Monday, June 24, 2024

Europe’s Digital Markets Act: A cautionary tale for U.S. policymakers – Roll Call

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The rapid ascent of China poses profound economic and national security challenges for the West in the 21st century. However, overzealous regulation of American technology firms by European allies, as exemplified by the European Union’s Digital Markets Act, threatens to undermine U.S. technological leadership and cede advantage to Beijing’s burgeoning tech sector.

Case in point: the EU recently designated six companies as “gatekeepers” under the DMA. Alarmingly, five of the six gatekeepers — Alphabet, Amazon, Apple, Meta and Microsoft — are U.S.-based, and 21 of the 22 platform services requiring compliance are owned by American companies.

The law enacts strict compliance requirements and draconian fines that will force many of America’s most innovative and successful companies to reduce risk-taking and rein in research and development budgets. It will undercut America’s vibrant startup ecosystem by disincentivizing larger, more mature companies from acquiring rising competitors and providing them with the capital and experience needed to grow and expand. It will mandate onerous compliance rules that force our companies to spend an estimated $22 billion to $50 billion a year in administrative costs. And it will require our most prosperous and innovative companies to share proprietary technology and data, even with Chinese competitors. This is reckless myopia given China’s voracious theft of intellectual property. America already hemorrhages more than $500 billion a year in stolen trade secrets to Beijing. Now Brussels practically invites more Chinese piracy.

The likely fallout includes reduced revenue growth, diminished innovation, stifled economic growth and a strategic gift aiding China’s geopolitical ambitions. This should serve as a sobering cautionary tale for U.S. policymakers considering proposals for expansive new regulations on American technology leaders.

Technology serves as the cornerstone of America’s economic might and is indispensable for national security. Every day, U.S. entrepreneurs and tech firms create new products and services that generate jobs, accelerate economic growth — and enhance how we work, live and connect. This will only grow more consequential as emerging capabilities like artificial intelligence, quantum computing and biotechnology fundamentally transform society in the coming years.

Yet, over the past several years, we have seen some in Congress and other positions of power seek to enact sweeping, anti-innovation policies that would restrict the types of products certain companies can develop, dictate how they can compete, and prevent them from growing and acquiring cutting-edge technologies.

This is the wrong approach.

We can’t afford to undercut the same American companies we depend on to safeguard our collective cybersecurity, sustain our national defense, and support millions of jobs and trillions in economic activity. The winners will be China and Russia, who will not hesitate to exploit the loopholes created by the legislation at a moment of acute competition between our economies.

Doing so would cede crucial ground to competitors like China, which has invested heavily in an aggressive campaign to displace the United States as the world’s preeminent economic and geopolitical power. Beijing views dominating strategic technologies like AI as vital for advancing its ambitions. And they are making substantial progress toward achieving this goal. For instance, a comprehensive study published earlier this year found that China has surged ahead of America in 37 of 44 categories of critical technologies that will play a central role in determining their economic future.

This must serve as a warning to leaders on both sides of the Atlantic. Rather than undercut each other with protectionist policies, the U.S. and EU should cooperate to foster innovation while balancing privacy and security. With shared values and interests, the transatlantic partnership can reinforce Western leadership in technology governance and ensure the internet remains free and open for decades to come.

America is the most innovative nation in the history of the world. Over the past century, we have created technology to lift millions out of poverty, usher in an era of peace and prosperity, and improve the way we all work, live, and connect. Heavy-handed legislation, like the EU’s DMA, threatens to diminish this leadership and embolden our competitors. It is imperative that leaders in the U.S. don’t make the same mistake, and instead focus on policies that support and promote American innovation.

Kent Conrad represented North Dakota in the Senate from 1986 to 2013 as a Democrat. Saxby Chambliss represented Georgia in the Senate from 2003 to 2015 as a Republican. Sens. Conrad and Chambliss serve as advisers to the American Edge Project.

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