The European Union (EU) has long desired to be a hub of technological innovation. But recent developments suggest otherwise, with restrictive regulations hurting its efforts to be an industry leader. The latest example of this is the EU’s reaction to the Chatbot GPT (ChatGPT) service. This has further cemented the belief that Brussels is still stuck in its heavy-handed approach to regulating when it comes to technology.
On March 31, the Italian privacy regulator (Garante per la Protezione dei Dati Personali) put a ban on OpenAI’s ChatGPT, a revolutionary AI-powered chatbot, in response to growing calls for better protections for personal data. In response, the EU’s privacy regulator has established a task force dedicated to the ChatGPT, showing its commitment to stricter regulations for the service.
This tendency for Brussels to regulate to a fault could be costly for the EU’s ambitions to advance in the global tech race. The bloc is pouring billions of euros into quantum computing, microchips, and cloud infrastructure with plans to challenge the tech leadership of the US and China. However, with the EU’s continued approach to regulation, it will be hard for European firms to reap the benefits of these revolutionary technologies.
For instance, the digital market legislation, including the Digital Markets Act and the Digital Services Act, imposes transparency and compliance rules on tech platforms with high user numbers and revenue. The draft AI Act and the upcoming Data Act will require firms to share their data with competitors and force high-risk AI to go through a market-authorisation procedure, further delaying the deployment of AI tools.
These regulations, in addition to the General Data Protection Regulation (GDPR), have impacted the continent’s venture capital investments, with evidence showing that Europe’s share of global venture-capital investments dropped from around 27% to 15-17% in 2020 and 2021 respectively. In 2022, it followed the same trend.
As of now, the leading players in LLMs (Large Language Models) which include OpenAI, MidJourney, Google, Microsoft, and Meta, are all US-based companies. Europe has also lagged behind in other core technologies such as virtual reality and quantum computing. According to a report by the Boston Consulting Group, without structural reforms, the EU could fall behind in the quantum computing sector, risking its economic competitiveness and technological autonomy in the long run.
In the end, the EU must choose between enforcing regulation or boosting innovation. Its previous choice between being the first and strictest regulator and imposing its vision of regulation globally has adversely impacted Europe’s progression in the digital world. Time is quickly running out for the EU to turn this around, and it must act soon if it wants to remain a contender in the tech industry.
Dirk Auer is the Director of Competition Policy at the International Center for Law and Economics. His primary research focuses on legal and economic aspects of anti-competitive practices, mergers, and state aids. Dirk has consulted and advised on cases related to competition and intellectual property law in various fields, including information technology and digital markets.
