# IMMC.EESC-2023-00254-AC.ENG.xhtml.EESC-2023-00254-00-00-AC-TRA-EN.docx

| OPINION |
| --- |
| European Economic and Social Committee |
| Enhancing digital competitiveness |
| _____________ |
| Further enhancing the EU's digital competitiveness

  (exploratory opinion) |
| |
| INT/1010 |
| |
| Rapporteur: Gonçalo LOBO XAVIER |
| Co-rapporteur: Philip VON BROCKDORFF |

OPINION

European Economic and Social Committee

Enhancing digital competitiveness

_____________

Further enhancing the EU's digital competitiveness

  (exploratory opinion)

INT/1010

Rapporteur: Gonçalo LOBO XAVIER

Co-rapporteur: Philip VON BROCKDORFF

EN

Referral

| Referral | Presidency of the European Council, 14/11/2022 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Single Market, Production and Consumption |
| Adopted in section | 04/04/2023 |
| Adopted at plenary | 27/04/2023 |
| Plenary session No | 578 |
| Outcome of vote
  (for/against/abstentions) | 145/0/0 |

Referral

Presidency of the European Council, 14/11/2022

Presidency of the European Council, 14/11/2022

Legal basis

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Section responsible

Single Market, Production and Consumption

Single Market, Production and Consumption

Adopted in section

Adopted in section

04/04/2023

04/04/2023

Adopted at plenary

Adopted at plenary

27/04/2023

27/04/2023

Plenary session No

Plenary session No

578

578

Outcome of vote
  (for/against/abstentions)

Outcome of vote
  (for/against/abstentions)

145/0/0

145/0/0

1.Conclusions and recommendations

1.

Conclusions and recommendations

1.1For the European Economic and Social Committee (EESC), there is no doubt that digital competitiveness is vital for the overall competitiveness of the EU and should be seen as an essential part of the EU's competitiveness agenda as highlighted in previous EESC reports. Considerable improvements in competitiveness are needed for the EU to succeed in the global competitive environment. To this end, the EESC has called for the introduction of a competitiveness check that conforms with EU policies and objectives to be embedded in the EU's policy- and law-making processes. It should include a comprehensive assessment of the impacts of any new initiatives on competitiveness and ensure that competitiveness aspects are properly considered in decision-making. The EESC believes that with this perspective and with clear messages it would be easier to involve citizens and motivate them to achieve the overall goals.

1.1

For the European Economic and Social Committee (EESC), there is no doubt that digital competitiveness is vital for the overall competitiveness of the EU and should be seen as an essential part of the EU's competitiveness agenda as highlighted in previous EESC reports. Considerable improvements in competitiveness are needed for the EU to succeed in the global competitive environment. To this end, the EESC has called for the introduction of a competitiveness check that conforms with EU policies and objectives to be embedded in the EU's policy- and law-making processes. It should include a comprehensive assessment of the impacts of any new initiatives on competitiveness and ensure that competitiveness aspects are properly considered in decision-making. The EESC believes that with this perspective and with clear messages it would be easier to involve citizens and motivate them to achieve the overall goals.

1.2The EESC supports the position that the EU needs to provide a favourable business environment, based on a comprehensive strategy that brings together and aligns different policy areas, with competitiveness, the social dimension and impact of business on citizens' welfare being at the forefront. For the EESC, the aim should be to boost digital-driven competitiveness by improving the conditions, on the one hand, for the development and supply of digital solutions by EU enterprises, and, on the other hand, for the adoption and use of digital solutions across the wide variety of EU businesses, including sectors such as manufacturing, transport and logistics, retail, agriculture and construction, just to mention the more relevant ones.

1.2

The EESC supports the position that the EU needs to provide a favourable business environment, based on a comprehensive strategy that brings together and aligns different policy areas, with competitiveness, the social dimension and impact of business on citizens' welfare being at the forefront. For the EESC, the aim should be to boost digital-driven competitiveness by improving the conditions, on the one hand, for the development and supply of digital solutions by EU enterprises, and, on the other hand, for the adoption and use of digital solutions across the wide variety of EU businesses, including sectors such as manufacturing, transport and logistics, retail, agriculture and construction, just to mention the more relevant ones.

