This is an excerpt from Global Counsel's latest publication Europe in the Global Economy, which can be downloaded in full here.
After years of angst about the impact of artificial intelligence (AI) on labour markets, global competition and member state pressure has driven the EU to encourage it through legislation. Despite prominent examples of AI development in Paris and other cities, the platform revolution in Europe has been dominated by American tech companies and Asian software companies. China and US start-ups, for example, comprised 87% of equity funding to AI start-ups globally in 2017. Attempts at European responses through public funding have been complicated by competition between member states to attract inward investment, resulting in a slew of fragmented national strategies. France will allocate €1.5 billion for AI development over the next five years while the UK has committed to a package of up to €1.08 billion of support for the sector. Finland has also launched its own strategy, with Germany to soon follow.
Constrained financial firepower at EU level will mean the next Commission focussing on the power of the single market and its legislative prerogatives to strengthen global competitiveness. The “Digital Europe” programme seeks to build the market for the internet of things, by allocating €2.5 billion in funding for AI. However, this proposal encapsulates many of the limitations of Commission policymaking — high on ambition and intent but low on concrete actions, as €2.5 billion pales in comparison to the levels of funding in either China or the US. Addressing divergent rules between EU member states may be a more productive focus. The Commission’s AI Strategy has already sought to address the risk of divergence in liability rules for innovative products such as autonomous vehicles, and the incoming Commissioner can be expected to build on this with a more proactive approach to setting EU wide standards.
Even where internal agreement can be reached, successfully asserting global standards will be more difficult, and will depend on overtaking other countries through rapid innovation. EU attempts to repeat the success of its world-leading industrial standards in the online world have failed by being late to the development of new markets. The challenge will therefore be to introduce flexibility in regulation that permits innovation while also reassuring citizens about privacy and data protection. The Commission’s new high-level expert group on AI is charged with setting out policy recommendations. However, this can be expected to stir up a debate over the balance between the EU’s desire to set the world’s standard for data privacy and protection — as touted via the General Data Protection Regulation — and its ambitions for global competitiveness in AI.
EU investment in AI is thinly spread and low by international standards
European policy on AI is being driven by fear of being left behind by US and Asian competition
The European response is complicated by competition between member states to attract inward investment