Europe

Growing tensions between the United States and Europe over digital trade and technology regulation risk weakening the transatlantic alliance at a time of intensifying competition with China. Washington sees European rules as disproportionately targeting U.S. firms, while Europe views them as necessary to reduce dependence on American technology. Unless both sides address these differing threat perceptions and pursue regulatory compatibility, fragmentation could undermine their ability to shape global technology rules and allow China to fill the gap.

The inconsistent and flawed theories of harm on both sides of the Atlantic reflect, to borrow from former FTC Chair Lina Khan, a real “Amazon’s antitrust paradox,” if there ever was one.

The European Parliament has disabled built-in AI features on corporate tablets and phones issued to MEPs and staff over concerns that data sent to cloud services by these features presented a security risk. This decision is misguided because it does not address security risks, drives AI use into the shadows, disrupts everyday productivity tools, and imposes disproportionate costs on the Parliament’s smaller delegations.

The European Commission is challenging Meta’s decision to restrict third party AI assistants on WhatsApp, arguing it may violate competition rules. The argument here is that forcing Meta to open its platform would undermine its vertically integrated AI model, weaken incentives for continued investment, and introduce security and operational risks. At a critical moment in global AI competition, such regulatory actions could slow innovation at a leading American firm and advantage foreign competitors.

Amidst this time of increasing technological dynamism and global tensions, and given the special relationship that exists between the United States and the UK, the CMA should reassess how it can implement the Digital Markets, Competition and Consumers Act 2024 in a more light-touch way.

Global trade is evolving into a form of mercantilist economic warfare where foreign nations use discriminatory regulations to target the U.S. tech sector, draining its wealth and undermining American innovation.

European calls for “payment sovereignty” misdiagnose the problem: Visa and Mastercard lead through competition, not coercion, and a state-backed alternative would entrench protectionism instead of enabling regulatory reforms that would let European firms scale and compete globally.

The EU’s Digital Services Act (DSA) imposes the heaviest regulatory burdens on large platforms in a way that overwhelmingly targets U.S. technology companies, exposing them to disproportionate compliance costs and fines while largely sparing European firms. This discriminatory model functions as a non-tariff attack that risks weakening U.S. innovation and competitiveness, and is now being replicated globally, amplifying the strategic challenge for American tech leadership.

In a letter to the Financial Times, Daniel Castro argues that Europe’s push for “digital sovereignty,” exemplified by France replacing Zoom and Teams with a domestic platform, risks fragmenting the transatlantic digital ecosystem and weakening security and efficiency, and that true resilience comes from interoperable systems, shared rules, and cooperation among allied countries.

Matthew Kilcoyne in World Commerce Review argues that Europe’s pursuit of digital sovereignty risks fragmenting the digital economy and weakening innovation, and instead calls for coordinated, interoperable infrastructure, open data flows, and shared standards to preserve scale, efficiency, and economic growth.