1.3European citizens must be involved in the digital competitiveness strategy and must feel reassured when it comes to one of the most relevant topics regarding digital and data collection: cybersecurity. The EESC is of the view that the EU needs to promote a European data economy by enhancing the availability, accessibility and transfer of data, accompanied by appropriate data protection. To this end, the EU needs a more strategic approach to enable stakeholders to gather, store, pool, share and analyse data securely. It is crucial to accelerate initiatives towards sector-specific cross-European data spaces to enable better analysis and use of data for the benefit of European society, the EU and the competitiveness of its businesses. The data spaces could seed and boost new scalable industrial innovators and start-ups. A well-functioning single market of data is also crucial because it is intrinsically linked to the single market of goods, services, capital and people, as well as to energy and transport systems.

1.3

European citizens must be involved in the digital competitiveness strategy and must feel reassured when it comes to one of the most relevant topics regarding digital and data collection: cybersecurity. The EESC is of the view that the EU needs to promote a European data economy by enhancing the availability, accessibility and transfer of data, accompanied by appropriate data protection. To this end, the EU needs a more strategic approach to enable stakeholders to gather, store, pool, share and analyse data securely. It is crucial to accelerate initiatives towards sector-specific cross-European data spaces to enable better analysis and use of data for the benefit of European society, the EU and the competitiveness of its businesses. The data spaces could seed and boost new scalable industrial innovators and start-ups. A well-functioning single market of data is also crucial because it is intrinsically linked to the single market of goods, services, capital and people, as well as to energy and transport systems.

1.4For the EESC, investment in a comprehensive, effective and secure digital infrastructure is a necessary foundation for any digital development. That can be clearly seen in other geographic areas that are leading in some fields on a global scale. Besides digital networks, data centres, computing capacity etc., this must also cover access to low-carbon energy and the critical raw materials needed in digital products and systems.

1.4

For the EESC, investment in a comprehensive, effective and secure digital infrastructure is a necessary foundation for any digital development. That can be clearly seen in other geographic areas that are leading in some fields on a global scale. Besides digital networks, data centres, computing capacity etc., this must also cover access to low-carbon energy and the critical raw materials needed in digital products and systems.

1.5For the EU to take the lead in critical areas such as cybersecurity, it thus needs to promote and support cybersecurity on the one hand and boost the competitiveness of its businesses on the other. In this regard, the EESC considers that EU certification needs to remain market-led and based on existing international standards. The EU should raise security levels by "Europeanising" existing national certification schemes to ensure a harmonised market among the Member States, before drafting new candidate schemes under the Cybersecurity Act (CSA). The EU must also guarantee a coherent and harmonised legislative framework at EU level and avoid inconsistencies in EU legislation, e.g. risks of non-aligned requirements with cyber provisions included in vertical legislation in the New Legislative Framework (NLF).

1.5

For the EU to take the lead in critical areas such as cybersecurity, it thus needs to promote and support cybersecurity on the one hand and boost the competitiveness of its businesses on the other. In this regard, the EESC considers that EU certification needs to remain market-led and based on existing international standards. The EU should raise security levels by "Europeanising" existing national certification schemes to ensure a harmonised market among the Member States, before drafting new candidate schemes under the Cybersecurity Act (CSA). The EU must also guarantee a coherent and harmonised legislative framework at EU level and avoid inconsistencies in EU legislation, e.g. risks of non-aligned requirements with cyber provisions included in vertical legislation in the New Legislative Framework (NLF).

1.6For the EESC, it is clear that excellence in key technologies requires a significant increase in both public and private investment in research and innovation, the development of world-class RDI infrastructures, the attraction of talent, and the creation of ecosystems based on cooperation between businesses, universities and research institutions. While it is important to enhance the uptake of AI, quantum and other advanced technologies, it must also be recognised that many SMEs face big challenges in adopting even basic digital technologies. The EU and Member States should focus specific efforts on supporting and facilitating the digitalisation of SMEs. This will involve engaging SMEs in innovation hubs, data spaces and business ecosystems. It is also necessary to raise SMEs' awareness of the opportunities provided by digitalisation, the support available for skills development, and the technical expertise and guidance available on the regulation in this area.

