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The European intention is to defend the continental digital market and install Union’s own digital-technology regulations. This goal has been, actually, constantly threatened by the US government by imposing global tariffs on countries/regions -including the EU- with the digital policies that the US considers “discriminatory.” The EU laws that safeguard digital transition are at risk of being dismantled under the false (and still undefined) promise of “digital simplification” and freedom; in reality, the new EU-US trade deal makes it easier for dig-giants to profit.
Background
The European Commission insists on the EU and the member states’ sovereign rights to “regulate economic activities on the Union’s territory”, which are “consistent with our democratic values”, said recently Commission’s spokesperson Paula Pinho.
The European main digital regulation legislation, i.e. – the Digital Markets Act (DMA) and the Digital Service Act (DSA) are the cornerstone of the EU-wide digital policy. For example, the DSA sets obligations for online platforms concerning such issues as misinformation and child safety, whereas the DMA is dealing with the so-called gatekeeper firms, i.e. global digital technology giants like Google, Apple, Meta, Amazon, Microsoft and TikTok. The EU insists that these gatekeepers should “open up their services” in order to ensure a fair world-wide competition.
The US Administration and several American digital technology companies have repeatedly attacked the EU digital and AI regulations, including the DSA, which is a EU-wide “flagship social media platform”, and accusing the EU’s digital censorship approach, adding that the EU would impose sanctions on the US digital companies.
See, e.g. “Online platforms in the EU: Digital Service Act in action”, in: https://www.integrin.dk/2024/01/09/online-platforms-in-the-eu-digital-service-act-in-action/
Note. The DSA regulates online intermediaries and platforms such as marketplaces, social networks, content-sharing platforms, app stores, and online travel and accommodation platforms. Its main goal is to prevent illegal and harmful activities online and the spread of disinformation. It ensures user safety, protects fundamental rights, and creates a fair and open online platform environment. The DSA protects consumers and their fundamental rights online by setting clear and proportionate rules. It fosters innovation, growth and competitiveness, and facilitates the scaling up of smaller platforms, SMEs and start-ups. The roles of users, platforms, and public authorities are rebalanced according to European values, placing citizens at the center.
The “digital divide”
According to the US regulators (and personally President Trump), the US threatened to “impose substantial additional tariffs”, as well as placing export restrictions on digital technology and chips on countries with digital rules the US deemed to be discriminatory to American companies.
“As the President of the United States, said D. Trump, I will stand up to countries that attack our incredible American tech companies; thus, the US technology companies, are neither the “piggy bank” nor the “doormat” of the world any longer. Show respect to America and our amazing tech companies or, consider the consequences!” he added in a post on Truth Social.
Citation from: https://truthsocial.com/@realDonaldTrump/posts/115092243259973570
However, the EU notes that “the European DSA does not look at the color of a company, company’s jurisdiction, nor its owner”; both the DSA and the DMA apply to all platforms and companies operating in the EU territory irrespective of their place of establishment. Thus, the last three Commission’s enforcement decisions were against AliExpress, Temu and TikTok, the spoke person added.
Besides, the head of the Commission’s trade department Sabine Weyand said that the EU is “familiar with the concerns expressed by successive US administrations about EU regulations.”
But, she added, “we have always been very clear, our regulation is nondiscriminatory and we will apply it as decided by our democratic institutions. That is not up for concessions or negotiations with other countries. That doesn’t change.”
Source and citations from: https://www.politico.eu/article/eu-resists-trump-tech-regulation-is-our-sovereign-right/
There are several points on which the EU and the US can agree: e.g. on the need to protect children, to combat misinformation, to protect consumer welfare and to promote innovation and sustainable growth. However, in standard trade agreements, the devil always lies in the details: so, when the sides talk about any agreement on data regulation, they “enter unchartered territory”, as the new technologies and standards render the traditional approach to negotiations aimed at reaching binding, detailed outcomes overly burdensome if not obsolete.
