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The Battle for the Soul of the Digital Economy –An Interview with Anu Bradford on Digital Empires

This conversation is available in French, Spanish and Italian in Grand Continent, a journal published by Groupe d’études géopolitiques.

In your new book Digital Empires, you describe three competing regulatory models for the digital economy: the US model, the Chinese model, and the EU model. What are these models and how do they reflect the underlying values of each jurisdiction, in your view?  Who are the ‘digital empires’ you refer to in the title? 

In our contemporary digital landscape, the United States, China, and the European Union emerge as formidable “digital empires.” This metaphorical framing captures their role as technological, economic, and regulatory powerhouses, each shaping the global digital order in alignment with their unique values and ideologies. Just like historical empires, they extend their influence beyond borders, exporting their distinct governance models and thereby drawing other nations into their respective spheres of influence. These models, deeply rooted in each empire’s cultural and ideological fabric, represent a modern-day extension of power and influence in the digital realm.

At the heart of these empires lie three distinct regulatory models, each reflecting a different vision of digital capitalism. The US model is predominantly market-driven, emphasizing free speech and innovation with minimal government interference. This approach is grounded in a belief in the transformative power of technology for economic prosperity and societal progress. China’s state-driven model, in stark contrast, uses technology as a tool for political control, with the government playing a pivotal role in guiding and regulating the tech sector. The European Union, meanwhile, champions a rights-driven approach, where regulation is crafted to protect individual rights and ensure a fair, human-centric digital marketplace.

The American model exudes a strong faith in market mechanisms and technological optimism, advocating for a limited role for government intervention. This techno-libertarian stance views government involvement as a potential impediment to market efficiency and individual liberties. Conversely, China’s approach reflects a strategic maneuvering of technology to bolster state control and societal stability, often at the expense of individual freedoms. Here, technology serves as an instrument of censorship, surveillance, and propaganda, aligning with the objectives of the Chinese Communist Party.

Europe’s framework is distinctly different, prioritizing individual rights and democratic values within the digital economy. The EU model seeks a balance between free speech and other fundamental rights, advocating for regulatory intervention to protect citizens and ensure equitable benefits from digital advancements. This approach reflects a commitment to align technological progress with the tenets of a liberal democratic society, contrasting sharply with the American emphasis on free markets and the Chinese focus on state control.

While these models have unique characteristics, they also share commonalities in their attempt to balance market forces, state control, and individual rights. Even in the US the market-driven regulatory model has never existed in a pure form. But when making various trade-offs, the US generally leans towards market-centric solutions, whereas China prioritizes state interests, and the EU focuses on protecting citizen rights. These foundational principles shape their respective digital economies and create ongoing tensions and conflicts. Understanding these models is crucial for comprehending the complex dynamics that define the global digital landscape and its future trajectory.

You argue that the US is losing its horizontal battle against the two other models, and its regulatory model is in decline. What explains this phenomenon? 

Today’s digital economy rests on a foundation built by the United States and its leading tech companies. For more than two decades, the American market-driven regulatory model enabled large US tech companies’ international expansion. Across the Clinton, Bush, and Obama administrations, the US not only championed its values around a free market and free internet domestically, but also proactively exported those values to other countries, emphasizing the importance of those values for economic growth and societal progress everywhere. As a result, American private power is today seen everywhere. Citizens around the world communicate using US online platforms, and few individuals would want to go back to the world without these tools that enable humans to interact and share information with each other with remarkable ease.

But I believe that the US government’s internet freedom agenda sowed the seeds of its demise, causing it to subsequently wane in policy agendas around the world. Despite the genuine admiration—perhaps even jealousy—of the success of US tech companies among foreign companies and governments, these US companies have also become a subject of growing criticism around the world. The harmful effects of these tech giants’ business practices on foreign economies and societies are increasingly felt abroad, fueling discontent and accelerating demands to curtail their power and influence across jurisdictions. There’s growing discomfort with the harms associated with these companies, including abuses of market power, repeated privacy violations, the normalization of disinformation and hate speech, and the destabilization of democracies. These failures show that the US’s digital economy often falls short on its techno-libertarian promise to be the amplifier of liberal democracy and individual freedoms, questioning the long-held assumption that democracy and freedom will inevitably ensue as long as we leave technology companies alone.