1.6

For the EESC, it is clear that excellence in key technologies requires a significant increase in both public and private investment in research and innovation, the development of world-class RDI infrastructures, the attraction of talent, and the creation of ecosystems based on cooperation between businesses, universities and research institutions. While it is important to enhance the uptake of AI, quantum and other advanced technologies, it must also be recognised that many SMEs face big challenges in adopting even basic digital technologies. The EU and Member States should focus specific efforts on supporting and facilitating the digitalisation of SMEs. This will involve engaging SMEs in innovation hubs, data spaces and business ecosystems. It is also necessary to raise SMEs' awareness of the opportunities provided by digitalisation, the support available for skills development, and the technical expertise and guidance available on the regulation in this area.

1.7Once again here, the EESC maintains that people are one of the most important European assets that can change the pace of economic and social development. It is necessary for the Member States to invest decisively in education and training systems, including life-long learning, in order to respond to the current and future needs of both the development and application of digital tools and solutions. The EU must also encourage and facilitate the cross-border mobility of labour and talent, both within the EU and in cooperation with third countries. The EESC also maintains that the "golden years" section of the population must be involved and engaged in this process.

1.7

Once again here, the EESC maintains that people are one of the most important European assets that can change the pace of economic and social development. It is necessary for the Member States to invest decisively in education and training systems, including life-long learning, in order to respond to the current and future needs of both the development and application of digital tools and solutions. The EU must also encourage and facilitate the cross-border mobility of labour and talent, both within the EU and in cooperation with third countries. The EESC also maintains that the "golden years" section of the population must be involved and engaged in this process.

1.8To make the regulatory framework contribute to digital competitiveness, the EU must ensure that regulations are fit for purpose, encourage innovation and investment, and provide equal conditions and treatment in the single market. The EU also needs to cooperate with like-minded countries to enhance common international rules and standards. While maintaining high standards, any regulations must be conducive to the successful digitalisation and competitiveness of businesses. The public sector also needs to digitalise its own operations and services, including administrative processes. Speeding up the permit procedures for investments and other business operations is an example of urgent needs where digitalisation would be part of the solution.

1.9The EESC supports the idea that access to finance, whether venture capital, public funding or any other source of financing, is another prerequisite for a successful and efficient digital transformation. Regarding the Multiannual Financial Framework, the funding for the Digital Europe programme should be increased to strengthen, for example, the role, visibility and accessibility of Digital Innovation Hubs. This is well justified, given that digital companies grow on average two and a half times faster than non-digital ones. Evidently, the EESC is not calling for a separate investment line for "digital transformation": the EESC is calling for a combined and reasonable strategy regarding the funding process for digitalisation to create suitable conditions for all stakeholders involved in the innovation ecosystem.

1.10As in many different areas of the economy and society (industrial strategy, health systems, retail, etc.), the EESC calls for a smart and combined strategy regarding skills. Many sectors are already preparing large-scale projects regarding the reskilling and upskilling of their workforce based on digitalisation and the green transition. The EESC calls for a coordinated programme for skills that can allow the existing and new workforce to surpass the challenges involved. Member States should allocate enough resources to address this challenge and this must be an immediate priority, especially to support SMEs that are still struggling with difficulties related to the COVID-19 crisis and the war in Ukraine.

1.11The EESC believes that ambitious and challenging key performance indicators are fundamental here to boost and measure the EU's digital competitiveness. The current indicators (based on the Digital Economy and Society Index, DESI) and the targets set in the context of the Digital Compass should be assessed and complemented from the point of view of digital competitiveness, to monitor not only the enablers but also the benefits of digital development such as new digital products and their share in the markets, more efficient production processes and the accompanying impact on productivity, and the deployment of digital solutions to societal challenges (e.g. health and climate). The monitoring of the indicators needs to address the progress over time in the EU and its Member States and involve comparison with international competitors. Motivation of citizens through better communication and their involvement in the process is also important.

2.Background

2.1This opinion is a response to the request from the Swedish presidency of the Council for an EESC exploratory opinion in the area of EU competitiveness as a follow-up to opinion (INT/1000)
  1
  on a Competitiveness Check adopted at the request of the Czech presidency. The Swedish presidency of the Council asked the EESC to explore the topic of What is needed for the EU to further enhance its digital competitiveness, and in particular to enable businesses to benefit from digitalisation. This opinion will attempt to put the focus on the EU's competitiveness in the context of the digital transition towards a more sustainable economic growth model. It will address the measures and policies that are necessary to further enhance the EU's digital competitiveness, and in particular to enable businesses and workers to benefit from the process of digitalisation.

