The European Union (EU) has been persisting in its regulatory push to lead global digital governance since 2018, but questions remain about whether its approach balances protecting society with fostering innovation, according to Xinhua.

Will its hardline stance help realize a visionary „man + machine” future, or does it risk stifling innovation and ultimately sidelining Europe in the race for technological supremacy?

SWORD IS DRAWN

OpenAI’s Advanced Voice Mode, launched in May, was delayed for months before reaching EU due to regulatory requirements, while Meta’s Llama AI model remains unavailable, citing the unpredictable regulatory environment.

Over the past decade, the EU has emerged as a global trailblazer in digital governance, beginning with the General Data Protection Regulation (GDPR) in 2018.

It sets new global data privacy standards and imposed significant compliance costs on tech giants, including a 91 million-euro (96 million -U.S.-dollar) fine for Meta this year.

The EU’s regulatory ambitions have since expanded with the Digital Services Act (DSA) and the Digital Markets Act (DMA), aiming to curb the dominance of tech giants like Alphabet, Amazon, Apple, Meta, Microsoft, and ByteDance.

Under DSA rules, Meta’s Facebook and Instagram are being investigated for potential violations of EU online content regulations on child safety.

The EU has also pursued several high-profile antitrust cases this year, with Meta fined 797.72 million euros, Google loosing a 2.42-billion-euro appeal, and Apple ordered to repay 13 billion euros in back taxes.

The new European Commission has emphasized its commitment to tighter oversight of digital markets. New antitrust chief Teresa Ribera has vowed dedication to vigorously enforcing the DMA.

A range of aggressive actions reflects EU’s intent to strengthen its digital sovereignty and shape global digital governance through „Brussels Effect,” said Lin Ying, a cyber and data security PhD researcher at Vrije Universiteit Brussel.

GUARDRAILS OR ROADBLOCKS?

The EU’s zeal to solidify its „Brussels Effect” through sweeping regulations has sparked debate over whether its approach builds trust or stifles innovation.

The newly adopted AI Act, the world’s first comprehensive AI law, categorizes AI systems by risk levels: „minimal,” „limited,” „high risk,”and „unacceptable,” and will impose fines of up to 7 percent of global revenue for non-compliance.

This framework, while aiming to ensure ethical AI use, has caused unease among tech firms. In a September open letter, executives from over 20 major companies, including Meta, warned that ambiguities around data usage for AI training could chill innovation.

Some tech giants, including Google, Meta, and Apple, have delayed product launches in the region in recent years.

Local tech firms also felt the strain. Andreas Cleve, CEO of Danish health-tech Corti, which is classified as „high risk,” has said that the costs of compliance, estimated by European officials to run into six-figure sums for a 50-member company, amount to an extra „tax” on the bloc’s small enterprises.

Giuliano Noci, a strategy and marketing professor at the Politecnico University in Milan, warned Europe’s regulatory primacy may come at a price. „Being the first to regulate is not a good thing, because our companies are under more constraints compared to their counterparts from other countries,” the professor said.

EUROPE’S TALENT DRAINS

Swedish fintech Klarna has planned to seek U.S. listings. Stripe’s Collison brothers and WhatsApp’s Jan Koum moved to the U.S. before launching their companies.

Europe boasts world-class talent, but its entrepreneurs often look abroad for opportunities.

Data show that the EU lags behind in producing unicorn startups valued at over 1 billion U.S. dollars. As of May 2024, EU hosts less than 9 percent of the world’s over 1,200 unicorns, compared to more than 50 percent in the United States and 14 percent in China, according to research firm CBInsights.

Between 2008 and 2021, 40 percent of Europe’s 147 unicorns relocated abroad. Former Italian Prime Minister Mario Draghi attributed this exodus to the lure of abundant U.S. venture capital and the prospect of faster growth and higher profitability.

Right after the rollout of GDPR, experts had warned of its chilling effect on European ventures. Now the trend may be repeating over generative AI.

According to the European Parliamentary Research Service, in 2023, the United States led private investment in AI with 62.5 billion euros, followed by China with 7.3 billion euros, while the EU struggled to catch up.

„Imagine if the Continental Congress in North America had attempted to regulate all uses of electricity and its applications in the 18th century,” said Henrique Schneider, the chief economist of the Swiss Federation of Small- and Medium-sized Enterprises.

Regulating a multipurpose and versatile technology right at its inception is misguided, Schneider warned.

Yet, concerns linger over charging full steam ahead into uncharted territory with unpredictable outcome, compounded by risks of misuse and overdependence.

Geoffrey Hinton, known as the „godfather of AI,” quitted Google in 2023 over concerns about inadequate risks assessing by the company, warning the humanity could be walking into a „nightmare.”

While regions like Japan and the United States take more flexible approaches, the EU opted to establish itself as a global AI hub and create trustworthy AI ecosystem with comprehensive and stringent governance.

For now, with the rules still in their infancy, the EU’s goal of achieving a „man + machine” future, rather than „man vs. machine,” remains a work in progress.

Although the EU’s strict AI regulations have faced various criticisms, it is widely agreed that simply letting market forces steer the way forward is surely not an ideal option.

Xinhua