Can the EU’s Dual Strategy of Regulation and Investment Redefine AI Leadership?

The following is an excerpt of an op-ed published by Pour Demain in Tech Policy Press. The article provides nuance to the innovation vs regulation debate, and charts a path forward for EU tech sovereignty and trustworthy AI adoption.

Office of European Commission in Brussels. Shutterstock

Beyond sharing a pair of vowels, AI and the EU both present significant challenges when it comes to setting the right course. This article makes the case that reducing regulation for large general-purpose AI providers under the EU’s competitiveness agenda is not a silver bullet for catching Europe up to the US and China, and would only serve to entrench European dependencies on US tech. Instead, by combining its regulatory toolkit and ambitious investment strategy, the EU is uniquely positioned to set the global standard for trustworthy AI and pursue its tech sovereignty. It is an opportunity that Europe must take.

Recent advances in AI have drastically shortened the improvement cycle from years to months, thanks to new inference-time compute techniques that enable self-prompting, chain-of-thought reasoning in models like OpenAI’s o1 and DeepSeek’s R1. However, these rapid gains also increase risks like AI-enabled cyber offences and biological attacks. Meanwhile, the EU and France recently committed €317 billion to AI development in Europe, joining a global race with comparably large announcements from both the US and China.

Now turning to EU AI policy, the newly established AI Office and 13 independent experts are nearing the end of a nine-month multistakeholder drafting process of the Code of Practice (CoP); the voluntary technical details of the AI Act’s mandatory provisions for general purpose AI providers. The vast majority of the rules will apply to only the largest model providers, ensuring proportionality: the protection of SMEs, start-ups, and other downstream industries. In the meantime, the EU has fully launched a competitiveness agenda, with the Commission’s recently published Competitiveness Compass and first omnibus simplification package outlining plans for widespread streamlining of reporting obligations amidst mounting pushback against this simplified narrative. Add to this the recent withdrawal of the AI Liability Directive, and it’s clear to see which way the political winds are blowing.

So why must this push for simplification be replaced by a push for trustworthy market creation in the case of general-purpose AI and the Code of Practice? I’ll make three main points: 1) Regulation is not the reason for Europe lacking Big Tech companies, 2) Sweeping deregulation creates legal uncertainty and liability risks for downstream deployers, and slows trusted adoption of new technologies and thereby growth, 3) Watering down the CoP for upstream model providers with systemic risk will almost exclusively benefit large US incumbents, entrenching dependency and preventing tech sovereignty.

Read the full article here

For questions, please reach out to our EU AI policy co-lead Jimmy Farrell at jimmy.farrell@pourdemain.eu.