Europe

The EU’s Tech Sovereignty Package seeks to reduce reliance on American technology, but by restricting access to the firms driving innovation in cloud computing, semiconductors, and AI infrastructure, it risks weakening Europe’s competitiveness and strengthening China’s position in the global tech race.

The EU has an array of discriminatory policies that target major U.S. tech firms, a legitimate basis for action under Section 301 of the Trade Act of 1974. U.S. policymakers should favor amicably negotiated solutions, but this tool is available as a last resort if necessary.

The EU is increasingly imposing digital fines based on firms’ global turnover rather than local revenue—a structure that disproportionately targets large U.S. technology companies. As other countries adopt similar regulatory models, Washington must push back before the European playbook becomes the global standard.

For policymakers to bolster their regional innovation capacity and global competitiveness, they first must know where they stand. This report benchmarks 48 regions across Albania, Bosnia and Herzegovina, North Macedonia, and Serbia on 13 commonly available innovation indicators.

EU regulations have cost European businesses about $176 billion annually, equivalent to almost 1 percent of the bloc’s GDP, and this cost doesn’t include the lost innovation and forgone growth that may have occurred if those rules were not in place.

The EU’s repair policy framework, alongside similar measures in other jurisdictions, is creating a fragmented and increasingly complex compliance landscape that disproportionately burdens American tech firms. U.S. policymakers should push for international standards that reflect diverse business models rather than defaulting to the EU’s hardware-centric approach.

While the U.S. invests heavily in AI competitiveness at home, discriminatory foreign regulations are systematically weakening American tech firms abroad, diverting resources from innovation to compliance and ceding ground to China's state-backed AI sector.

France’s sweeping effort to replace foreign technology providers with European alternatives prioritizes digital sovereignty and domestic protectionism over productivity, despite no public evidence the transition will improve government performance or reduce costs.

ITIF submits that the Commission’s proposed measures go well beyond what should be necessary for Google to comply with the DMA and will harm consumers and chill innovation in search.

Fixing the EU’s productivity, innovation, and competitiveness crisis requires a fundamental political reorientation. Until it makes that shift, expect more reports, more tinkering, and more decline.