Europe

The EU must make (digital) peace, not war, with the United States

In a time of growing influence of China and its large internet companies, you may think that we urgently need the EU’s proposed tech transatlantic partnership with the United States. You would be right.  And yet, the EU is fighting the wrong war, ramping up its fight against America’s most innovative tech companies. If the EU wants any hope of a stronger transatlantic alliance now that, in the words of President Biden, “America is back”, it will need to deescalate the digital war. 

Andreas Schwab, the leading EU parliamentarian on the Digital Markets Act (DMA)–the EU’s new proposal to regulate digital competition–recently amended the DMA so that it targets only U.S. tech companies because he considers that “the DMA should be clearly targeted to those platforms that play an unquestionable role as gatekeepers due to their size and their impact on the internal market”. 

With the proposed changes, European tech companies (such as Booking.com) escape scrutiny. The DMA will only apply to five U.S. tech companies – namely Google, Amazon, Facebook, Apple, and Microsoft. This is a drastic narrowing of the twenty companies initially targeted when the European Commission released the DMA last December.

Schwab’s careful exemption of any European tech company from the DMA’s ambit goes together with a defiant tone on American “partners”: “let’s not start with number 7 [gatekeepers] to include a European tech giant just to please [President Joe] Biden”, he made clear

On Twitter, when asked how he would justify such overt discriminatory, anti-American stance in light of well-traveled rules of international trade, Schwab bizarrely advertised a book sold on Amazon (sic!) written by U.S. Senator Josh Hawley (R-MO), “The Tyranny of Big Tech”:

To refer to a book plagued with mistakes and false claims written by a populist senator to justify an overtly discriminatory treatment against American tech platforms is not only a weak argument, but it’s also no argument at all

EU officials need to go back and read French journalist Jean Jacques Servan-Schreiber’s classic 1968 bestseller, The American Challenge, when he warned that “One by one, U.S. corporations capture those sectors of the economy most technologically advanced, most adaptable to change, and with the highest growth rates.” But Servan-Schreiber didn’t call for an attack on U.S. firms; he called for Europe to get its house in order. He wrote, “Nothing would be more absurd than to treat the American investor as ‘guilty’ and to respond by some form of repression.”

Servan-Schreiber was right then; he is right now. So many well-known positive solutions exist in Europe.  For instance, we need a Digital Single Market with one regulation at the EU level instead of 27 regulations fragmenting the internal market. Does the DMA avoid regulatory fragmentation? Not at all. It worsens it by allowing national regulations to be adopted in each Member State atop the DMA. We need a strong capital market for European tech companies –a “European NASDAQ”. Does the DMA help create an urgently needed capital market for European tech companies? Not a single word in the DMA about how European tech entrepreneurs could compete by scaling up with capital injections. The European NASDAQ may probably emerge from outside Europe, in London or New York.

Rather than positive policies, the DMA channels EU fear and insecurity into attacks on U.S. companies, thereby undermining the prospect of an EU-U.S. tech partnership. As the knives get sharpened, Europeans may expect no transatlantic partnership.

Ideally, a transatlantic tech partnership would spur collaborations between governments and companies to rebalance the rising Chinese tech industry. With optimal innovation policies, Chinese state-sponsored and state-affiliated tech companies may be held in check. The U.S. alone and the EU alone may not effectively squash the multiple concerns a Communist dictatorship muting into a tech champion raises for tech democracies.  We need a transatlantic tech partnership. Today, the EU proposal is not credible, even more so with the DMA. 

When will a transatlantic digital peace come to fruition? The French writer Victor Hugo once wrote in 1849:

A day will come when we shall see those two immense groups, the United States of America and the United States of Europe, stretching out their hands across the sea, exchanging their products, their arts, their works of genius […] And to bring about that day will not take another 400 years, for we are living in a fast-moving age”.

Hugo was right then; he is right now: We are living in a fast-moving age. And yet, we have a divided Europe stretching no hand across the sea but raising barriers through regulations rather than exchanging their work of genius through collaborations. Let’s make Hugo’s prophecy accurate, and let’s not be back on the warpath but instead be back on the transatlantic innovation path! 



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