BusinessEurope Headlines No. 2020-06

Innovation needs to play a central role in the Green Deal

“Research and innovation must be central to the Green Deal, in order to make this deep societal transformation a success”, said BusinessEurope’s Deputy Director General Alexandre Affre at the conference “Innovative Europe – The way forward”, organised by i-Com (Institute for Competitiveness) on 18 February. “A lot of technologies are already there and need to be deployed at large scale, but many still need to be invented. Innovation is therefore a must”, Affre added. As reported in the BusinessEurope’s strategy paper on research & innovation, to scale up their investments in Europe, companies need more and smarter public funding, innovation-friendly legislation, talents and collaboration.

Contact: Carolina Vigo

Our comment

The race for AI supremacy

By Patrick Grant, Digital Economy Adviser

Data, money and purpose. These were the three key elements the European Commission’s Executive Vice-President Vestager raised at a press conference in advance of the Commission’s release of its digital masterplan on Wednesday 19 February. In the Brussels bubble, politicians, bureaucrats, businesses and societal representatives have been eagerly awaiting this day. But how much is being heard outside of the European Quarter and what influence will it have in the global race for artificial intelligence (AI) supremacy?

It is no secret that AI has the potential to transform our economies and societies for better if legitimate challenges are overcome. But as a foundational technology, AI will also be an important measure of geo-political power for the incoming decades. This power will then be used to dominate further affairs across the globe that this technology interacts with, from consumer rights to national security.

China has committed itself to build a USD 150 billion AI industry by 2030. The United States used a 2019 executive order to prioritise federal research and development funding in AI. Meanwhile, the EU continued to force ePrivacy through its legislative machine, a law recognised by many that would slow down the development of machine learning in Europe.

But new personalities have been injected into the Commission college. Following their initial stumble, France presented Thierry Breton, a tech businessman who now sits as the EU’s Internal Market Commissioner. While it is unclear exactly how the relationship between Breton and Vestager will play out, it is clear that he is enjoying great influence over the Commission release this week.

The data strategy is clearly an initiative with Breton’s fingerprints on. While it is widely accepted that Europe initially lost the B2C digital revolution to the United States, leading to the rise of the GAFA’s (Google, Amazon, Facebook and Apple), it is believed there is all to play for in B2B industrial sectors. Data and the value that can be derived from it will be the resource of success. France’s President, Emmanuel Macron has been calling for a European data strategy since his visit to China in 2018. There, at an AI conference in Beijing, he explained that the Chinese view their domestic market so importantly as it can be used to energise home-grown companies to compete with the US tech giants. This is now the current direction of policy in Brussels.

But if the amount of data in the world is growing exponentially, industrial applications where Europe already leads are the next battleground and cloud processing is shifting to edge computing, why should Europe pull up the draw bridge? Optimists will preach that this is not about shutting Europe off from the rest of the world but simply creating its own data strategy as China and the USA continue to project their own ideas. This may be the case but no matter how the data strategy is implemented with the benefit of European AI in mind, Europe exists within a rule-based free market economy and there will be limits to mandating access to data that has been fairly collected and processed. Incentives will be required, privacy respected and intellectual property rights protected.

Europe has become a front runner in digital regulation rather than innovation itself. Views on whether this approach is correct varies across the continent. The General Data Protection Regulation (GDPR) is a prime chicken or egg case to test what came or should come first. The GDPR is a novel and detailed law that has certainly influenced other regions but was this at the detriment of home-grown innovation? This question will be answered by Europe when reviewed in May this year.

In fact, Europe’s inability to move faster has long been due to the same issues: a lack of holistic policy making, poor enforcement of existing rules, a fragmented single market, growing cases of cyberespionage, a digital skills gap and uneven distribution of high-quality digital infrastructure. This all leads to a risk adverse attitude in financing that doesn’t accept, unlike the USA, that failure is often the first step towards success. That is why, through yesterday’s release, it has never been more important for Europe to invest in long-term policy making to catch up and truly make Europe fit for a digital age.

Vestager believes the Chinese have the data, the Americans have the money and Europeans have the purpose. Yet when AlphaGo defeated the world “Go” champion in 2016, demonstrating an ancient Asian board game enjoyed for generations could be beat by an American computer programme, Europe had little to no visible hand in the contest. While computers beating humans at board games is no ground-breaking feat surely Europe’s claims for purpose would be best demonstrated by moving from the artificial to reality?

Contact: Patrick Grant

Rebalancing EU-China relations is key for European industry

“The relationship between the EU and China must be stronger and fairer. European companies need the same access to the Chinese market as Chinese companies have to the European market”, said Luisa Santos, Deputy Director General at BusinessEurope, during the General Assembly of Industry4Europe on 14 February. She pointed out that there are many ways of rebalancing this relationship at different levels - multilateral, plurilateral, bilateral and unilateral. “A single action will not be enough and that is why BusinessEurope is proposing a comprehensive strategy that includes more than 130 recommendations that should be implemented simultaneously”, Santos stated. The systemic challenges resulting from China’s state-led capitalism are generating a new sense of urgency among European Industry that something must be done to restore the level playing field. That is why BusinessEurope believes the EU needs to act now in pursuing four key objectives in its relationship with China: (1) secure a level playing field, (2) mitigate the impact of government-induced market distortions, (3) reinforce the EU’s competitiveness for instance by implementing an Industrial Strategy and by (4) ensuring fair competition and cooperation in third markets.