2.2It is important to recall that in INT/1000, the EESC recognised that the single market and the EU's social market economic growth model have greatly contributed towards supporting economic growth and social wellbeing across the EU. That basis is important in any proposals aimed at enhancing digital competitiveness and in this particular case it will be no different.

2.3It is also important to realise that Europe's competitiveness as compared with its main competitor nations has deteriorated over the past years as evidenced in key economic indicators on competitiveness and productivity growth. Digitalisation, however, is an area where the EU has made important inroads and could be the basis for increased competitiveness and increased profitability for businesses and improved working conditions for workers. A forward-looking medium-term perspective is needed to chart the way forward in the process towards the digital transition.

3.Digitalisation in the context of the competitiveness agenda

3.1The EESC has called on the Commission to make the competitiveness agenda one of its priorities with the principal goal of enhancing the EU's competitiveness. The Commission initiatives in the area of digitalisation are all aimed at facilitating the digital transition in economies and societies across the EU. A successful transition, however, requires a firm and unrelenting commitment on the part of the Member States. This commitment is already expressed in Recovery and Resilience measures at individual Member State level but the EESC believes that the Member States may not all be moving towards digitalisation at the same pace and with the same intensity, which is crucial if the EU is to become more competitive.

3.2The EU must rely more than ever on the Single Market, but just as importantly, should focus on access to foreign markets; investment and access to funding; tax systems; research and innovation; skills and strengthening of the labour market; as well as MSMEs and the twin transitions, also taking into account the sustainable finance framework with competitiveness being consistent with social and environmental objectives
  2
  . The digital transition is key to all this since it provides the basis for innovation, increasing competitiveness, and developing the labour market, while at the same time providing opportunities for better working conditions in the context of a social market economy.

3.3The EESC believes that digitalisation is the driver towards making the Single Market reach its potential. After 30 years of social and economic benefits arising from the Single Market, the EESC is of the view that much more can be achieved, and that digitalisation, if implemented successfully and with the same intensity and inclusion across the EU, will make a huge difference to businesses, workers and citizens of all ages and social backgrounds.

3.4The EESC is also of the view that in strengthening Europe's competitiveness, policy support for an entrepreneurial and a knowledge-based economy that can retain and attract talent and offer improved working conditions is crucial. This is what the EESC understands by a complete digital transition process in enterprise. For the EESC, it is clear that the EU needs to provide a favourable business environment as a whole, to be based on a comprehensive strategy that brings together and aligns different policy areas.

3.5The EESC acknowledges the many initiatives and policies that have been applied to increase competitiveness in the past, no doubt with good intentions. The reality has shown, however, that the EU is now lagging behind the US and China insofar as productivity is concerned. Against this background, digitalisation offers an opportunity to make up ground on both the US and China while at the same time applying an economic growth model that is more sustainable and focuses on both the economic and the social wellbeing of EU citizens.

4.Policies to support digitalisation in the context of the competitiveness agenda

4.1The EESC has in a number of its opinions expressed its view that the digital transition requires further and more focused investment in digital skills development. There is also a strong economic argument for increased investment in human resources and specifically in the link between skills development and productivity and indirectly competitiveness. Developing the range of digital skills is necessary to support workplace innovation. The EESC considers that innovation in the workplace should especially focus on methods of organising work and the way skills are utilised and developed in the workplace, and not just on the supply of workers. Working and employment conditions are just as important as investing in new technology or equipment. The EESC therefore recommends that businesses and the public sector should reflect on what kinds of policies and forms of work organisation have been shown to be effective in success stories and have enhanced innovation through investment in skills. Those success stories could then be replicated in other businesses.

4.2The EESC has in previous opinions also recommended investment in the infrastructure necessary to support digitalisation across the EU. Again, the Recovery and Resilience Plans are intended to do just that. Our concern is that this investment may be largely directed towards the public sector. The EESC acknowledges that shifting towards digitalised public services in say the judiciary indirectly increases competitiveness through enhanced efficiency. That said, enterprises also require a relatively high level of investment and, without available financial support, businesses of all size especially SMEs may struggle to keep up the financial outlay required to digitalise their work processes and invest in their workforce.

