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1. Cybersecurity at Risk: How the EU’s Digital Markets Act Could Undermine Security across Mobile Operating Systems

Author:
Matthias Bauer and Dyuti Pandya
Publication Date:
02-2025
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The EU’s fight against cybersecurity threats risks being undermined by the over-enforcement of the Digital Markets Act (DMA). Article 5(4) could force mobile operating system providers to allow unregulated external links, bypassing critical security controls and exposing millions of smartphone users to cyber threats. The DMA focuses on market structure, overlooking how differences in operating system design affect security vulnerabilities. A one-size-fits-all approach ignores platform-specific security needs, leaving European users exposed to cyber threats. This risks undermining the EU’s economic security agenda, including initiatives like the Cybersecurity Strategy, Cyber Resilience Act, and NIS2 Directive, which aim to strengthen digital defences. The unintended consequences of this regulatory approach are already evident in Apple’s recent decisions to withhold certain features – such as advanced AI functionalities and enhanced app security tools – from the EU market due to DMA-related concerns. As a result, EU consumers face reduced access to innovative technologies, diminished user experiences, and weaker security protections compared to users in other regions. Now, Android, a widely used open-source system, may also be compromised by DMA enforcement, potentially limiting its flexibility, security, and the broader ecosystem of app developers and device manufacturers that rely on its open architecture.
Topic:
European Union, Cybersecurity, Digital Economy, and Digital Markets Act (DMA)
Political Geography:
Europe

2. Boosting Efficiency and Quality in EU Public Services: The Need for a European Multi-Cloud-First Strategy

Author:
Matthias Bauer, Andrea Dugo, Dyuti Pandya, Vanika Sharma, and Elena Sito
Publication Date:
03-2025
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
EU governments have an unprecedented opportunity to unlock up to EUR 450 billion in annual fiscal savings by modernising public services through advanced multi-cloud solutions, cloud-based AI, and other deep tech innovations. As estimated in this study, this figure highlights the transformative impact of digitised government services – not only in improving service quality and operational efficiency but also in generating substantial fiscal gains that would enhance Europe’s economic competitiveness. Multi-cloud adoption is not merely an infrastructure choice but a strategic enabler of modern, agile, and citizen-focused public services. To fully capitalise on cloud adoption, EU governments should embrace a multi-cloud strategy that integrates different public cloud providers and, where necessary, also incorporates sovereign or private cloud environments. Cloud services come in many forms, including Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS). Each model offers unique value propositions such as ease of use, rapid security updates, scalability, and the capacity to integrate novel technological features, such as AI applications, seamlessly.
Topic:
European Union, Digital Economy, and Cloud Computing
Political Geography:
Europe

3. Openness as Strength: The Win-Win in EU-US Digital Services Trade

Author:
Matthias Bauer, Dyuti Pandya, and Oscar du Roy
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The discourse surrounding the EU’s supposed over-reliance on digital services imports from non-EU countries, particularly the US, has been a recurrent topic among some political circles. However, this viewpoint tends to oversimplify and misrepresent the nuanced and complex reality of the EU’s status within the global Information and Communication Technology (ICT) sector and digitally enabled trade. A thorough analysis of trade data and trends clearly illustrates that the EU’s engagement with foreign (non-EU) digital services, notably from the US, represents a strategic economic advantage, bolstering Europe’s competitiveness and fostering productivity growth. Below we underline the critical importance of openness to foreign innovation and technology diffusion for the EU’s economic future.
Topic:
European Union, Digital Economy, Strategic Competition, Imports, and Productivity
Political Geography:
Europe, North America, and United States of America