Contact: Maurice Fermont

Regulation on digital: what EU needs to become global leader

On the day of release of the European Commission’s digital package, the College of Europe organised the conference “Democracy and Human Rights in the Digital Age” on 18-19 February. Academia, policy makers and stakeholders exchanged views on major trends that change our societies and how digital affects law-making. BusinessEurope participated in the panel “From Ethics Codes to Regulation: a Renaissance of the Law?”. Martynas Barysas, Director for Internal Market, talked about the context of the global race for digital supremacy and pointed out that Europe is facing a choice: to get the balance between open innovation and societal protection correct or to buy superior artificial intelligence (AI) solutions from 3rd countries for a great number of sectors to achieve our ambitions. Answering a question whether Europe can become the global leader through regulation on digital, he said that it was not possible at all without innovation and investment friendly environment that allows businesses to thrive and society to be fit for the digital age. “Europe needs a framework allowing research and testing, offering top infrastructure and skilled labour, education systems need to adjust if we are to deliver all the benefits to our society”, Barysas said. AI application alone would add up to USD 15 trillion to the global economy by 2030, and the estimated gains in Europe (USD 2.5 trillion) are unfortunately smaller compared to our main competitors. “We need coherent and principles-based framework with good implementation if we are to become global leaders”, he added, stressing the need to ensure that any framework should be enforceable.

Contact: Martynas Barysas

Economic Outlook discussion with Gentiloni’s Cabinet representative

“The recently published review of economic governance by the European Commission provides the opportunity to better support the implementation of the growth-enhancing country-specific recommendations, as part of the European Semester’”– this was the key-message of BusinessEurope’s Economic and Monetary Affairs Committee (ECFIN) when it welcomed Jakob Friis, Deputy-Head of Cabinet of Economy Commissioner Paolo Gentiloni, to its meeting on 18 February. After a discussion with Friis on the current economic climate for 2020, and in particular the European Commission’s Economic Governance Review, the committee expressed their concern about the low implementation rate of structural reforms in EU Member States, as highlighted by our Reform Barometer. Some members also noted that the Economic Governance review can be an opportunity to improve the clarity of the Stability and Growth Pact (SGP) and in particular to simplify the fiscal rules and reduce their pro-cyclicality.

Contact: Pieter Baert

Does EU competition policy need reform?

The European Policy Centre (EPC) and BusinessEurope organised on 13 February a Policy Dialogue to discuss whether EU competition policy needs reform. The event brought together stakeholders, representatives of EU Member States and the European Commission. EU competition policy plays an essential role in Europe and globally and the fundamental objective of EU competition rules is to prevent distortion of competition. But the context in which European businesses operate is changing. Challenges now relate to the lack of a global level playing field, the emergence of the digital economy and the need to strengthen the EU’s competitiveness. Uncertainties and burdens when it comes to competition law-related procedures should also be looked at. Timing is important in fast moving markets to preserve competition and allow companies to remain competitive. An urgent reflection on possible adjustments to competition policy is therefore needed.

Contact: Pedro Oliveira

Europe’s strategic autonomy: the role of foreign direct investment screening

At a workshop organised jointly by the European Policy Centre (EPC) and the Konrad Adenauer Stiftung (KAS) on 18 February, Luisa Santos, Deputy Director General of BusinessEurope shared the perspective of EU business on the screening of foreign direct investment (FDI) and how it can contribute to Europe’s strategic autonomy. Over the past years, awareness has increased in Europe not only on the opportunities, but also the risks that certain FDI may have in terms of security. On the need for action at EU level, Santos highlighted it is important to find the right balance between, on the one hand, not overstepping the competences of the Member States in the field of national security while, on the other hand, allowing the establishment of a mechanism that enhances knowledge and cooperation in the EU. Regarding the implementation of the scheme, Santos noted: “We hope that the cooperation mechanism set up in the EU’s Regulation will work effectively and that all Member States – those that have FDI screening mechanisms in place as well as those that do not – share information. It is also essential that commercially sensitive information is adequately protected”. She added that the signalling that this Regulation gives to EU’s trading partners is clear. “Although this is not an instrument that closes our market for investments and should not be used in this manner, it shows that Europe is aware of risks and ready to take measures to mitigate them when necessary”, Santos pointed out.

Contact: Luisa Santos / Sofia Bournou

European businesses call for Unitary Patent system in force

BusinessEurope published its position paper on the Unitary Patent system on 18 February to recall the importance of such system for European industry and the expectations regarding the post-Brexit scenarios. Unitary Patents will make it possible to get patent protection in up to 26 EU Member States by submitting a single request to the European Patent Office (EPO). The Unified Patent Court (UPC) Agreement will provide a better framework for all parties involved in patent litigation in Europe as costs will be reduced and parties will not need to engage in parallel patent litigation in different Member States. In addition, diverging decisions from different national courts on infringement and validity of the same patent will cease as the UPC would develop a truly European case-law, thus enhancing legal certainty for all users. BusinessEurope calls Member States party to the UPC Agreement to complete swiftly all actions necessary for the entry into operation of the Unified Patent Court and the Unitary Patent, preferably including the United Kingdom, so that European users and society can finally fully benefit from the expected economic benefits arising from such system.

Contact: Elena Bertolotto

Photo copyright: EPO

EU and US industry discuss patent law harmonisation

BusinessEurope and its partners from the United States (Industry Trilateral) met in Arlington (Virginia, USA) from 10 to 12 February. The delegation included experts on intellectual property (IP) of European companies and Elena Bertolotto, BusinessEurope Legal Advisor. These meetings focused on continued discussions of the key issues being considered by the Industry Trilateral (Japan, US and European IP business representatives) in an attempt to reach industry consensus on a broad package of substantive legal matters (e.g. grace period, prior user rights, conflicting patent applications) towards harmonisation of patent laws. This harmonisation exercise would bring benefits in terms of legal certainty, simplification and cost reduction to the benefit of users of the global patent system.