Last week, the European Commission announced ambitious new plans to reshape the tech world.
With a new initiative to overtake global leadership in artificial intelligence and a new plan to create an integrated data market in Europe, the European Union aims to assert European dominance in the digital world while mitigating the power of American tech giants.
Given the global and borderless nature of the internet, the EU’s plans may have far-reaching consequences that can hamper innovation while harming consumer welfare well beyond the borders of Europe.
Specifically, the EU is developing policies to establish a Eurocentric approach to tech policy, including a European strategy for data, new policies governing the use of AI in Europe, and new rules for a fair and competitive economy to be laid out in a forthcoming Digital Services Act.
While seemingly well intended, with the stated goal of injecting more transparency into the flow of data across the internet while addressing concerns over security and data that pose a challenge in all countries, the proposals include more than a small element of self-interest.
European Commission president Ursula von der Leyen acknowledges that the first-mover advantage saw American firms emerge and dominate the early internet. Today’s tech giants that everybody loves to hate — Google, Amazon, Facebook, and Apple — created a tremendous new industry and came to be global leaders in the first phase of the digital age.
But as President von der Leyen stated in her political guidelines for the EC: “It may be too late to replicate hyperscalers, but it is not too late to achieve technological sovereignty in some critical technology areas.”
With AI and the Internet of Things coming of age, the EU sees a new opportunity to leapfrog to leadership. Last week’s policy proposals are an attempt to provide European firms a leg up in the second phase of the digital age.
As the announcement notes, “Europe must now lead the standardization process of the new generation of technology, i.e. on blockchain, high-performance and quantum computing, AI and tools for data sharing and usage.”
Unfortunately, the EU’s proposed changes are likely to pose a significant threat to an integrated global digital network. As explained in a press release, “Everyone can access the European market as long as they accept and respect our rules.”
The changes under consideration are wide-ranging, including new rules for platform liability, issues of data localization, and industrial policies to benefit European companies relative to their global competitors.
New restrictions on the use of AI technologies and data sharing will make it more difficult for foreign companies to access European customers. These requirements can disrupt cloud technologies and impose significant new burdens on digital platforms that harm performance, and ultimately limit consumers access to online resources.
And ironically, the tech giants targeted by the EU will not bear the brunt of these burdens; it will be the small startups and newcomers who lack the legal resources to comply and pull out of the market.
In fact, the EU’s proposals may usher in a new balkanized version of the internet that makes online commerce more difficult to the detriment of both consumers and businesses seeking a broader customer base.
And while President von der Leyen may simply see this as pursuing the EU’s own economic self-interest or technological sovereignty, the measures taken in Europe will be carefully watched by authoritative regimes around the world seeking to adopt their own policies that will assert more political control over the online activities of their citizens.
The internet’s global reach and lack of borders have always posed unique challenges with respect to internet governance. While the United States — and increasingly China — have demonstrated leadership in innovation and deploying new technology, the EU is garnering a reputation as a leader in the regulation of technology, be it the privacy regulation, digital taxes, or the proposed new controls on AI.
Internet activist and visionary John Perry Barlow pronounced in his 1996 Declaration of the Independence of Cyberspace: “Cyberspace does not lie within your borders. Do not think that you can build it, as though it were a public construction project. You cannot. It is an act of nature and it grows itself through our collective actions.”
The EU would do well to heed these words.