4. ICT Beyond Borders: The Integral Role of US Tech in Europe’s Digital Economy

Author:
Matthias Bauer and Dyuti Pandya
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Contrary to political assertions about the vulnerability of digital services provided by non-EU companies, the strong presence and sunk costs associated with US tech companies’ investments in data centres, skilled workforce development, and research facilities in Europe act as significant barriers to exit, highlighting the inherent symbiosis between US tech investments and Europe’s digital and non-digital sectors. These investments underscore a mutual inter-dependency that strengthens European economies, making the notion of “sudden cessation” of digital services by US companies implausible. Corporate data show a significant investment gap of approximately USD 1.36 trillion between US and EU ICT companies, attributing a competitive edge to US firms due to their heavy investment in ICT, cloud solutions, and R&D. Forecasted increases in ICT investments by US corporations outline a benchmark beyond reach for EU businesses. The notion of EU firms aligning with this growth path is rather fantastical, as it would call for immense government investment, ultimately draining financial resources from essential public services, such as healthcare, housing, and environmental policies. Substantial ICT investments across EU Member States together with a long-term commitment to the European market present an opportunity for the EU to leverage US continuous technological advancements, underscoring the potential for transatlantic collaboration to drive the EU’s digital transformation and innovation. EU-US partnerships not only fuel the EU’s digital transformation but also align with shared political values, reinforcing the significance of transatlantic collaboration in shaping a competitive and innovative digital future.
Topic:
Communications, European Union, Digital Economy, Investment, and Information Technology
Political Geography:
Europe, North America, and United States of America

5. The EU’s Trillion Dollar Gap in ICT and Cloud Computing Capacities: The Case for a New Approach to Cloud Policy

Author:
Matthias Bauer, Fredrik Erixon, and Dyuti Pandya
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
An inward-looking EU approach to cloud computing and data policies risks stifling innovation and competitiveness by promoting domestic champions at the expense of accessing global cloud capabilities. Limiting market diversity and access to best-in-breed solutions could hinder digital transformation across sectors, raising costs and constraining growth opportunities. By contrast, a free trade approach to cloud offer guardrails and security but champions non-discriminatory cross-border and regulatory policies, yielding economic advantages by stimulating investments, fostering innovation, and enhancing competition. Unfortunately, some EU policymakers envision Europe building an independent ICT infrastructure, exemplified by initiatives like the European Alliance on Industrial Data, Edge and Cloud. This approach prioritises technological sovereignty, aiming not just to maintain European control over critical infrastructure and data but favouring localisation policies, including in AI and quantum computing. However, the approach is simply not going to work because the amount of resources that are needed for “pure-EU firms” to rise up as significant competitors to global leaders is so large that it would drain other sectors of investments and human capital. The investment gap between the EU and the US in ICT and cloud-related sectors, totalling some USD 1.36 trillion, presents a significant challenge for native European companies. To catch up by 2030, 2040, and 2050, European technology companies would need to substantially increase annual investments, ranging from approximately USD 157 billion to USD 1.2 trillion annually, representing 0.8 percent to 6.4 percent of the EU’s GDP. This would – hypothetically – require a significant commitment of resources. Despite recent efforts such as state aid for R&D in cloud and edge computing, the scale of investment needed far exceeds the current levels, underscoring the urgency for an open and non-discriminatory EU policy approach to bolster Europe’s position in the rapidly growing and technologically changing digital landscape. There are different components to a successful cloud policy, including policies to spur adoption and cross-border cloud integration in the EU, and more investment in R&D. EU policymakers should adopt a dynamic perspective rather than fixating on static market shares, and pursue policies that prioritise innovation and technological advancement over merely seeking to catch up on current technologies. The cloud market and the broader Internet market are going through rapid changes, leading to new services and new competition. A future-oriented approach to cloud policy advocates for policies that foster competition, drive technological progress, and enable interoperability, all of which align with the dynamic nature of cloud services and global markets.
Topic:
Communications, European Union, Digital Economy, Cloud Computing, and Information Technology
Political Geography:
Europe