4.3The EESC recommends a review of existing funding opportunities for digitalisation provided by state entities across the EU. In general, schemes aimed at providing financial support to enterprises in the area of digitalisation are project-based with a formal application and approval process required prior to the commencement of project activities in order to secure the funding. Apart from the usual pre-award administrative procedures associated with such schemes, which may be a burden for some businesses (although these are being streamlined over time), the current processes tend to delay the launch of projects and initiatives in support of digitalisation in businesses.

4.4This may be non-feasible for businesses which require immediate results in order to commence the commercialisation process to improve products/services/processes to maintain a competitive edge, target new markets, and reduce costs or simply to respond to customer requirements. Such project-centric schemes may therefore dissuade private businesses from applying for funding. Therefore, the EESC calls for a new, albeit complementary, form of funding based on digital activities rather than only on projects. Under this approach, tax credits or cash payments would be provided to businesses based on their annual reported expenditure on digital activities, with eligible expenditures defined beforehand in order to provide clarity. The eligible costs would include any expenditure on staff training and development in the area of digitalisation.

4.5Whereas the EESC acknowledges the EU's capacity in the field of digitalisation with inroads being made in both the legislative and technological aspects, we are of the view that both national and foreign direct investment, particularly to support research and innovation in the area of digitalisation, remains critical. This, in our view, will also enhance the EU's competitiveness in the global market. Aspiring for strategic autonomy in the production of semiconductors is positive, and the EESC is of the view that the EU can ill-afford to experience shortages that risk disrupting European industries. Semiconductors are at the core of the EU's industrial policy aiming to achieve strategic autonomy in the digital sphere. While these risks need to be mitigated, the EESC cautions against taking a protectionist approach which puts at risk research partnerships with digital tech companies worldwide.

4.6Sustainable economic growth based on a successful digital transition is essential for the prosperity of the EU. This is also in line with the EU's objective for a highly competitive social market economy, aiming at full employment and social progress and a high level of protection and improvement of the quality of the environment. The EESC believes that this can only be achieved by increasing productivity growth from current levels in all sectors of the economy. The EESC is of the view that digitalisation is playing and can continue to play a key role in attaining the above economic and social objectives. The EESC also notes that in manufacturing, productivity growth has been fastest in technology-driven industries, which supports the view that digitalisation can increase both profits for enterprises and real earnings for workers. Moreover, digitalisation is an essential way of advancing the green transition. The EU thus needs to maximise the opportunities by promoting simultaneously both tracks of the twin transition.

4.7To achieve real digital competitiveness in the economy and society, the EESC calls for a smart and combined strategy regarding skills. Several sectors are already preparing large-scale projects regarding the reskilling and upskilling of their workforce based on digitalisation and the green transition. The EESC calls for a coordinated programme for skills that can allow the existing and new workforce to surpass the challenges involved and this must be a priority.

5.Competitiveness check and evaluation of digitalisation programmes

5.1Digital competitiveness is vital for the overall competitiveness of the EU and should be seen as an essential part of the EU's competitiveness agenda. Considerable improvements in competitiveness are needed if the EU is to succeed amid fierce global competition. To this end, the EESC has also called for the introduction of a competitiveness check that conforms with EU policies and objectives, to be embedded in the EU's policy- and law-making processes. Proper governance structures are also needed to ensure that the competitiveness check and agenda fully materialise in practice.

5.2The EESC notes the current Better Regulation Guidelines and Toolbox but points out that, as highlighted by the Regulatory Scrutiny Board, there is an evident need for improvements, especially with respect to the implementation of the measures necessary to increase competitiveness.

5.3Finally, the EESC calls for an effective use of the financial resources allocated to innovation and R&D activities related to the digitalisation process. In this context, it is also fundamental to evaluate the impact and proper implementation of the existing programmes that may have been developed to create the conditions for digitalisation. The prioritisation of access to finance, regarding both private and public investment, may be well perceived by European citizens and notably organised civil society.

Brussels, 27 April 2023

Oliver RÖPKE

  The president of the European Economic and Social Committee

_____________