strategy Prioritise securing a deal on data flows as part of the WTO eCommerce negotiations
Key findings
In our negative scenario, which reflects our current path, Europe could miss out on: €1.3 trillion extra growth by 2030, the equivalent to the size of the Spanish economy; € 116 billion exports annually, the equivalent to Sweden’s exports outside the EU, or those of the ten smallest countries of the EU combined; and 3 million jobs. In our optimistic scenario, the EU stands to gain: €720 billion extra growth by 2030 or 0.6 per cent GDP per year; €60 billion exports per year, over half coming from manufacturing; and 700,000 jobs, many of which are highly skilled. The difference between these two scenarios is €2 trillion in terms of GDP for the EU economy by the end of the Digital Decade. The sector that stands to lose the most is manufacturing, suffering a loss of €60 billion in exports. Proportionately, media, culture, finance, ICT and most business services, such as consulting, stand to lose the most – about 10 per cent of their exports. However, these same sectors are those that stand to gain the most should we manage to change our current direction. A majority (around 60 per cent) of the EU’s export losses in the negative scenario come from an increase in its own restrictions rather than from third countries’ actions. Data localisation requirements could also hurt sectors that do not participate heavily in international trade, such as healthcare. Up to a quarter of inputs into the provision of healthcare consist of data-reliant products and services. In the major sectors affected, SMEs account for around a third (manufacturing) and two-thirds (services such as finance or culture) of turnover. Exports by data-reliant manufacturing SMEs in the EU are worth around €280 billion. In the negative scenario, exports from EU SMEs would fall by €14 billion, while in the growth scenario they would increase by €8 Data transfers will be worth at least €3 trillion to the EU economy by 2030. This is a conservative estimate because the model’s focus is international trade. Restrictions on internal data flows, e.g. internationally within the same company, mean this figure is likely much higher.
More information on the study
The study looks at two realistic scenarios, closely aligned with current policy debates. The first, ‘negative’ scenario (referred to throughout the study as the ‘challenge scenario’) takes into account current restrictive interpretations of the Schrems II ruling from the Court of Justice of the EU, whereby data transfer mechanisms under the GDPR are made largely unusable. It also takes into account an EU data strategy that places restrictions on the transfers of non-personal data abroad. Further afield, it considers a situation where major trade partners tighten restrictions on the flow of data, including through data localisation. The study identifies sectors in the EU that rely heavily on data, and calculates the impact of restrictions to cross-border transfers on the EU economy up to 2030. These digitising sectors, across a variety of industries and business sizes, including a large proportion of SMEs, make up half of EU GDP.
Read the full report here

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Business

How the internet saved businesses and economies around the world

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The internet has made the globe a village, revolutionized ways of doing business, dwarfed advertising costs, made it easier for citizens to access government services, and provided consumers with an unprecedented choice of products and services at rock-bottom prices. Per Statista, global e-commerce sales hit $4.28 trillion in 2020 and are projected to surpass $5.4 trillion in 2022. That's good for economies everywhere.

Where the internet shines brighter is how it's saved small businesses from the wrath of traditional owners of capital. It’s now easier than ever for merchants to obtain small business financing from online lenders.

6 Ways the Internet has saved businesses

Low-budget advertising

Gone are the days when blue chips owned the tools of advertisement. According to data provided by Adage, the average cost of a 30-second TV commercial can be as high as $115,000.

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The Internet has democratized the advertisement scene with online marketing. Expert Market estimates that businesses can now spend as low as $750 -$1500 per month on SEO campaigns and an average of $5,500 per month on social media campaigns.

That's a boon for small business owners everywhere. They can now meet their marketing costs with loans for small business financing.

Effective marketing

Internet marketing tools have helped businesses remove the guesswork out of their marketing efforts. Using Conversion rate optimization (CRO) tools like Google Analytics, HubSpot, and Unbounce, businesses can measure the effectiveness of their digital marketing strategies.

You can see how many people landed on your product pages from an email, Facebook, or Google ad and how many ended up buying your product or services. Thus, you can measure conversions and determine your ROI on the go.

Again, online tools enable businesses to obtain valuable information about their customer's interests and run targeted ads that appeal to specific demographic groups that are already interested in their products or services.

Expand with fewer overheads

With the internet came eCommerce, which has made it easier for businesses to scale to new markets and grow their businesses with little overheads. Today, small business owners can sell their products online in different cities, states, and countries from a single location.

It takes money to build a business website, but the cost is minuscule compared to the ongoing overheads of renting space and hiring new workers in different places. You can easily obtain small business financing from an online lender to fund the upfront costs of taking your business operations to the cloud.

Easier Entry

The Internet has removed all barriers to entry into the business world. Today, anyone with a laptop and internet connection can start a business from the comfort of their house - even without inventory! Yes, if you're tech-savvy and can build your own website and do a bit of digital marketing, starting a business with little to no capital and $0 overheads is now possible in the internet age.

That's what dropshipping is all about. Simply create an online store and liaise with reliable third-party fulfillment partners to list their products on your site as if they are yours. Once you make a sale, your partner packages and ships the product directly to the customer. How good is that!

Access to talent

Businesses of all sizes can now access an on-demand workforce online from any part of the world without the need to hire expensive in-house professionals. That's what platforms like Upwork and Fivver are all about. From talented programmers, SEO experts, and animation professionals to content creators and graphic designers, there is no shortage of talented freelancers that businesses can get online at a fraction of the cost of building a whole department in-house.

