Transatlantic Technology Policy Pipeline 2023
Tensions to continue over the Inflation Reduction Act: The United States and its allies, especially the EU, will work to quell tensions over the Inflation Reduction Act’s “Buy American” provisions. These include tax credits for electric vehicles assembled in North America and requirements for critical minerals to originate in the United States or a country with which it has a free trade agreement. The EU believes that such provisions discriminate against European companies. Other allies, such as South Korea, which has a free trade agreement with the United States, protest that the provisions violate World Trade Organization rules. The United States and the EU have established a task force on the Inflation Reduction Act to address the bloc’s concerns. Efforts to resolve these disagreements illustrate the strains among supporting domestic industry, accelerating a green transition, and working with allies. The talks will set the tone for future cooperation on technology and trade issues.
Can the Trade and Technology Council (TTC) resolve digital challenges? The TTC’s capacity to move toward US-EU agreement on key technology issues will test the body’s usefulness when it meets again in mid-2023. Priorities established at the council’s December 2022 meeting include coordinating third-country information and communication technology and services (ICTS) projects, beginning with those involving Kenya and Jamaica; cooperating on emerging technologies, notably through a newly agreed joint artificial intelligence (AI) roadmap that will inform approaches to risk management and trustworthy AI; establishing an agreed-upon early warning system for semiconductor supply chains to catch and mitigate disruptions; advancing principles of internet freedom illustrated by the Declaration for the Future of the Internet; and bolstering efforts such as the Transatlantic Initiative for Sustainable Trade to increase sustainability and information-sharing on medical devices, protect the privacy of shared health information, and implement strategies for dual-use technologies. Despite transatlantic collaboration on a range of issues, tensions remain, most notably on the approach to export controls and the extent to which the TTC should focus on countering China.
New agreement—and legal challenges—ahead on transatlantic data flows: US President Joe Biden issued an executive order in October 2022 to expand privacy and civil liberties protections for data transferred between the United States and Europe. The European Commission has until March 2023 to ratify the US commitments, and senior European officials express confidence in their durability. Austrian privacy activist Max Schrems, however, has all but announced that he will challenge any commission approval in the Court of Justice of the European Union (CJEU). The United States and the EU are seeking to replace the previous Privacy Shield mechanism governing transatlantic data flows since the CJEU invalidated it in 2020. They appear close to finding a successor, but it may not last.
US and Europe will seek to expand their semiconductor manufacturing: Following global semiconductor shortages and decreasing domestic chip production, the United States and Europe invested heavily in the semiconductor industry. The US CHIPs and Science Act, passed in August 2022, provides $52 billion in funding for the research, development, and manufacturing of semiconductors in the United States. In early 2023, the Commerce Department will begin soliciting applications for these funds. Companies have already announced their own new investments in semiconductor production, but the law’s geopolitical impact remains uncertain. The EU’s proposed Chips Act, which lags its US counterpart in enactment, aims to bolster European competitiveness and resilience in semiconductors by fostering a doubling of European manufacturing of high-end semiconductors to 20 percent of the global market by 2030. Final legislation is expected early next year. Some industry leaders doubt that the €43 billion in funding is sufficient to achieve the 20-percent target.
Export controls and sanctions will thwart Russia’s war effort, but EU-US approaches to China differ: Wide-ranging sanctions on key technologies, including semiconductors, have already impacted Russia’s war effort. The country’s situation will become more desperate in 2023 as an inability to replenish high-tech equipment persists. However, some European governments and key firms, such as ASML, a linchpin in the most advanced chip-manufacturing equipment, are not entirely in line with US strategy toward China.
Europe to explore new approaches to financing internet communications infrastructure, testing its commitment to net neutrality: The European Commission is considering requiring large content providers, such as YouTube, Netflix, and Disney+, to pay internet service providers for the physical infrastructure used to deliver content to customers. The plan has received widespread criticism for its perceived violation of net neutrality rules and the lack of a guarantee that payments would lead to increased infrastructure investment by telecommunications companies. The EU model under consideration requires only certain content providers to pay a fee, and this may also violate the EU’s open internet regulation.
