The European Union has significantly changed global technology rules with recent regulations such as the Digital Services Act, Digital Markets Act and Artificial Intelligence (AI) Act. However, to remain competitive in the global technology race and harness the social benefits of technology, the regulatory environment must be fit for purpose. Now is the time to focus on innovation, digital simplification and investment, not new regulations.
The EU needs a holistic approach to its digital rulebook. Many of its legislative actions are prudent and encourage responsible business practices. But companies don’t need to hire more lawyers than engineers just to comply with EU legal requirements. As policymakers, we need to streamline and clarify our laws to reduce regulatory duplication and bureaucratic burden, especially for small and medium-sized businesses.
Delivering innovation
We need to shift our focus to enable innovation. Europe needs to attract top talent and balance risk-based AI legislation (which categorizes certain technologies into four risk levels: unacceptable, high, limited, or minimal) with efforts to accelerate the adoption of AI by businesses and the public sector. The development and use of AI tools is important to strengthen Europe’s competitiveness and improve the quality of health care and other welfare services.
Sandboxes (environments designed to test new technologies) can be an important tool, but they are not sufficient when there is general overregulation. AI laws need to be pragmatically enforced based on an understanding of the business case for the technology, and regulators need to avoid applying rules too harshly.
This article is part of Congress’ latest policy report, Regulating Technology Without Stifling Innovation.
Simplify your digital rulebook
Europe’s digital rulebook must be regularly evaluated to ensure it is fit for purpose and does not add to the burden on businesses. AI laws need to be incorporated into a future digital “omnibus” aimed at streamlining existing laws and making them easier for businesses to implement. Enforcement of AI laws requires legal clarity, particularly in relation to high-risk requirements.
Duplication and conflicting interpretations in broader digital law must be removed. These problems are exacerbated by national gilding (the extension of EU directive powers when transposed into member state law) and regulatory fragmentation. The EU’s General Data Protection Regulation (GDPR) is just one area that could benefit from simplification and more uniform application.
increased investment
The EU must increase investment. Europe has a strong talent pool, universities and start-ups, but funding remains severely delayed because too few companies are scaling up in the region. In 2024, the US led the world in private AI investment with $109 billion, while Sweden, the EU’s highest-ranking country, came in fourth with $4.34 billion.
We need to invest more in research, mobilize private capital and perfect savings and investment associations. If we want a European champion in this field, we need a favorable investment environment for venture capital.
The EU should not enact new digital legislation unless it offers significant competitiveness benefits or addresses clear legal gaps identified through impact assessments. More laws and regulations will only make it more difficult for European companies.
The European Commission’s withdrawal of the AI Liability Directive is a great start to simplification. The AI Act is already reducing the burden it places on businesses. Existing frameworks such as the AI Act and the Product Liability Directive should be evaluated before adding new layers of liability.
Good legislation should be proportionate and technology-neutral. Rules should not overlap. Instead, AI-related provisions should be integrated into existing laws to make digital law enforcement viable.
This creates predictability for businesses and people and ensures that EU law is future-proof and does not stifle innovation.
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