Access to financing for small businesses

Lastly, the internet has played a big role in closing traditional lending gaps. Obtaining small business financing from traditional lenders has been a bane for small business owners for many years. With the rise of online lenders, crowdfunding, and peer-to-peer lending platforms, the funding gap is now closing quickly.

For instance, online lenders like caminofinancial.com are now the cream of the crop when it comes to obtaining financing for small businesses. They have a simple application process, provide loans with bad credit, and have short approval periods of 1-10 days.

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European Commission

Fisheries: EU and Cook Islands agree to continue their sustainable fisheries partnership

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The European Union and the Cook Islands have agreed to continue their successful fisheries partnership as part of the Sustainable Fisheries Partnership Agreement, for a duration of three years. The agreement allows EU fishing vessels operating in the Western and Central Pacific Ocean to continue fishing in the Cook Islands fishing grounds. Environment, Oceans and Fisheries CommissionerVirginijus Sinkevičius said: “With the renewal of this Fisheries Protocol, European Union vessels will be able to continue fishing one of the healthiest tropical tuna stocks. We are particularly proud to contribute, through our sectoral support, to the development of the Cook Islands' fisheries sector - a Small Island Developing State that has been often praised for its effective and responsible fisheries management policies. This is how the EU's Sustainable Fisheries Partnership Agreements work in practice.”

In the framework of the new Protocol, the EU and ship owners will contribute with a total up to approximately €4 million (NZD 6.8m) for the next three years, of which €1m (NZD 1.7m) to support the Cook Islands' initiatives within the sectoral fisheries and maritime policy. Overall, next to improvements in the fishing sector, the revenue obtained from this Agreement has previously allowed the Cook Islands' government to improve its social welfare system. More information is in the news item.

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Aviation/airlines

Commission approves €800 million Italian scheme to compensate airports and ground-handling operators for the damage suffered due to the coronavirus outbreak

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The European Commission has approved, under EU state aid rules, an €800 million Italian scheme to compensate airports and ground-handling operators for the damage suffered due to the coronavirus outbreak and the travel restrictions that Italy and other countries had to implement to limit the spread of the virus.

Executive Vice President Margrethe Vestager in charge of competition policy said: "Airports are among the companies that have been hit particularly hard by the coronavirus outbreak. This €800 million scheme will enable Italy to compensate them for the damage suffered as a direct result of the travel restrictions that Italy and other countries had to implement to limit the spread of the virus. We continue working in close cooperation with member states to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules.”

The Italian scheme

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Italy notified to the Commission an aid measure to compensate airports and ground-handling operators for the damage suffered during the period between 1 March and 14 July 2020 due to the coronavirus outbreak and the travel restrictions in place.

Under the scheme, the aid will take the form of direct grants. The measure will be open to all airports and ground-handling operators with a valid operating certificate delivered by the Italian civil aviation authority.

A claw-back mechanism will ensure that any public support received by the beneficiaries in excess to the actual damage suffered will have to be paid back to the Italian State.  

The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures granted by member states to compensate specific companies or specific sectors for the damages directly caused by exceptional occurrences, such as the coronavirus outbreak.

The Commission considers that the coronavirus outbreak qualifies as an exceptional occurrence, as it is an extraordinary, unforeseeable event having a significant economic impact. As a result, exceptional interventions by the member states to compensate for the damages linked to the outbreak are justified. 

The Commission found that the Italian measure will compensate damages that are directly linked to the coronavirus outbreak, and that it is proportionate, as the compensation will not exceed what is necessary to make good the damage, in line with Article 107(2)(b) TFEU.

On this basis, the Commission approved the measure under EU state aid rules.

Background

Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as for example wage subsidies and suspension of payments of corporate and value added taxes or social contributions do not fall under State aid control and do not require the Commission's approval under EU State aid rules. In all these cases, member states can act immediately.

When State aid rules are applicable, member states can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus outbreak in line with the existing EU State aid framework.

On 13 March 2020, the Commission adopted a Communication on a co-ordinated economic response to the COVID-19 outbreak setting out these possibilities.

In this respect, for example:

  • Member states can compensate specific companies or specific sectors (in the form of schemes) for the damage suffered due and directly caused by exceptional occurrences, such as those caused by the coronavirus outbreak. This is foreseen by Article 107(2)(b)TFEU.
  • State aid rules based on Article 107(3)(c) TFEU enable member states to help companies cope with liquidity shortages and needing urgent rescue aid.
  • This can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by Member States immediately, without involvement of the Commission.

In case of particularly severe economic situations, such as the one currently faced by all member states due the coronavirus outbreak, EU State aid rules allow member states to grant support to remedy a serious disturbance to their economy. This is foreseen by Article 107(3)(b) TFEU of the Treaty on the Functioning of the European Union.

On 19 March 2020, the Commission adopted a State Aid Temporary Framework based on Article 107(3)(b) TFEU to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020 and 28 January 2021, provides for the following types of aid, which can be granted by member states: (i) Direct grants, equity injections, selective tax advantages and advance payments; (ii) State guarantees for loans taken by companies; (iii) Subsidised public loans to companies, including subordinated loans; (iv) Safeguards for banks that channel State aid to the real economy; (v) Public short-term export credit insurance;(vi) Support for coronavirus related research and development (R&D); (vii) Support for the construction and upscaling of testing facilities; (viii) Support for the production of products relevant to tackle the coronavirus outbreak; (ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions; (x) Targeted support in the form of wage subsidies for employees; (xi) Targeted support in the form of equity and/or hybrid capital instruments; (xii) Support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus outbreak.

The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before this date if it needs to be extended.

The non-confidential version of the decision will be made available under the case number SA.63074 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.

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