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1. Building Resilience? The Cybersecurity, Economic & Trade Impacts of Cloud Immunity Requirements

Author:
Matthias Bauer
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
EU Member States should call on the EU’s Cybersecurity Agency (ENISA) and the European Commission to abandon immunity requirements in the proposed EU Cloud Certification Scheme (EUCS). With immunity requirements in the EUCS, the EU risks opening a Pandora’s box, paving the way for data localisation, foreign ownership restrictions, and local establishment requirements in digital industries globally leading to rising trade tensions. ENISA’s current proposal could increase policymakers’ appetite for data localisation in the EU. It would empower the European Commission and Member State authorities to exclude foreign businesses from domestic cloud services markets and set a dangerous precedent for any data-intensive sector. The list of “sectors of high criticality” could be logically extended to both existing services (e.g., financial services) and to new technologies and business models, such as IoT in the energy and healthcare sectors, and autonomous driving in the transport sector. Non-EU jurisdictions would be pressured to respond in kind. EUCS immunity requirements would increase cloud adopters’ exposure to cybersecurity risks. Data localisation often creates obstacles to an integrated management approach towards cybersecurity risks. Country of headquarter and foreign ownership restrictions in the proposed EUCS risk removing global frontier cybersecurity technologies from Member State markets. Excluding these and other EU and non-EU companies from EU Member States could result in a long-lasting security deficit of EU cloud adopters vis-à-vis organisations that are still able to use reliable and often best-practice cloud services offered by providers from outside EU Member States. Immunity requirements in the EUCS are discriminatory by design. They could provoke retaliatory measures by EU trading partners, either unilaterally or through WTO or bilateral FTA (e.g., UK-EU) Dispute Settlement. Local establishment requirements and foreign ownership restrictions would by design discriminate against foreign cloud providers. US-headquartered companies, which currently serve more than 75% of the EU market, would be most affected by EU immunity requirements.[1] Depending on US preferences and the scope of the proposed EUCS, the EU could be subject to retaliatory tariffs of up to USD 12 billion worth of EU goods exports or equivalent restrictions for EU services exports to the US. Other governments could lodge complaints via the WTO as well (e.g., Singapore, Japan, Canada and others, where cloud development is advancing rapidly). EU suppliers are currently in no position to manage a broad-based transition to cloud, and thus such requirements would delay significant efficiency and security gains that current foreign suppliers could offer. A blanket exclusion of non-EU cloud vendors would also likely undermine Europe’s objective to achieve a 75% cloud adoption rate for EU enterprises. Sensitive European businesses and public sector organisations would have to delay migration and make do with legacy systems for a very long time. Contrary to large countries, these negative impacts would be much more pronounced for smaller EU Member States, which lack the presence of large domestic incumbents and generally rely much more on an open international trading regime for digital services. ENISA’s cloud certification scheme should be limited to technical and transparency requirements. Immunity requirements for non-personal data should be addressed in bilateral initiatives such as the EU-US Trade and Technology Council (TTC) or agreements requiring a company that sought to offer services of the highest level of sensitivity to be headquartered in a country granted adequacy with EU data protection rules, or a country that is an adherent to the OECD’s Trusted Government Access principles, or (concerning the US) a participant in the upcoming Trans-Atlantic Data Privacy Framework. Excluding foreign companies from operating in the EU would have far-reaching consequences. If that is the intent, it should require a sound legal analysis and the decision should be taken through a formal legislative procedure at the EU level.
Topic:
Economics, Markets, European Union, Cybersecurity, Digital Economy, Trade, and Resilience
Political Geography:
Europe

2. The Economic Dividend of Competitiveness

Author:
Fredrik Erixon, Oscar Guinea, Philipp Lamprecht, Elena Sisto, and Erik van der Marel
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
In a world of technological and economic rivalry, the EU must devote increased attention to its competitiveness. Higher levels of competitiveness will help the EU build a more prosperous economy which will in turn produce innovation and resources to address the great challenges of our time. ECIPE published a study presenting a competitiveness compass with concrete policy recommendations that will improve EU’s competitiveness. These policy recommendations, once implemented, will bring tangible benefits to the EU economy in the form of higher levels of trade and productivity. This report presents five scenarios in which the EU pursues competitiveness policies that lead to higher economic growth.
Topic:
Economics, Science and Technology, European Union, Economic Growth, and Competition
Political Geography:
Europe

3. Building a Mature UK Trade Policy

Author:
David Henig
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Global Britain has not delivered according to the hopes expressed by supporters of leaving the EU. Trade with the rest of the world has not grown to make up for leaving a bloc with seamless trade, early Free Trade Agreements with Australia and New Zealand are of minor economic significance, and it is hard to discern much of a strategy beyond completing a few more similar deals. Meanwhile the world of trade policy is transformed since 2016, negatively. The US has essentially declared its national interests to be more important than global rules, while the EU wants to act unilaterally as the global regulator. In both, the climate crisis is being used as an excuse to reintroduce protectionist measures threatening economic damage and global stability. Expectations of what a UK outside of the EU could achieve were exaggerated, but nonetheless the country could be doing a lot better in its trade policy. There is no good reason for such tensions as exist with a broad range of frustrated stakeholders, the absence of clear purpose on UK strengths such as services, or the defensiveness that seemingly takes pride in secrecy and resistance to proper scrutiny. Adjustment time was inevitable, but six years should have been enough.
Topic:
Economics, European Union, Free Trade, and Trade Policy
Political Geography:
United Kingdom and Europe

4. Increasing Systemic Legal Risks in the EU: The Economic Impacts of Changes to the EU’s Product Liability Legislation

Author:
Matthias Bauer and Elena Sisto
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The EU’s Product Liability Directive (PLD) determines the rules for strict product liability in the EU. It establishes a framework in which manufacturers’ liability is determined solely based on the presence of defects in the product, regardless of the manufacturer’s fault. The PLD is intended to serve as a “safety net” when fault-based or contractual liability rules do not offer sufficient compensation to consumers. It operates independently from contractual arrangements between businesses and consumers, and it cannot be weakened by contractual agreements between businesses and consumers. The PLD is a horizontal regulation that applies to a wide range of industries in the EU because it applies to all products available on the EU market. The recently proposed changes by the European Commission would increase systemic legal uncertainty for producers and sellers of technology-intensive goods and services in the EU. The impact assessment of the European Commission does not sufficiently account for changes to the PLD proposed in 2022. Nor does it sufficiently account for the major impacts of increased legal uncertainty for European businesses. Legislators in the Council and the European Parliament should slow negotiations to allow time for policymakers to collect more evidence on the impacts on businesses, insurers, and courts we detail in this paper. This would be an opportunity to improve regulatory quality in light of the high levels of legal uncertainty associated with the changes proposed by the Commission.
Topic:
Economics, European Union, Legislation, and Risk
Political Geography:
Europe