6. Reinventing Europe’s Single Market: A Way Forward to Align Ideals and Action

Author:
Matthias Bauer, Dyuti Pandya, Vanika Sharma, and Elena Sisto
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
It is essential for EU institutions and Member State governments to shift their focus from the abstract concept of the “Single Market” to the concrete objective of “legal harmonisation in the EU.” This transition represents a strategic realignment towards more pragmatic policymaking. Adopting a 28th regime to address national regulation discrepancies would align with this goal and enhance the Single Market’s effectiveness in promoting economic growth and competitiveness. Given the EU’s ongoing loss of relative global economic clout, it is crucial to establish an ambitious timeline for implementing the most critical Single Market reforms. The Letta Report serves as a wake-up call to revitalise the EU’s Single Market, emphasising the need for decisive action. Its vision largely hinges on legal harmonisation within Europe, building on early efforts to liberalise markets and establish a truly integrated European market. Despite efforts, “integration fatigue” remains a significant challenge due to legal fragmentation across European economies. Previous reports, from the Cecchini Report in 1992 to the Europe 2020 Strategy, have highlighted persistent issues like regulatory divergences and declining political support for market integration. Despite numerous proposals, progress has been limited, and many challenges persist or have worsened (see Section 2). An analysis of EU reports reveals a shift in policy priorities over time. Initially, there was a strong focus on liberalisation and market opening, with less attention given to state aid and industrial policymaking. The Letta Report highlights the importance of regulatory convergence and harmonisation, reflecting a deeper understanding and recognition of the drivers of EU competitiveness. The rise of nationalism and a shift towards “Strategic Autonomy” within the EU have hindered crucial market reforms. This highlights the importance of aligning laws across Member States to strengthen and reinforce EU’s economic resilience and international competitiveness (see Section 3). EU institutions and Member State governments should set specific goals for “legal harmonisation in the EU.” This shift would address real challenges faced by businesses and citizens, and build political will for necessary reforms. Prioritising legal harmonisation would enhance internal cohesion and align national laws with Union-wide goals. An actionable roadmap – potentially with a 2028 deadline – is crucial to address the substantial gap between ambitious EU strategies and Europe’s economic realities. (see Section 4). Implementing sector-specific and horizontal policies in a new regulatory regime would improve cross-border operations and competitiveness. The Letta Report advocates for a European Code of Business Law to establish a unified regulatory framework, introducing a 28th legal regime to address national regulation discrepancies. Extending this regime to include tax and labour market policies would significantly enhance cross-border operations. The EU and Member State governments can eliminate substantial internal barriers by prioritising key horizontal policies affecting all businesses, such as fragmented tax laws, labour market policies, and social security systems. Simplifying and harmonising these policies on the basis of the facilitation of four freedoms is crucial for unlocking the Single Market’s potential for businesses and workers, boosting the EU’s global competitiveness. Allowing coalitions of willing countries to advance in certain areas of legal integration provides a viable solution to the long-standing Single Market “fatigue”. By enabling smaller groups of Member States to pursue integration in specific areas, the EU can bypass the constraints imposed by rigid voting requirements and achieve greater agility, accountability, and acceptance in EU law-making. This approach not only fosters flexibility but also upholds the fundamental principles and objectives of the EU. To ensure the integrity of the EU legal order and prevent unjustified barriers or discrimination against non-participating members, it is essential to establish safeguards and oversight mechanisms. These measures would maintain cohesion within the Union while allowing for progressive legal integration among willing Member States.
Topic:
Markets, European Union, Digital Economy, and Economic Integration
Political Geography:
Europe

7. Future-proofing the EU’s Investment Attractiveness: A Bold Reform Agenda for Competition Enforcement, Taxation and Digital Policy

