The EU Must Seize its Opportunity to Inspire, Not Regulate, Innovation

The EU recently finalized the world’s first law regulating AI technology. It joins the five-year-old General Data Protection Regulation, the world’s first and still most prominent law to protect digital privacy, as an example of how Europe is driving technology regulation worldwide. 

Jason Oxman, President and CEO of the Information Technology Industry Council.

As EU policymakers plan their future work on digital policy, Europe is on the frontline of significant global challenges, including wars in Ukraine and the Middle East. These conflicts are putting pressure on the EU’s economy and increasing the cost of the green transition. Supporting the EU’s competitiveness and resilience through innovation – and not just regulation – is essential to navigating this tricky period.

2024 kicks off an important period for digital policy in Europe. The European Parliament elections in June mark the start of a new five-year mandate for the European Commission and MEPs. This new mandate must come with a reflection on the EU’s goal of being the best destination for businesses to grow their cutting-edge technologies. Following the current mandate’s unprecedented wave of groundbreaking rules impacting virtually all aspects of the digital economy, the new EU leadership will have to determine which policy solutions can help Europe reach the much-coveted balance between sustainability and competitiveness by reaping the benefits of technological innovation at a time of acute global challenges. 

The next mandate must ensure technology-driven businesses can thrive in Europe while upholding the Union’s fundamental values. 

To be an attractive place for tech companies, EU policymakers must drive forward work on a truly integrated Single Market. At the same time, they should focus on reducing the compliance burden on companies seeking to invest in Europe while ensuring coherent implementation of the existing rules. For the EU to inspire the next generation of technological breakthroughs, it is essential that policies incentivize innovation and competitiveness by design. 

The reports that Enrico Letta and Mario Draghi are writing for European Commission President Ursula von der Leyen – on the Single Market and on Europe’s competitiveness respectively – should put forward bold approaches. We hope that Draghi’s report on competitiveness will include systematic, in-depth assessments of the impact of legislative proposals on competitive conditions on the market. 

By driving forward work on an open and attractive Single Market, the EU has the opportunity to ensure its values and interests are protected while supporting its global competitiveness and enhancing its leading role internationally. This is important for the EU’s own economic security – especially within the current geopolitical context. The European Commission’s economic security strategy of 2023 stressed that competitiveness of the Single Market and international partnerships as crucial tools for economic resilience.

When developing new regulatory frameworks in the EU, policymakers must avoid fragmentation. This fragmentation only increases complexity for firms operating in the EU.

EU policymakers should increasingly focus on how legislation is implemented. They should provide more guidance to businesses on how to comply while also supporting national implementation to ensure a uniform interpretation of complex regulatory regimes such as those for data governance, cybersecurity and sustainability. 

As the EU implements the AI Act, clarity is especially important. Since the landmark law’s passage, AI policy has become increasingly complex with a multiplication of requirements and authorities under EU law – including the AI Act, AI Liability, Product Liability, and GDPR. There are also new bodies and voluntary tools created within international and multilateral initiatives, such as the G7 Code of Conduct and United Kingdom’s AI Safety Summit. Failure to ensure coordinated implementation will lead to legal complexity that will complicate and stifle the development of a robust AI ecosystem and the use of innovative AI solutions in Europe. 

While the EU’s Single Market is a clear competitive asset, the bloc is stronger when it works with allies and trading partners. To attract and retain investment, the EU needs to complement the Single Market through deeper international engagement with partners that can help shape international norms, set the rules for the global economy, and enhance the chances of realizing common security, economic, and diplomatic objectives. 

The European Union should prioritize the development of international, industry-led, voluntary standards and their wider recognition under EU law. In addition, EU standardization processes should not discriminate against companies with headquarters outside the EU and should avoid the creation of international trade barriers. 

The EU should also implement policies based on trust and cooperation with allies in ways that are compatible with its longstanding commitment to free trade, allowing it to shape emerging technologies in international fora such as the EU-U.S. Trade and Technology Council and the G7. 

Digital policy will remain a crucial priority for the years to come. The EU has a ripe opportunity to lead a global pro-innovation agenda. The global technology industry shares the firm commitment to building trust, promoting international cooperation, and fostering innovation as essential elements of Europe’s competitiveness and resiliency.

Jason Oxman is the President and CEO of the Information Technology Industry Council (ITI), the premier global advocate for technology, representing the world’s most innovative companies.