Abstract:
To boost the European Union's digital economy, the European Commission is seeking to reduce the burden of its digital rulebook. However, the Commission's deregulatory strategy lacks a rigorous, evidence-based analysis of the expected effects entailed by proposed burden reductions, is insufficiently transparent and accountable in relation to potential distributive trade-offs, and is overly focused on a narrow geopolitical goal of 'catching up' with the United States, which may neglect Europe's distinct social and institutional priorities. This paper introduces a framework to analyse these issues. It distinguishes between efficiency effects that enhance total societal value, and distributive effects which determine how value is shared within society. The framework explains how total factor productivity (a proxy for competitiveness) may have a complementary and a substitutive relationship with digital regulatory protection. The Commission's deregulatory initiatives may entail both efficiency and distributive effects, but that the Commission typically only acknowledges the former. This misrepresentation leads to unrealistic goals, such as EU companies matching the same level of data use as US companies without compromising European privacy standards. Digital regulation can be designed to generate value and can distribute that value in accordance with the goals the Commission intends to pursue. A distinction should be introduced between 'mitigating' distributive effects, in which the proposed initiatives shift the distribution of value among players without fundamentally altering business models, and 'steering' distributive effects, in which proposed initiatives may encourage the development of alternative approaches to technological development. In pursuing a deregulatory strategy, the Commission should be more transparent about its aims. The Commission should ground reforms in robust impact analysis, without a preconceived goal in terms of the desired amount of reduction in regulatory burden. It should also clearly identify the end goals while detailing potential trade-offs between them, and adopt measurable indicators for efficiency, mitigating distributive effects and steering distributive effects, in order to assess the potential effectiveness of its initiatives and to understand their actual impacts.
