US President Donald Trump is becoming increasingly aggressive towards the European Union. Digital regulation is one of his targets.
The White House has issued a memorandum warning the United States might retaliate against the EU’s landmark digital competition and online safety laws, which the administration sees as “unfair exploitation of American innovation.” The Judiciary Committee in the Republican-controlled House of Representatives, the lower chamber of Congress, has also written to the European Commission's Executive Vice-President Teresa Ribera, alleging that EU tech laws “discriminate” against US firms.
The US may, like the European Union, want to rein in big tech, but it's clear that the Americans want to set the rules.
This external pressure dovetails with growing calls from within the EU about the need for deregulation to boost the EU’s competitiveness. Two recent major reports argue that the bloc’s precautionary approach to regulation is one reason for its poor performance in the high-growth tech industry.
Whether ditching EU tech laws would drastically boost EU innovation is questionable. The realistic alternative to EU-level regulation is often a fragmented set of national laws. Cohesive regulation can even promote innovation, as in the case of Europe’s Open Banking initiative.
In reality, other factors — such as the lack of capital and services markets — play a much bigger role in the EU’s slow economic growth. Still, EU regulations have an image problem.
The EU’s response to these challenges so far has been measured — dropping some new legal proposals and preparing to “simplify” certain existing laws. Fortunately, neither the Commission and nor European Parliament have advocated abandoning the EU's digital rulebook. Instead, existing laws must be enforced properly.
Rightly so: EU regulations protect important European values such as open competition, transparency and privacy. Emasculating its laws would undermine the EU’s promise of a predictable and rules-based order. Given the period of geopolitical instability we are experiencing, it is more important than ever that the bloc protects this advantage for its 450 million consumers.
Still, it cannot ignore threats to these frameworks. There are ways to defend them.
In the long term, building on the EU's market size while supporting the emergence of innovative European players could decrease dependence on foreign providers.
More immediately, the EU can improve regulation and enforcement. That means making digital regulations more focused on ensuring tech firms deliver preferred outcomes, rather than dictating exactly how they design their services. Online safety laws, for example, require large social media platforms to mitigate risks, but allow firms to decide how they do that.
This flexibility can help American firms accommodate both US political sensitivities and European regulatory requirements. For example, while some firms have removed safety measures that the US considers objectionable, they have simultaneously taken positive steps in Europe, such as adopting the recently updated voluntary code of conduct to fight hate speech.
The EU is also using inclusive governance mechanisms, involving big and small tech platforms and their users, to build broad consensus about how to translate outcomes-focussed regulations into concrete steps. These implementation forums need to be carefully designed so that firms clearly see the benefit of co-operating. They could reduce transatlantic tensions by demonstrating that the EU's preference is to work with, not against, American technology firms.
Steps like these are not new. We are not recommending a major pivot or buckling to pressure from the Trump administration. Nor will improving EU regulation solve all transatlantic tensions.
Nonetheless, the flexibility of giving technology companies help to navigate the increasing chasm between EU and US approaches to regulation — and give US firms more stake in seeing EU rules succeed — are crucial. However stressful the current transatlantic relationship is, it offers an opportunity for the EU to illustrate its commitment to a predictable approach based on the rule of law.
Doing so will help the EU maintain its influence — the so-called Brussels Effect — at a time most countries do not want to follow the US president’s techno-libertarian approach.
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