However, even as US policymakers acknowledge the limits of its market-driven model, translating this awareness into effective legislation proves challenging. The techno-libertarian distaste for regulation has been sustained over the years through the persistent lobbying efforts of the tech industry. Moreover, political dysfunction of Congress paralyzes today any meaningful legislative effort, and the US judiciary might also not yet be ready for an ‘antitrust revolution’. 

Many voices in the US seem to push for a more EU-like approach to digital regulation. But couldn’t competition with China lead to a “race to the bottom”? 

The US is in a unique predicament. On one hand, there’s increasing discontent with its market-driven regulatory approach. On the other, the intense competition with other superpowers limits its capacity to enact substantial changes. In other words, the horizontal battle between different governments and the vertical battle between governments and the tech companies are deeply intertwined. The US government is reluctant to regulate its tech companies too aggressively for fear of stifling these companies’ ability to innovate as such a strategy could, in turn, weaken the US in its horizontal rivalry over technological supremacy against China. So the critical question the US faces is how to balance the need for regulatory reform with maintaining its technological edge and competitiveness in the global landscape.

What about China? We often tend to assume that it’s all about State control. But you give a more nuanced view, showing that there is a lot of room for market innovation, and—more surprisingly—EU-like rights-centered regulation emphasizing “shared responsibilities”.

It’s important to offer a nuanced view of China, recognizing that no model is absolute. There are state-driven elements in both the US and European models, and market-driven aspects in the Chinese model, with the Chinese tech sector significantly benefiting from American venture capital, not just state subsidies. 

It’s true that political control lies at the heart of China’s state-driven regulatory model. In the name of social stability, the Chinese government deploys technology to engage in extensive surveillance of its citizens while also censoring the information that those citizens can access online, employing the internet as a propaganda tool. To operate a large-scale censorship regime, the Chinese government needs the help of its tech companies, and employs both rewards and threats of punishment to secure their cooperation. These are key aspects of what I describe as the digital authoritarian model, and represent a stark departure from the American market-driven model and the European rights-driven model. 

However, China’s digital governance isn’t solely about oppression and surveillance. The government has sought to facilitate the growth of China’s tech industry. In addition to refraining from regulating the tech industry with burdensome measure, it also enacted a proactive industrial policy. It extended generous state subsidies and adopted other industrial policy measures to further accelerate the country’s technological development and to ensure China will become self-sufficient in all key technologies. For instance, the Chinese government launched a ten-year plan in 2015 known as the “Made in China 2025” program that leverages China’s state-owned enterprises to invest in strategically important technologies, while also extending generous government subsidies to domestic firms and encouraging the negotiation of technology transfer agreements with companies that do business in China. The program has been heavily criticized abroad for its protectionist goals and effects, leading the government to forgo explicit references to the program, while continuing to pursue its goals in practice. 

The Chinese government also takes consumer protection seriously and shows discomfort with companies exploiting consumer data. While it enables the use of data by the State, it imposes restrictions on what companies can do with it. This approach is evident in areas like competition law and data privacy, where there is a clear stance against exploitation of consumer rights. In this respect, there are similarities with the EU, especially in the Chinese data protection law. However, despite being modeled after the GDPR, the latter include exceptions for state surveillance.

Since late 2020, the Chinese regulatory model has taken a turn toward greater state control of the country’s tech industry, suggesting that the Chinese government is now fundamentally revaluating the bargain that it initially struck with its tech companies. It first released new, stringent Anti-Monopoly Guidelines, sending a chill through global markets. Beijing also issued new rules restricting the collection of personal information by mobile internet apps. Next, the regulators unveiled rules affecting online live-streamed marketing, which is a major trend in Chinese e-commerce. As a major piece of legislation, China’s legislature issued a monumental Data Security Law, setting out stringent data security requirements across broad categories of data, which limits cross-border transfer of such data. The amount of sweeping regulatory activity that took place within a few months in 2021 was dizzying, targeting especially fintech, e-commerce, private education, and online gaming and entertainment. In part, the newfound regulatory scrutiny reflects Beijing’s growing attention to wealth redistribution and the pressing need to pursue “common prosperity” in the face of social divisions and inequalities found in Chinese society. The government is also responding to public outrage related to the business practices of large tech companies. The Chinese government also wants to restore its own control over an industry that has grown so large that it threatens the power and influence of the state, and to steer its tech industry toward more strategically relevant sectors that can support the country’s long-term economic growth. 

