Can EU Digital Competitiveness Survive Global Pressure?
Should China and the US – where major market players are based – manage to sideline Europe in its regulatory isolation, the EU’s influence may wane. A commentary by Marco Bassini.
As Anu Bradford notes in Digital Empires, the European Union’s approach to digital regulation follows a rights-based model, contrasting with the market-driven approach of the United States and the state-driven model of China. However, recent geopolitical and technological developments have placed the EU’s regulatory approach under increasing pressure.
On one hand, major tech companies seem aligned with the agenda of newly elected US President Donald Trump, who has already issued an executive order aimed at removing barriers to American leadership in artificial intelligence. On the other hand, China’s response to Trump’s renewed push for US dominance was swift, as evidenced by the rising prominence of DeepSeek.
Quite paradoxically, while evolving dynamics in China and the United States have exposed certain limitations of the European regulatory model, the European Commission has just released new guidelines on key aspects of the AI Act, including the definition of AI systems and the interpretation of prohibited AI practices. And more developments are forthcoming: in the next months, the EU AI Office will unveil the final version of the Code of Practice on General Purpose AI Models.
In the AI sector, the EU has deliberately positioned itself as a first mover, anticipating significant advantages from this strategy - largely driven by the so-called ‘Brussels effect.’ However, these benefits have yet to materialize, and tensions surrounding this model are already evident.
So far, the defense of the EU’s rights-based approach has largely fallen to Data Protection Authorities, which have launched multiple investigations into DeepSeek’s compliance with the GDPR and, in some cases, imposed temporary blocking orders, as seen with the Italian Garante.
Navigating these complex challenges will serve as a litmus test for the European model and its prospects for success. In this evolving landscape, a question that is worth asking comes into play: Is digital competitiveness truly a driving force behind EU policymaking?
A Bigger Picture
The tensions surrounding AI regulation are just the tip of the iceberg, reflecting broader challenges in shaping EU digital law and its notable differences from the regulatory approaches of other jurisdictions.
Overall, the EU has adopted a value-driven framework in its digital lawmaking, a recurring theme in regulations concerning data, digital services, and markets.
As highlighted in a recent CERRE report I have co-authored with Alexandre de Streel and Mariateresa Maggiolino, EU digital legislation has significantly underestimated the inherent costs of regulation.
A closer analysis of legislation, such as the GDPR, reveals that compliance costs were substantially miscalculated. More recent initiatives, such as the Digital Markets Act and the Digital Services Act, appear to assume or imply positive correlations between regulation and expected benefits - often without a thorough, evidence-based assessment.
These shortcomings are also echoed in Mario Draghi’s report on EU competitiveness, which highlights structural weaknesses in the European approach, raising serious concerns about Europe’s role in the global battle for digital sovereignty.
As the IEP@BU Report Rules That Empower emphasizes, "a competitive and innovative digital ecosystem within the EU hinges on the effective implementation of regulations that encourage growth”.
While the EU has made considerable efforts to prevent excessive concentration of (both market and non-market) power among tech companies and has prioritized transparency, accountability, and the protection of fundamental rights and the rule of law, an open question remains: Is the EU also succeeding in enhancing its digital competitiveness?
This question becomes even more pressing in light of the 200-billion-euro AI investment push announced by Ursula von der Leyen at the Paris AI summit at the beginning of February.
The AI Act and the Regulatory Paradox
One of the key aspects the AI Act shares with other EU digital regulations is its legal basis. It is premised on Article 16 of the Treaty on the Functioning of the European Union, which enshrines data protection as a fundamental right, and Article 114, which empowers the EU to adopt measures for the establishment and functioning of the internal market.
This dual foundation aligns with the EU’s value-oriented approach, combining a product safety framework with the goal of safeguarding fundamental rights.
As a response to the swift realignment of tech companies with the new US administration and the emergence of DeepSeek as a disruptive competitor, some commentators have urged the EU to ‘stop apologizing’ and ‘go on the offensive’.
While advocating for a more assertive defense of Europe’s digital regulatory model is commendable, it must be preceded by a reasoned reassessment of the EU’s existing approach.
For instance, the release of a 140-page document outlining prohibited AI practices epitomizes the contradictions within the EU’s regulatory blueprint - concerns that were, albeit indirectly, also reflected in Draghi’s report.
While this strategy is intended to reduce legal uncertainty and prevent fragmentation, in fact, it risks overcomplicating compliance and adding unnecessary layers of complexity. The forthcoming Code of Conduct for General Purpose AI Models may offer a more flexible approach, but the success of co-regulation in EU digital law remains unproven.
Against this backdrop, the question of whether the EU is genuinely fostering its digital competitiveness is well worth asking.
As a matter of fact, the EU has primarily relied on the GDPR – and the enforcement role of data protection authorities – to defend the European citizens and the market from DeepSeek and, previously, ChatGPT. While this demonstrates the potential effectiveness of a rights-based approach, it also exposes its vulnerabilities.
Should China and the US – where major market players are based – manage to sideline Europe in its regulatory isolation, the EU’s influence may wane.
AI will be the next battleground where the EU’s ambition to establish an influential regulatory paradigm – the so-called Brussels effect – will be put to the test.
While Anu Bradford argues that the perceived trade-off between digital regulation and innovation is a false dichotomy, a more in-depth reflection on the demands of global competitiveness is necessary.
The challenge goes beyond the traditional debate between regulation and the protection of fundamental rights – it is about the EU’s ability to remain a significant player in the digital economy.
With no turning back from the AI Act and broader EU digital law, a more business-friendly policymaking – one that remains firmly committed to protecting fundamental rights, as embedded in Europe’s DNA, while actively fostering innovation – seems desirable. Such a framework would not only make the EU’s announced AI investments fruitful but also better safeguard European digital competitiveness on the global stage.
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
