Foreign Regulators Increasingly Squeezing U.S. Tech Firms and Even Consumers

Regulatory action overseas increasingly is chilling competition from U.S. tech firms while hurting American consumers, regulatory and trade policy experts said Tuesday during an American Consumer Institute (ACI) panel discussion focused on EU regulations and tech competition with China. Legislation like the EU's Digital Services Act and AI Act subjects U.S. firms to "aggressive" investigations and allegations of competitive harm, said Tirzah Duren, ACI vice president-policy and research.

U.S. firms are finding themselves stuck between conflicting regulatory obligations from the EU's General Data Protection Regulation, its Digital Markets Act and the AI Act, said Kristian Stout, International Center for Law and Economics (ICLE) director-innovation policy. The net result is skyrocketing compliance expenses, he said. In addition, the EU's regulatory approach is cumulatively functioning as an industrial policy that helps big European firms maintain market dominance because they have the resources to stay in compliance while startups and new entrants don't. Panelists said compliance difficulties also chill competition from U.S. firms

Mercatus Center Research Fellow Matt Mittelsteadt said the global outage of Microsoft systems that a software update from cybersecurity company Crowdstrike caused (see 2407190025) was partly due to EU rules that required Microsoft to give third-party security software access to Windows.

Turning to the ransomware attack on UnitedHealth subsidiary Change Healthcare that affecting hospital billings and led to denials of care earlier this year, Mittelsteadt said the rising volume and sophistication of cybersecurity attacks are leading to "big showstopper attacks" that affect U.S. consumers.

Arguably the Biden administration's most potent step in international tech regulation is its aggressive export controls on semiconductor manufacturing equipment and certain chips, as well as financial controls on quantum computing-related technologies, said Mittelsteadt. While those steps are likely succeeding in countering China and other nations, he added, smuggling as well as loopholes that chip manufacturers exploit are somewhat undermining export controls. ICLE's Stout said while U.S. policy is focused on denying China access to the most cutting-edge chips, which are needed for advanced AI models, it still "can do a lot with last-generation chips."

ACI Technology Policy Director Logan Kolas said the next presidential administration must engage more in international tech policy issues that affect American consumers. It might rethink the tariff-heavy approach, he noted. Simon Lester, nonresident fellow at the Baker Institute, said U.S. tech-related trade agreements are hampered because of disagreements between political parties and among federal agencies.