The EU’s new digital agenda

Digital matters are intrinsically detached from the logic of territorial boundaries. For this reason, the “Europe fit for Digital Age” plan of the European Commission’s President Ursula von der Leyen is likely to have an impact on the Western Balkans as well as on EU member states. These prospects of a “Digital Age” will probably be reinforced, and perhaps even regarded as critical for the Economy in a post COVID-19 EU, as leaked EU Council documents reveal:

EU member states and the European Commission should “thoroughly analyse the experiences gained from the COVID-19 pandemic” in order to inform future policies across the entire spectrum of the digital domain.

Designed to take advantage “of the opportunities of the digital age within safe and ethical boundaries”, this ambitious new e-economy strategy contains two key aspects. Firstly, it pushes for a renewed interest in technology and innovation in the form of increased combined investments from private and public partners, with the support and involvement of the EU and its own financial capacities. Secondly, it emphasises stringent yet innovative digital regulation in the wake of 2018’s General Data Protection Regulation (GDPR). This new wave of regulations will be designed to strengthen legal certainty and legal protections for citizens in the digital era, notably by ensuring the EU’s digital sovereignty in terms of technological standards and frameworks’ enforcement while enhancing its legal and normative leadership in the technology industry at the global level.

Following these new resolutions from the Commission, it can be assumed that technological sovereignty will hardly be detached from data sovereignty. In consequence, European policies such as the newly proposed European Data strategy might affect the Western Balkans. This strategy will essentially create a legal data framework that will democratise non-personal information with the creation of a “single market for data”. In short, businesses and individuals will be affected by changes to rules for access to, and protection of, privacy and data generally, whilst benefitting from a unique, cloud infrastructure. In addition, the current health and sanitary crisis seems to be pushing the Commission to act, especially in the field of EU data Economy. The executive requested, by the end of March, telecom firms to hand over “anonymised mobile metadata to help analysing the patterns of diffusion of the coronavirus.”

Concerning the Western Balkans, predictions on how EU legislation is replicated in the Western Balkan can be drawn from previous experience.

One perfect instance of how such EU digital policies might affect the Western Balkans can be found in the implementation of the previously mentioned General Data Protection Regulation (GDPR). For instance, it was rapidly transposed into a national regulation in Serbia, answering needs from concerned industry  based in the country to align with the EU in order to access the common market. In short, the EU is likely to encourage relevant stakeholders to adopt or translate these new data standards into national legislation, through instruments such as the Digital Agenda for Western Balkans.  This aims to support the transition of the region into a digital economy and bring the benefits of the digital transformation, such as faster economic growth, more jobs, and better services[1]. This will be done through programs aiming at enhancing Connectivity (5G), Cybersecurity, Digitalisation of the Industry and Society, while funding research and innovation.

The Von der Leyen proposal will safeguard this Data Strategy through various means. Beyond regulation, this proposal hopes to produce and promote EU standards as a common denominator in and for various areas in the digital industry. In this regard, the European 5G standardisation policy will most probably be replicated in the Western Balkans, as projects like the EU 5G cross-border corridor (Bulgaria-Greece-Serbia) show that protocols and infrastructures in the region are already deeply penetrated by EU-based principles.

Aside from entertaining plans for strategies and projects, the renewed EU appetite for regulation in the digital sector might come as an issue for Serbia, which has recently become known for industry-wide agreements with large foreign companies. Deals have, notably, recently been made in Serbia with the controversial Chinese tech giant Huawei. Numerous officials within the EU raised concerns about the potential issues such deals can mean for European digital markets, resulting from Chinese intelligence law that technically compel “individual and workplaces” to comply with “state intelligence agents” . Those criticisms were soon followed by Von der Leyen’s statement that “if there’s a risk that the data of civilians or companies can be tapped into on the basis of this law, then we can’t accept that”, as related by the German weekly Der Spiegel.

Despite Huawei’s presence in other EU countries as previously mentioned, Serbia might be especially problematic in this regard; The company has secured a strong foothold in the country, which it views as a “gateway to the European market”. In fact, most 5G-related projects in the country involve the company, ensuring a strong presence. Huawei also likely has a degree of leverage over the Serbian market and government, notably through various funded projects, based in Belgrade, thanks to the Huawei Innovation Centre for Digital Transformation, established as the company’s future Headquarter in the development of important policies, as with the “smart cities” strategy,  aimed at “creating a platform for the development of local potential and the building of a local ecosystem in the field of digital transformation in the public, financial, education and energy sectors, as well as in the transport segment”, thus positioning Huawei as a strategic partner for municipal and local governments in towns such as Belgrade, Novi Sad, and Nis.

Huawei is not the only company with growing interests in the country, however. Among other investments, Chinese companies contributed notable sums to the nation’s economic assets. On the Serbian side, the government adopted agreements on bilateral, economic and technical cooperation with China.

China has loaned Serbia money in recent years for everything from a €170 million bridge over the Danube in Belgrade to a €700 million thermal power plant. A Chinese company also bought Serbia’s only steel plant, promising to revitalize the troubled operation without cutting jobs.

In parallel, the European Parliament and the European Council have responded to concerns over foreign investments and their potential threats to security by adopting a regulation that establishes a framework for screening foreign direct investments in EU strategic assets.

As stated in the Commission’s factsheet, the regulation will set an indicative list of factors to help member states and the Commission determine whether an investment is likely to affect security and public order. That list includes the effects of the investment on critical infrastructures, critical technologies, and access to sensitive information, as well as on control over information, the freedom and pluralism of the media, and other criteria.

Member states and the Commission may also consider whether the investor is controlled by the government of a third country[…].

The framework for the screening of foreign direct investments into the Union entered into force in April 2019 but will only be applied from November 2020. These measures could have a notable impact on the Western Balkans, as the countries of the region involved in the EU accession process could come under pressure (or feel obliged) to comply with it on going forward, even if the regulation is not an element of current accession negotiations. The application of this framework is nevertheless to be expected eventually as countries will have to align with EU regulations in the long run.

This triangular conflict, a surge of foreign investment in the Serbian economy tied to the strengthening of China’s position in core industries, in turn triggering European concerns, is an undeniable stumbling block. It reveals the geopolitical and strategic dimensions of the digital economy, deeply intertwined with EU accession concerns. Consequently, the Serbian government should anticipate the implementation of this screening mechanism in order to avoid problems further down the line, such as increased scrutiny within the accession process, generated by European concern over massive foreign and strategic investments in Serbia. If some commercial agreements and deals made with the government are not modified or nullified, the EU screening process could potentially label them as “affecting security and public order” in Serbia as a future EU member state.

The author is Quentin Rumeau, currently an intern at the European Policy Centre – CEP.