US seeks to close the digital divide through broadband investments: The Bipartisan Infrastructure Law and American Rescue Plan earmarked a combined $90 billion in funding and investment for high-speed internet access. The funding will support state and local efforts to construct new broadband infrastructure and provide internet access assistance to households, schools, and libraries.
US and EU move forward on AI guardrails, and research and development: The White House will build on its October 2022 Blueprint for an AI Bill of Rights through federal agency action. The blueprint identifies five principles that should guide the design, use, and deployment of automated systems: the right to safe and effective systems; protection from algorithmic discrimination; the right to data privacy; notice of usage of automated systems and explanation of their potential implications for users; and the ability to opt out of such systems and choose human alternatives, when appropriate. The Department of Education is expected to release in 2023 recommendations on AI in educational technology as the Consumer Financial Protection Bureau plans to combat algorithmic discrimination in the financial sector. With congressional regulation on AI unlikely in the near term, look to federal agencies for efforts to establish AI guardrails that still ensure innovation.
Meanwhile, the EU will likely finalize its AI Act, establishing a product safety framework for developing, commodifying, and using AI based on tiered risk categories. It will create a process for government oversight of high-risk AI systems, such as those that impact health or access to education, and of transparency requirements for AI systems that interact with people. The transparency requirements and enhanced scrutiny of high-risk AI will have global impact and come as AI has made significant advances in recent months. The ChatGPT chatbot and DALL·E 2 image generator have become available, illustrating the potential for these technologies amid their wide adoption by the general public.
Platform regulation takes center stage at the US Supreme Court: The Supreme Court granted certiorari to two major Section 230 cases. In Gonzalez v. Google LLC, the family of an American victim of a 2015 ISIS attack in Paris alleges that Google-owned YouTube’s algorithms recommended content from the militant group. The family also argues that the exception to Section 230 immunity for federal criminal cases also applies to civil cases brought under criminal statutes, such as the Anti-Terrorism Act, which is the basis for the family’s legal action. The Supreme Court will now consider whether Section 230 liability protections cover platforms’ algorithmic content-recommendation systems. In Twitter, Inc. v. Taamneh, the court will consider whether a platform with general knowledge that a terrorist organization uses its service can be liable. US Supreme Court Justice Clarence Thomas has signaled support for stripping away some Section 230 protections. Although many see lower court rulings as affording platforms overly broad protections, concern exists that platforms would implement excessive content moderation policies if liability protections are curbed.
The Supreme Court will also likely take up two content moderation laws from Texas and Florida to address a circuit court split. The Texas law bans large social media companies from removing content based on opinion. The Florida law prohibits social media companies from suspending the accounts of political candidates. Depending on the outcome of Gonzalez v. Google LLC and Twitter, Inc. v. Taamneh, a ruling that upholds the Florida and Texas laws could put platforms in a catch-22. They would face penalties for not removing enough content and for removing too much content. The fate of the Florida and Texas laws may also set the stage for a patchwork of dramatically different content moderation laws between red and blue states.
House Republicans will target platform content moderation efforts: Likely House Judiciary Committee Chair Jim Jordan (R-Ohio) has accused online platforms of quashing conservative voices and signaled that he will subpoena Meta CEO Mark Zuckerberg to address concerns that the company suppressed content damaging to Joe Biden’s presidential campaign. Rep. James Comer (R-Kentucky), the likely chair of the House Oversight Committee, called on former senior employees of Twitter to testify about the company’s handling of a New York Post article on Hunter Biden’s laptop.
