India-EU trade mustn’t stumble on digital sovereignty
Last week, the European Union (EU) witnessed a surge in digital policy activity that could impact trade ties with India. On 17 February, the Digital Services Act (DSA), which mandates increased safety compliance for online platforms, took effect. Also, on 21 February, the EU brought out a white-paper on ‘How to master Europe’s digital infrastructure needs’ advocating economic protection for its communication industry.
Meanwhile, digital trade is a key part of the India-EU Free Trade Agreement (FTA), which saw its seventh round of negotiations conclude last week. The EU’s policy agenda centres on the concept of ‘digital sovereignty,’ or the desire to enforce its legal authority in cyberspace. This push for more regulatory levers, however, seems at odds with efforts to accelerate digital trade.
For instance, the DSA requires online businesses that target EU customers to adhere to new obligations such as transparency mandates linked to algorithmic decision-making, and requires them to navigate a complex maze between national regulators and the European Commission. Many Indian internet companies will struggle to comply and may simply walk away from EU markets unless they have significant business interests at stake. Similarly, the white-paper on EU communication infrastructure advocates more regulation of cloud and other digital services on the premise that exercising sovereignty through heavy-handed licensing is the only way for the EU to compete with foreign players.
This approach echoes its ‘2030 Digital Compass’ strategy which aims to reduce dependence on US and Chinese tech through regulation. Despite this regulatory zeal, only four European firms rank among the top 25 digital companies globally. The EU’s attempt to
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