Is the EU's fragmented regulation of artificial intelligence (AI) hindering its own development?
Recently, nearly 50 company executives, researchers, and industry organizations, including Facebook's parent company Meta CEO Mark Zuckerberg and Ericsson's President and CEO Brje Ekholm, jointly wrote to the European Union, stating that "due to inconsistent regulatory decisions, Europe faces the risk of further falling behind in the era of artificial intelligence
This open letter is not intended to challenge the newly enacted EU Artificial Intelligence Act, "said Nils Rauer, a partner at the law firm Pinsent&Mason in the UK." The focus is on data. Every AI based application needs to have full access to data. This starts with model training and runs through the entire lifecycle of the product
The EU's General Data Protection Regulation (GDPR), which has been in effect for over 6 years, has become a target of public criticism in the joint letter. The joint letter states that if companies and institutions want to invest billions of euros in building generative artificial intelligence for European citizens, they need a clear and consistent set of rules for application, and allow them to use European data.
Associate Professor Zhang Longtian from the School of International Economics and Trade at Central University of Finance and Economics stated in an interview with First Financial News that regulatory policies such as the EU's General Data Protection Regulation provide important protection for data privacy and security, but to some extent, they also increase compliance costs for enterprises and inhibit innovation vitality. He further explained, "Especially in emerging technologies such as artificial intelligence, the free flow of data is a key factor driving technological progress, and the EU's heavy regulatory environment may lead to more restrictions for technology companies, thereby reducing competitiveness
GDPR becomes a target of public criticism
GDPR requires data processors to obtain explicit consent from the data subject before using the data, and to anonymize it. There are clear regulations on cross-border data transfer mechanisms from member states to third countries, and the penalty for violations can reach up to 20 million euros or 4% of the company's global annual revenue, whichever is higher.
Tech giants such as Meta and Amazon have faced fines of billions of euros for violating GDPR by transferring EU user data to the United States.
According to a study published in May by David S. Evans, director of consulting firm Berkeley Research Group, in order to meet GDPR requirements, EU companies have reduced their data storage by 26% and data processing by 15% compared to similar companies in the United States. For enterprises, the average data cost increases by 20%.
The signatories stated that in recent years, the EU's regulatory decisions have become "fragmented" and "difficult to predict", and stated that due to the intervention of the EU Data Protection Agency (DPA), there is significant uncertainty regarding which data can be used for AI model training.
This means that the next generation of open-source artificial intelligence models, products, and services built on top of it will not understand or reflect European knowledge, culture, or language, "they said.
Previously, several tech giants, including Meta, which coordinated this letter, announced the postponement of the entry of artificial intelligence products into the European market due to concerns about compliance risks in data usage.
In May of this year, Meta announced plans to train AI using publicly available content from EU and UK users on Instagram and Facebook. The non-profit organization European Centre for Digital Rights (NOYB) immediately filed complaints with 11 EU member states, requesting the initiation of emergency procedures. Subsequently, at the request of regulatory agencies in multiple countries such as Ireland, the United Kingdom, and Norway, Meta announced the suspension of this plan and postponed the launch of its own large-scale model Meta AI in Europe.
Recently, X also announced the suspension of using data from European users to train Grok for the same reason and may face fines. In addition, Apple announced in June that it will temporarily not launch three new AI technologies, including Apple Intelligence, in the EU market. Google also postponed the launch of its artificial intelligence chatbot Bard in the European Union last year.
Zhang Longtian believes that the statement in the letter may have limited impact on the formulation of EU policies in the short term. He explained that the policy-making process of the European Union is complex and slow, involving coordination among multiple member states, interest groups, and legislative bodies. Different interests and priorities make it difficult for the EU to quickly adjust its existing policy framework. In addition, regulatory coordination within the EU often faces challenges, as member states have differences in specific policy implementation, which further delays the process of policy adjustments.
At present, the development of artificial intelligence is uneven among EU member states. France and Germany have gathered a group of the most promising artificial intelligence startups within the European Union, including Aleph Alpha, DeepL, Mistral AI, Hugging Face, and others. The report released by the European Court of Auditors (ECA) in May also showed that the two countries mentioned above have the largest investment in artificial intelligence, while four EU countries have not yet announced any AI strategies.
Turning to London?
In the open letter, the signatories also issued a warning: "Compared to other regions, Europe's competitiveness and innovation capabilities have declined
According to CompaniesMarketCap, the global ranking website of listed companies by market value, 39 Internet companies have the highest market value in the world in China and the United States, and only Spotify of Sweden is on the list in Europe. Nicolas Petit, a professor at the European University College in Florence, once said that since the birth of the Internet, there has been no "superstar company" in Europe. Digital Europe, a group representing the European technology industry, stated in April that currently only 3% of global artificial intelligence unicorns come from EU member states.
Unlike the EU's approach of strengthening regulation, the UK government has previously adopted a light touch, principle based, and 'innovation supported' approach to regulating artificial intelligence.
At the first Global Artificial Intelligence Security Summit held in November last year, then British Prime Minister Sunak said, "The answer for the UK is not to rush regulation," and stated, "We will always encourage innovation, not stifle it
According to research by venture capital firm Accel, London is already the largest center for generating artificial intelligence in Europe, with nearly 30% of emerging startups in Europe. Companies such as Microsoft and Salesforce also announced this year that they will open new artificial intelligence centers in London.
Regarding this, Zhang Longtian said, "London, as a financial technology and innovation hub in Europe, has strong academic and technological resources, which provide a favorable environment for enterprise research and development. At the same time, the investment of these enterprises will also attract more high skilled talents to enter the European market, promote knowledge sharing and technology transfer
Meta recently announced the resumption of training Meta AI in the UK using public content shared by adult users on Facebook and Instagram to ensure it reflects British culture, history, and idioms.
However, the new Labour government led by UK Prime Minister Stamer has stated that it will seek to enact appropriate legislation to demand from those committed to developing the 'most powerful artificial intelligence models'. Due to pressure to cut costs, a £ 1.3 billion artificial intelligence investment plan set by the previous Conservative government has been cancelled.
Cerys Wyn Davies, a partner at Pincheng Mason Law Firm, also said, "Companies need legal certainty and security. These are prerequisites for investing in modern technology development