Bridging the digital divide
There are many global most iconic companies and a large and ever-growing number of digital giants on both sides of Atlantic: thus, the reciprocal trade in goods and services came to $1.3 trillion in 2022; recently more than 2.64 billion people bought $6.3 trillion worth of goods online. Today 54% of global trade in services, worth $3.82 trillion, takes place digitally and the US and the EU are, by far, the largest exporters of services in the world.
The EU has taken the lead in setting regulations which impact global digital trade; contrary to the US Federal laws and/or regulations, the EU imposes anti-trust actions against big tech companies using “methodologies” that go beyond traditional emphasis on consumer welfare – efficiency and lower prices – and look instead at how digital market’s power may harm workers, suppliers and entrepreneurs.
At the period of absent of both the bilateral digital agreements and the US digital laws, the EU regulations become the de facto rules of the “global road”, known as the “Brussels effect.”
It is obvious, that if the EU and the US could agree on standards for data privacy and protection, they would take a giant step towards setting the global standards for digital trade. But despite ongoing efforts to find common ground reaching such a deal has proven elusive.
Further complicating matters are, in fact, that international efforts to establish regulatory standards that the World Trade Organization, WTO has foundered, were not active, at least due to US disengagement.
The WTO members have struggled to agree on a framework of rules for electronic commerce: an agreement on the issue was reached among about 80 WTO members only recently; but many key players including the US pulled out of the deal at the last minute. Moreover, serious differences remain on the critically important issues of cross border data flows, data localization and forced transfer of data-source codes.
As the result, growing uncertainty has prevailed, i.e. for SMEs and big businesses across the world it has become a serious problem; hence, the tech-companies largely accept the need for regulation. Their worries center on whether rules may be too onerous and whether disparate regimes create regulatory fragmentation. Different approaches to tech regulation mean companies must adapt to a glut of different regulations, reducing efficiency and productivity and perhaps sowing the seeds of intense legal clashes with government regulators.
Since the beginning of 2024, the Konrad-Adenauer-Stiftung and the Wilson Center have analyzed the issue of trans-Atlantic cooperation on digital regulation and have examined possible approaches which might narrow policy gaps in the positions of these two critically important economic partners in the world.
Source and citations from: https://5g.wilsoncenter.org/article/bridging-transatlantic-digital-divide-kas-wilson-center-reflections
The European “scene”
When it comes to digital regulation, the EU is leading the way: some business leaders believe that the EU has been overly zealous and that burdensome bureaucracy is stifling innovation. Thus, in a report commissioned by the European Commission “Future of European Competitiveness”, the former Italian Prime Minister and European Central Bank chief Mario Draghi lays blame for Europe’s sluggish tech performance squarely at the feet of ill-considered regulations. “The problem is not that Europe lacks ideas or ambition,” he writes. “We have many talented researchers and entrepreneurs filing patents. But innovation is blocked at the next stage: we are failing to translate innovation into commercialization, and innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations.”
More in “EU-wide competitiveness: challenges and perspectives in Draghi report”, in: https://www.integrin.dk/2024/09/09/eu-wide-competitiveness-challenges-and-perspectives-in-draghi-report/
Imperfect though these regulations may be, the fact is that apart from China – which imposes on consumers and companies a draconian and highly restrictive system of tech regulations – the EU offers the only extensive framework for regulating information technology.
The EU’s concerns about data privacy and protection led to the implementation of the General Data Protection Regulation (GDPR) in 2018. These rules are strictly enforced with severe penalties applied to those who do not adhere to them. Under GDPR rules, the EU can impose a fine on company, municipality or an individual of up to €20 million and/or up to 4% of global revenues for violating data privacy and protection laws.
More on GDPR in: https://www.local.gov.uk/sites/default/files/documents/The+General+Protection+Data+Regulation+(GDPR)+-+Guidance+for+Members.pdf
Back in 2021, the EU fines were significantly increased, and Amazon was hit with a €746 million fine; in 2024, the EU Commission hit Meta (a parent of Facebook and Instagram), with a €1.2 billion fine for violating the privacy of EU citizens: i.e. the case specifically involved the transfer of data from the EU to the US.