Platform regulation accelerates in the EU: The EU is gearing up to enforce its Digital Services Act (DSA), potentially sparking a showdown with Twitter. The DSA entered into force in November, designating “Very Large Online Platforms” and “Very Large Online Search Engines” (those with more than 45 million users), and triggering a four-month period in which those large companies must complete additional compliance requirements, including risk assessments. The commission’s Directorate-General for Communications Networks, Content and Technology is hiring experts for enforcement. Meanwhile, the timing could prove tricky for Twitter, which recently shuttered its Brussels office, perhaps making the company unable to fulfill some DSA compliance requirements. EU officials have already cited Twitter as a potential first test case for the DSA.
Privacy legislation could unite a divided Congress – but don’t hold your breath: The American Data Privacy and Protection Act received broad bipartisan approval in committee and is likely to be reintroduced in the new Congress. The legislation would limit the types of data companies can collect, restrict targeted advertising, and provide consumers with transparency on usage of their personal data. But the bill has stalled due to concerns about enforcement and the potential preemption of California and Colorado privacy laws.
United States to put its shoulder to the wheel on internet freedom: The United States and more than 60 global partners signed the Declaration for the Future of the Internet, signaling their commitment to uphold a single, global, open internet that fosters competition, privacy, and respect for human rights. The document counters data localization efforts and declining internet freedoms. The United States has brought new partners on board since the declaration’s April 2022 launch, including South Korea, which confirmed its readiness to endorse the declaration in May, and Chile, which endorsed it in November. The United States will seek additional signatories in 2023, with Mexico, Norway, and South Africa among the most likely candidates.
The United States will also assume the chair of the Freedom Online Coalition, a group of 35 governments “committed to work together to support internet freedom and protect fundamental human rights”. The coalition recently condemned Iranian restrictions on internet access during protests following the death of Mahsa Amini. US Secretary of State Antony Blinken has announced that Washington intends to expand the coalition’s membership, make it a “center of action for ensuring a free and open digital future”, and build on the work of Canada, as 2022 chair, on internet connectivity, digital literacy, freedom from censorship and shutdowns, and online safety. The Freedom Online Coalition could become a primary avenue for countries to fight internet censorship and shutdowns, such as those in Iran and Russia in 2022.
Meanwhile, at the second Summit for Democracy, slated for March 29–30, 2023, the United States and more than 100 partner countries will present their progress in advancing technology for democracy since December 2021’s inaugural summit. Ongoing summit work includes the creation of the Global Partnership for Action on Gender-Based Online Harassment and Abuse, innovation challenges for privacy-enhancing and anti-censorship technologies, and USAID support for global advocates for democracy-affirming technology and data protection. GMF Digital co-chairs the work on “harnessing the potential of technology for the benefit of open, democratic societies”.
Competition enforcement grinds on: Europe’s Digital Markets Act (DMA) will start to apply, giving the European Commission broad enforcement powers. The DMA requires “gatekeepers” of “core platform services”—search engines, app stores, social networks, video-sharing platforms, communications apps, and cloud services—to allow space for competing products and to promote interoperability. DMA rules will become applicable in May and begin the process of designating gatekeepers. Once designated as such, gatekeepers will have six months to be in full compliance with the DMA, as it will be enforced as of spring 2024.
Congressional inaction on antitrust issues likely to continue: Two antitrust bills, the American Innovation and Choice Online Act and the Open App Markets Act, appear unlikely to advance. The former aims to stop technology giants from favoring their own services over those of smaller rivals, while the latter focuses on preventing large app stores from self-preferencing and allows the sideloading of apps and alternative payment systems. The bills received some bipartisan support in committee but are not on the calendar for the remainder of the session.
Judicial action is trying to fill the void. Lawsuits on both sides of the Atlantic have targeted core elements of technology firms’ business models, such as advertising, app stores, and contracts with third-party sellers. Regulators, for their part, have increased merger scrutiny in recent years. The Federal Trade Commission and Department of Justice Antitrust Division have promised to more closely review acquisitions and address discriminatory power. They recently moved to block Microsoft’s acquisition of Activision Blizzard. But a Supreme Court case on federal agency powers could limit the agencies’ power. As a result, state attorneys general could become particularly important in ongoing cases against Google, Amazon, and Meta.