KEVIN FRAZIER: Europe’s Digital Protectionism Coming For AI
When Congress convened a recent hearing on “Anti-American Antitrust,” attention centered on Europe’s Digital Markets Act and its influence abroad, from South Korea to Brazil. The testimony, however, pointed to a wider…
When Congress convened a recent hearing on “Anti-American Antitrust,” attention centered on Europe’s Digital Markets Act and its influence abroad, from South Korea to Brazil. The testimony, however, pointed to a wider trend in which foreign governments are increasingly willing to use regulation as a tool against U.S. companies leading in emerging technologies.
That dynamic is now moving into artificial intelligence (AI), where Europe is preparing to apply the same protectionist instincts to the next technological frontier. This could not come at a worse time. As China moves ahead on its technological ambitions, the West is in danger of undercutting its shrinking AI lead. There’s still time for a course correction, but that window is closing.
Europe is in the middle of the largest expansion of computing infrastructure in its history, thanks mainly to the ingenuity and investment of American firms. OpenAI is building a $1 billion Stargate facility in Norway, while Amazon,Microsoft, and Google are pouring tens of billions of dollars into new cloud and AI infrastructure across Europe, including major data-center expansions and regional AI capacity builds.
In nearly any other context, this kind of mutually beneficial, cross-border investment would be celebrated as a model of economic cooperation. But Europe has made clear that when American firms drive innovation, its instinct is not to welcome the benefits but to regulate the competition away.
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KEVIN FRAZIER: Europe’s Digital Protectionism Coming For AI - IJR
We have already seen this pattern in the cloud market, where the success of U.S. providers was met not with partnership but with a barrage of new regulations and even formal investigations, including Europe’s most recent probe into Microsoft and Amazon Web Services. The EU has offered no clear explanation of what either company actually did wrong, citing their “very strong positions” as the basis for such an unusually sweeping inquiry.
Europe frames these efforts as supporting so-called “digital sovereignty,” but this narrow view mistakes the geopolitical moment. What’s necessary now is not a go-it-alone posture, but a coalition of countries dedicated to AI that aligns with democratic values. Critically, the U.S. has refrained from penalizing EU companies with massive U.S. holdings.
A European company – T-Mobile, owned by Deutsche Telekom – controls a majority of the U.S. wireless market. Swiss giant Ericsson is widely reported to have the largest share of wireless 5G infrastructure in the United States. Nokia likewise enjoys near unfettered U.S. market access, a drastic departure from the treatment of U.S. counterparts in Europe. A similar imbalance exists in the automobile and pharmaceutical sectors, where European firms enjoy wide access to the U.S. market while limiting ours overseas.
Given this disparity, it’s hard not to suspect that the EU’s real goal is to handicap successful American businesses that outcompete their European counterparts. As of March of this year, U.S. companies accounted for 83% of all EU data privacy fines, and nearly every platform labeled a “gatekeeper” under EU competition rules is American. Several EU countries have even added digital taxes that extract hundreds of millions almost entirely from American firms.
Now Europe is applying that model to AI infrastructure.
European regulators have begun an aggressive push for “sovereign AI” – the concept that users’ data should be stored on infrastructure within the country or continent in which they reside.
Take for example, France’s SecNumCloud certification requirement. The rule, enforced by France’s cybersecurity agency, precludes any cloud company with majority non-EU ownership from providing services to the French public. The only way around this strict standard for American providers is to enter into a joint venture with a SecNumCloud-certified firm, which are nearly all French or EU-based. It’s extortion.
With France as the test case, other EU countries are considering similar regulatory tools to disadvantage U.S. firms once they are operating on European soil.
Europe justifies this posture by claiming sovereign AI is needed to rebalance an uneven digital market. But that argument collapses under scrutiny. Europe is not struggling to build data centers or attract infrastructure investment. Cloud providers expanded 167% between 2017 and 2022, France alone has secured more than €110 billion for digital infrastructure, and domestic operators like Data4, Scaleway, and Eclairion are growing aggressively.
While the reality of their growth undermines the arguments underpinning Europe’s aggressive and, in practice, anti-innovation regulations, this isn’t a battle over market share. The future of AI — specifically, whether the world comes to rely on systems supported and informed by democratic values — is at stake.
Europe’s AI rules are just the latest example of its tendency to rush ahead with policies that don’t just jeopardize its own future but do so at the expense of U.S.-based innovators. A European system designed to saddle U.S. companies with rules aimed at their defeat and hand strategic leverage to China risks long-term security for the U.S. and our allies. The Trump administration must not let that go unchallenged.
Kevin Frazier is the AI and Innovation Fellow at the University of Texas at Austin.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the 🏢Daily Caller News Foundation.
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