Author:
Matthias Bauer, Dyuti Pandya, and Oscar du Roy
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Reducing the deterrent effects from EU and Member State laws in three key cross-sector policy areas – competition policy, business taxes and VAT, and digital policies – could significantly enhance the business environment within the Single Market and boost the EU’s attractiveness to both domestic and foreign investors. The EU’s future competitiveness is at risk due to a significant disparity in investments, particularly in technological innovation, compared to the US. Despite having a larger population and labour force, the EU lags behind in large business activities, with US firms consistently outspending their European counterparts in key tech-intensive sectors such as software, computer services, pharmaceuticals, and biotechnology. Moreover, China and other emerging nations are rapidly catching up, dramatically diminishing the EU’s relative economic and political influence on the global stage. The urgency for the EU to bridge these gaps is more critical than ever (Section 2). The EU’s profound investment gap highlights a systemic advantage for the US in fostering innovation and economic growth. The EU’s regulatory complexity, largely driven by legal fragmentation in horizontal policies, further exacerbate the situation, deterring cross-border activities reducing the region’s attractiveness to global investors (Section 3).
Topic:
Markets, Reform, European Union, Digital Economy, Investment, and Digital Policy
Political Geography:
Europe

8. Enhancing Technology Diffusion in the EU amid Tough Structural Challenges

Author:
Matthias Bauer, Elena Sisto, and Oscar du Roy
Publication Date:
09-2024
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
To remain globally competitive, the EU must empower firms to adopt the best technology solutions available on global markets. Building on a strong tradition of innovation, the EU relies on corporations across industries to drive the diffusion of technology through the commercialisation of technological innovations. Technology diffusion is crucial for embedding new technologies into society and is essential for sustaining industrial competitiveness. EU and Member State governments must prioritise enhancing the EU’s “diffusion capacity” – the ability to effectively spread and adopt innovations across Member States.
Topic:
Science and Technology, European Union, Digital Economy, and Services
Political Geography:
Europe

9. 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

10. Merger Policy, Competition and Innovation Leadership: Implications for the UK’s Investment Attractiveness

Author:
Matthias Bauer, Oscar du Roy, and Vanika Sharma
Publication Date:
10-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The UK’s competition regulator has adopted hard-sitting views in its assessment of transnational mergers and acquisitions. Since 2019, the Competition and Markets Authority (CMA) has blocked a historic 59% of all mergers that were under investigation, which is double compared to the previous five years. With increased competence to set conduct requirements for large technology companies, aggressive enforcement by the CMA risks undermining Britain’s ambitions to become a leader in global trade, technology, and innovation.[1] Acquisitions in the technology sector have increasingly been scrutinised by competition authorities over the past decade, often based on the hypothesis that transactions involving large multinational companies tend to be anti-competitive. Authorities’ concerns are based on theories about post-acquisition market structures and the impacts of “killer acquisitions”. While their theories lack empirical justification, competition authorities have increasingly quoted them to assess cases through an ideological lens. Indeed, investigations into acquisitions show that competition authorities can come to markedly distinct conclusions when assessing the impacts on competition over time, especially in technology-intensive industries. The premise that acquisitions of small rivals by large tech companies inherently result in decreased competition lacks solid empirical evidence. Competition authorities often fail to adequately consider efficiency criteria and the resultant benefits for consumers. The proposed acquisition of Activision Blizzard, a video game maker, by Microsoft is a case in point. The UK CMA had initially found that the acquisition would reduce competition in gaming markets. EU and US competition regulators, by contrast, have cleared the transaction, highlighting the uncertain nature of merger review results for international transactions. Large multinational technology companies are major sources of innovation and productivity growth. The services they provide are increasingly pervasive across developed market economies, promising large productivity gains. Small, medium, and young companies in high-tech sectors are also important sources of innovation and productivity growth and, therefore, major targets for investment. Ideologically charged competition enforcement would have a negative impact on the UK’s investment attractiveness. The prospect of an innovative and commercially successful company being taken over by another company is an important precondition for investors to make early-stage and continued seed capital investments. Acquisitions also play an important role in driving investments in business growth and internationalisation. By contrast, there is no hard evidence to support the presumption that acquisitions by major tech companies result in decreased competition. A continuation of aggressive merger enforcement by the UK CMA would undermine investments in innovation-driven UK businesses and reduce access to funding for British venture capital-backed start-ups.
Topic:
Digital Economy, Leadership, Investment, Innovation, and Economic Competition
Political Geography:
United Kingdom and Europe