NEW STUDY: The EU can be €2 trillion better off by 2030 if we secure cross-border data transfers

A new study commissioned by DIGITALEUROPE and conducted by Frontier Economics shows that our policy decisions on international data transfers now will have significant effects on growth and jobs across the whole European economy by 2030, impacting Europe’s Digital Decade goals.

• Overall, Europe could be €2 trillion better off by the end of the Digital Decade if we reverse current trends and harness the power of international data transfers. This is roughly the size of the entire Italian economy any given year.
• The majority of the pain in our negative scenario would be self-inflicted (around 60%). The effects of the EU’s own policy on data transfers, under the GDPR and as part of the data strategy, outweigh those of restrictive measures taken by our major trade partners.
• All sectors and sizes of the economy are impacted across all Member States. Data-reliant sectors make up around half of EU GDP. In terms of exports, manufacturing is likely to be hit the hardest by restrictions on data flows. This is a sector where SMEs make up a quarter of all exports.

Director-General of DIGITALEUROPE Cecilia Bonefeld-Dahl said:

“Europe stands at a crossroads. It can either set the right framework for the Digital Decade now and facilitate the international data flows that are vital to its economic success, or it can slowly follow its current trend and move towards data protectionism.

Our study shows that we could be missing out on around €2 trillion worth of growth by 2030, the same size as the Italian economy.

The growth of the digital economy and the success of European companies is dependent on the ability to transfer data. This is especially so when we note that already in 2024, 85 per cent of the world’s GDP growth is expected to come from outside the EU.

We urge policymakers to use the GDPR data transfer mechanisms as it was intended, namely to facilitate – not to hinder – international data flows, and to work towards a rule-based agreement on data flows at the WTO.”

Policy recommendations

The EU should:

1. Uphold the viability of GDPR transfer mechanisms, for example:
   1. standard contractual clauses,
   2. adequacy decisions
2. Safeguard international data transfers in the data strategy
3. Prioritise securing a deal on data flows as part of the WTO eCommerce negotiations

Key findings

• In our negative scenario, which reflects our current path, Europe could miss out on:
  • €1.3 trillion extra growth by 2030, the equivalent to the size of the Spanish economy;
  • € 116 billion exports annually, the equivalent to Sweden’s exports outside the EU, or those of the ten smallest countries of the EU combined; and
  • 3 million jobs.
• In our optimistic scenario, the EU stands to gain:
  • €720 billion extra growth by 2030 or 0.6 per cent GDP per year;
  • €60 billion exports per year, over half coming from manufacturing; and
  • 700,000 jobs, many of which are highly skilled.
• The difference between these two scenarios is €2 trillion in terms of GDP for the EU economy by the end of the Digital Decade.
• The sector that stands to lose the most is manufacturing, suffering a loss of €60 billion in exports. Proportionately, media, culture, finance, ICT and most business services, such as consulting, stand to lose the most – about 10 per cent of their exports. However, these same sectors are those that stand to gain the most should we manage to change our current direction.
• A majority (around 60 per cent) of the EU’s export losses in the negative scenario come from an increase in its own restrictions rather than from third countries’ actions.
• Data localisation requirements could also hurt sectors that do not participate heavily in international trade, such as healthcare. Up to a quarter of inputs into the provision of healthcare consist of data-reliant products and services.
• In the major sectors affected, SMEs account for around a third (manufacturing) and two-thirds (services such as finance or culture) of turnover. Exports by data-reliant manufacturing SMEs in the EU are worth around €280 billion. In the negative scenario, exports from EU SMEs would fall by €14 billion, while in the growth scenario they would increase by €8
• Data transfers will be worth at least €3 trillion to the EU economy by 2030. This is a conservative estimate because the model’s focus is international trade. Restrictions on internal data flows, e.g. internationally within the same company, mean this figure is likely much higher.

Background

The study looks at two realistic scenarios, closely aligned with current policy debates. The first, ‘negative’ scenario (referred to throughout the study as the ‘challenge scenario’) takes into account current restrictive interpretations of the Schrems II ruling from the Court of Justice of the EU, whereby data transfer mechanisms under the GDPR are made largely unusable. It also takes into account an EU data strategy that places restrictions on the transfers of non-personal data abroad. Further afield, it considers a situation where major trade partners tighten restrictions on the flow of data, including through data localisation.

The study identifies sectors in the EU that rely heavily on data, and calculates the impact of restrictions to cross-border transfers on the EU economy up to 2030. These digitising sectors, across a variety of industries and business sizes, including a large proportion of SMEs, make up half of EU GDP.