Ireland, which is the European home to many tech companies from the US and Asia, has been particularly active in enforcing privacy regulations. In addition to the €1.2 billion fine, the Irish Data Protection Commission hit Meta with another hefty fine, this time with € 390 million because, the Irish claimed, Facebook and Instagram forced users to agree to the distribution of their data. TikTok was fined by Irish Data Commission with € 345 million for the public disclosure of children’s data. These fines are in addition to the billions in fines levied on these companies by EU anti-trust regulators.
The GDPR is only the first of many EU digital regulations: e.g. the Digital Services Act, implemented in 2023, differs from the GDPR in that it covers all information carried on social media platforms and seeks to “prevent illegal and harmful activities online and the spread of disinformation,” according to the EU Commission. Companies in breach of these regulations could be hit with fines of up to 6% of global revenue and repeated offences risk being banned from setting up activities in Europe.
However, the US objections to GDPR have been consistently rebuffed by the EU; the US tried to assuage EU concerns about its protection of EU citizens’ data, but in 2020 the European Court of Justice struck down an initial agreement, arguing that it did not go far enough. A second effort, an executive order by President Biden in 2021 was the basis for a 2022 deal which strengthened the protections by further restricting the ability of US intelligence agencies to access data and by providing recourse to EU citizens in US courts if they feel their rights have been violated.
European General Data Protection Regulation, GDPR
The GDPR sets out requirements for public organisations and private persons to handle personal data; in addition to other changes, it enhances the rights of people whose data is held (known as data subjects in the Data Protection Act) and give them more control over what happens to their data. The GDPR is the toughest privacy and security law in the world: although it was drafted and passed by the EU, it imposes obligations onto organizations anywhere, so long as they target or collect data related to people in the EU-27.
The regulation imposes strict fines against violators of privacy and security standards, with penalties reaching into millions of euros.
With the GDPR, the EU is signaling its firm stance on data privacy and security at a time when more people are entrusting their personal data with cloud services and breaches are a daily occurrence. The regulation itself is large, far-reaching, and fairly light on specifics, making GDPR compliance a daunting prospect, particularly for SMEs.
As technology progressed and the Internet was invented, the EU recognized the need for modern protections: e.g. already in 1995 it passed the European Data Protection Directive, establishing minimum data privacy and security standards, upon which each member state based its own implementing law.
However, the Internet providers already in 1994, have installed first banner-adds online; in the beginning of the new century, several financial institutions offered online banking, and in 2006, Facebook was opened to the public; in 2011, a Google user sued the company for scanning her emails. Two months after that, Europe’s data protection authority declared that the EU needed “a comprehensive approach on personal data protection” and work began to update the mentioned data protection directive in 1995.
The GDPR entered into force in 2016 after passing European Parliament, and as of May 25, 2018, all organizations were required to be compliant with it.
Source: https://gdpr.eu/what-is-gdpr/
The GDPR follows all the EU-wide digital regulations, such as the Digital Markets Act approved in 2022, which sets regulations for “gatekeeper” platforms like search engines or social media companies. Gatekeepers are required to grant access for third parties to the platforms and to any data that the platform may generate.
The AI Act, which was approved in May 2024 and will come fully in force in 2026, would ban certain AI activities such as government run systems which “score” citizens behavior, as is done in China. Scanning tools which rank job applicants would be subject to legal oversight.
Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla have a market capitalization value of more than $12 trillion. The seven largest European tech companies hold a combined market capitalization of $705 billion. Revenues for the US companies came to $1.72 trillion vs. $133 billion for their European counterparts and average annual revenue growth has been 27% over the last decade compared with 10% for the European companies.
Some commentators go even as far as to see a correlation between excessive EU tech regulations and the lack of a meaningful tech sector. Such dominant positions cause unease on both sides of the Atlantic: recently, Washington has also begun to question whether these companies are too dominant; the EU has kept a close eye on them for years.