Striking the balance between regulation and innovation in tech and AI is one of today’s most important policy questions. By pledging to create “a Europe fit for the digital age,” incoming European Commission President Ursula Von der Leyen has made clear that she wants to put the EU at the heart of that debate. This is something that all entrepreneurs working in European tech should follow closely.
The Commission’s proposals include ethical regulations for AI, new taxes, and a comprehensive Digital Services Act. On the surface, much is welcome. Von der Leyen understands the importance of the data economy. She will not want to see Europe left behind as AI becomes the defining technology of our era.
She has tasked Margrethe Vestager and Sylvie Goulard to carry out this mission as her commissioners. However, her Presidency has got off to a rocky start. Due to begin on 1st November, it has been hit by delays. MEPs have vetoed her selection of Goulard as commissioner for the internal market and defence. They are due to vote on her proposed replacement, Thierry Breton, recently head of French technology giant Atos. Many fear MEPs will look on him similarly as they did to Goulard, as a politician who will use the role to advance France’s interests in Europe, especially on economic, tech, and security matters.
This offers Europe a valuable moment to reconsider its digital policy. While the President’s intentions to complete the Digital Single Market are positive, there is little indication that her administration will take the approach needed. The overriding focus on ethical regulations for AI may lead to similar unintended consequences as GDPR, the EU’s landmark privacy regulation.
This is incredibly important for startups and enterprise. The Center for Data Innovation has researched the effect of European regulations on the tech economy. GDPR has had a global impact, as many foreign firms have become GDPR-compliant. It has been estimated that complying with GDPR has cost Fortune 500 and FTSE 350 companies around $9 billion, and British companies will have to bear these costs whether they are in the EU or not. But compliance has not been universal. Many non-EU companies have decided to forego operations in Europe altogether, including over 1,000 U.S. news sites.
Its effects have been felt closer to home. In the 12 months since GDPR, venture capital investment in European startups has declined by 33.8 percent, and it remains far behind the United States and China per capita. The EU is home to only 11.5 percent of the world’s tech unicorns, and this is likely to decline as the UK, home to many such firms, leaves the Union. If the new Commission wants to support European startups it should interrogate its existing regulations before enacting new ones.
The current pilot of ethical guidelines for AI risks repeating the mistakes of GDPR. The guidelines call for the creation of strict norms for the “AI-immersed future it wants to realize,” within which AI applications must operate. This regulate-first, adopt-second approach will harm the European digital economy.
In her mission letter to Vestager, Von der Leyen states that “we must ensure that the European way is characterized by our human and ethical approach. New technologies can never mean new values.” While few would disagree with the sentiment, in practice this risks stymying the creation of a Europe fit for a digital age, because it starts from the premise of suspicion towards AI.
The guidelines include an onerous assessment process and burdensome standards for all AI applications, which will entrench the power of companies with the largest resources and market share. Far from supporting startups, these rules risk being pro-incumbent and anti-disruptor.
If it wants to support startups, the new Commission would be wise to listen to them. Across Europe, businesses are arguing for a different approach. A recent report from a coalition of startups and scaleups in Europe’s northern, liberal nations calls for policies which prioritize AI adoption, and support innovation with flexible regulations built on real-world evidence.
As groups like the Danish Entrepreneurs Association have said, a digital Europe should focus on fundamentals which are good for startups like creating a digital Single Market and uniting Europe’s fragmented data frameworks. That means national governments agreeing standards on open and interoperable data, providing European AI far greater amounts of data than before. That does not sit in tension with a values-based approach—eliminating bias from algorithms is a priority we all share. But discrimination is more likely from too little data, not too much. This will only be overcome by ensuring AI has access to plentiful, high-quality data, rather than placing new regulations on data use and algorithms.
Technological innovation offers huge opportunities for the EU. Considering Europe’s long-term ‘secular stagnation’, this should be welcomed, not feared. If the EU wants to reap the benefits of AI and compete with the United States and China, it must focus on light-touch, flexible regulations. It is only by emphasizing innovation over caution that we will create a Europe truly fit for the digital age.