Super Mario publishes EU “competitiveness” report

Mario Draghi’s report for the EU on “competitiveness” reform was published this morning. In one sentence, he concludes: “Europe must profoundly refocus its collective efforts on closing the innovation gap with the US and China, especially in advanced technologies.”

Innovation is the first of his three main themes. He mentions reducing EU regulation several times 🤨 but most of the report is focused much more on innovation funding, foreign subsidy regulation, the potential of AI, and some dodgy stuff on EU-level telecoms competition regulation (including forcing Very Large Online Platforms to contribute to the financing of infrastructure…) The second and third themes are decarbonisation and security.

Draghi makes a high-level recommendation about “streamlining” the acquis communautaire (body of EU law), with a dedicated commissioner, and more exemptions for mid-sized firms. But there is little mention of specific legislation, beyond a swipe at the “fragmentation” of national GDPR transposition (which civil society warned about while that legislation was being made) and its overlap with the Artificial Intelligence Act. UPDATE: Part B, published a few hours later, has more specifics. Particularly interesting are these comments on the Digital Markets Act (p.302):

Open access and interoperability are pro-competitive forces, as is the adoption of common technological standards. Important advances in promoting open access and interoperability in digital markets have been achieved through the DMA.

Expanding the benefits of open access and interoperability beyond the core platform services regulated by the DMA is possible, but requires either additional regulations or the introduction of incentives for businesses to adopt these choices.

A promising solution is to link State aid contributions and their review process by DG COMP to the enhancement of open access and interoperable solutions, and to the development of Europe-wide standards. This approach should not be limited to digital services, but could involve sectors such as energy, connectivity and transportation. For instance, State aid toward vehicle charging infrastructure might be considered a determinant positive factor if interoperability standards were made mandatory for those receiving aid. An example in this direction are the guidelines and practice on open access to state-aided broadband networks. Furthermore, as discussed in the chapter on defence, interoperability and standardisation are essential in that area too.

In digital markets, in addition to the strong enforcement of the DMA provisions, new requirements involving open access and interoperability should be enacted when the presence of strong network effects and barriers to entry related to data impede market competition. The New Competition Tool [see point 9 below] can be used to identify the markets in need of these types of interventions06. As stressed in the ‘Joint statement on competition in generative AI foundation models and AI products’ of July 2024, AI products and services and their inputs have greater potential to benefit societies if they are developed to interoperate with each other and, accordingly, any claims that interoperability requires sacrifices to privacy and security must be carefully assessed against the potential benefits of interoperability. Finally, it is worth emphasising that sector-specific recommendations on common standards are presented in the chapter on digitalisation and advanced technology sectors regarding the need for coordination of standards both across telecom operators and within specific services, such as broadband.

These provisions will foster a Single Market in services that is crucial both to enhance competition and to make it easier to achieve scale when that is crucial for innovation.

One point I need to think more about: he wants “sovereign” encrypted EU clouds for sensitive data, but for everything else a transatlantic market, accessible to small firms. He doesn’t say so, but I imagine that would come with adequacy-determining action by the EU at a level that perhaps even the Court of Justice could not overturn.

Finally, the “competitiveness” perspective has been seriously criticised by civil society. Balanced Economy Project’s Nick Shaxson tweeted this morning: “Unfortunately, ‘competitiveness’  is a dangerous and confusing frame: easily weaponised by vested interests to push narrow agendas against the public interest.”

Here are some interesting quotes I noted reading the 65pp body of the main report, “Part A”.

“The EU’s competitive disadvantage will likely widen in cloud computing…[but] it is important that EU companies maintain a foothold in areas where technological sovereignty is required” (p.20)

“there are already clear signs that #AI will revolutionise several industries in which Europe specialises and will be crucial for EU companies ’ ability to remain leaders in their sector.” Pharma, transport, energy, auto (p.21)

‘researchers in Europe are less well integrated into innovation “clusters” – networks of universities, start-ups, large companies and venture capitalists (VCs) – which account for a large share of successful commercialisations in high-tech sectors’ (p.25)

“The EU has an important programme for R&I – Horizon Europe – with a budget of close to EUR 100 billion. But it is spread across too many fields and access is excessively complex and bureaucratic. It is also insufficiently focused on disruptive innovation.” (p.25)

AI “model training should be fed with data freely contributed by multiple EU companies within a certain sector. It should be supported within open-source frameworks, safeguarded from antitrust enforcement by competition authorities.” (p.30)

Telecom markets should be defined at EU level; “Country-level ex ante regulation should be reduced in favour of ex post competition enforcement in cases of abuse of dominant position.” (p.31)

“an EU-level body with public-private participation to develop homogenous technical standards for the deployment of network APIs and edge computing” (p.31)

“commercial investment sharing between network owners and Very Large Online Platforms that use EU data networks to a massive extent but do not contribute to financing them.” (p.31)

“To start lowering the “stock” of regulation, the report recommends appointing a new Commission Vice President for Simplification to streamline the acquis, while adopting a single, clear methodology to quantify the cost of the new regulatory “flow”.’ (p.65)

“EU companies face an extra burden due to national transposition… GDPR in particular has been implemented with a large degree of fragmentation which undermines the EU’s digital goals” (p.61) CIvil society warned the latter would happen w/ so many options for the Member States!