Let’s now turn to the EU. How is its rights-driven approach reflected in practice?

The EU model views governments as having a central role in both steering the digital economy and in using regulatory intervention to uphold the fundamental rights of individuals, preserve the democratic structures of society, and ensure a fair distribution of benefits in the digital economy. This pro-regulation stance is not limited to the technology sector but reflects a broader view of how markets operate and what the optimal role of government is, in line with the value-based constitutional foundation of European integration. 

A good example is the right to privacy, which is codified in the European Convention of Human Rights and the EU Charter of Fundamental Rights. The General Data Protection Regulation (GDPR) sets out further detailed privacy protections and has become a global “gold standard”. The EU’s judiciary has also played a key role, expanding the scope of European citizens’ data privacy rights in multiple landmark pro-privacy rulings, including in Google Spain—better known as the “right to be forgotten” case.” 

Another example is online content moderation. Until recently, the EU has relied on voluntary regulation, for instance through the 2016 nonbinding Code of Conduct on Countering Illegal Hate Speech Online signed with several tech giants. Regarding terrorist propaganda, the EU adopted in 2021 a binding Regulation on Preventing the Dissemination of Terrorist Content Online, which seeks to strike a balance between the fundamental rights of all affected parties. To EU is also steadfast in its commitment to limit the dissemination of disinformation online, given its manifested adverse effect on democracy. The Commission developed a nonbinding Disinformation Code, which, in its updated 2022 version, has been signed by leading online platforms. The signatories voluntarily commit to measures such as increasing transparency in political advertising, closing fake accounts, facilitating fact-checking, demonetizing the dissemination of disinformation, and granting researchers access to the data to facilitate research on disinformation. To complement these existing codes and regulations, the EU adopted in 2022 the Digital Services Act (DSA), which establishes a comprehensive and legally binding transparency and accountability regime for very large online platforms regarding the content they host. 

The other important policy tool for the EU is competition law. While this tool is traditionally deployed to promote market efficiency, rather than fairness, Commissioner Margrethe Vestager’s stance is that competition policy can help in creating a more equal playing field where even small rivals can contest powerful incumbents. Some of the recent Commission decisions, such as the 2017 Google Shopping case, illustrate how this concept of fairness informs EU antitrust enforcement action in practice, both reflecting and furthering the EU’s rights-driven regulatory model. But there is also growing consensus that the EU’s existing enforcement toolkit that relies on ex post enforcement of competition law is insufficient. These investigations are time-consuming and often fail to unlock competition. Smaller rivals cannot survive in the marketplace for the decade that it can take for the Commission to collect evidence and to build a case against a dominant company. Partly in response to these concerns, the EU adopted a new ex ante regulation on competition—the Digital Markets Act (DMA)—in 2022. In describing the goals of the legislation, the Commission emphasizes that “the DMA proposal is concerned with economic imbalances, unfair business practices by gatekeepers and their negative consequences, such as weakened contestability of platform markets.”

A common criticism of the EU regulatory approach, at least in the US, is that it hampers innovation and economic growth, especially because regulation cannot keep up with burgeoning technological innovation. For instance, just as the EU package of regulations was being debated in 2022, we witnessed the Generative AI boom. Yet, you argue that this criticism is misguided. 

Indeed, a common criticism is that the EU model overdoes regulation—to the extent that it kills innovation and stifles economic progress. According to this view, while the EU may be more successful in safeguarding the fundamental rights of individuals and the democratic structures of the society, its regulatory approach will deprive societies of economic opportunities. This concern stems from a widely held belief that there is an inevitable trade-off between regulation and innovation. However, although it is true the EU has been less successful in producing leading tech companies to date, as discussed below, there are other reasons besides regulation that primarily explain this fact. 

To be sure, there is much that Europe is not getting right in terms of nurturing innovation. One significant impediment faced by EU tech companies is that they do not benefit from a fully integrated Digital Single Market that would allow them to seamlessly operate across the EU. This explains, in part, why European tech companies have struggled to build a market presence comparable to their American and Chinese rivals. Another major impediment is the absence of deep and integrated capital markets that would allow European companies to fund their innovations in Europe. Instead, EU firms often need to rely on the US capital markets for growth opportunities. Another potential reason for the absence of European tech giants is Europe’s legal and cultural barriers to risk-taking and entrepreneurship. Punitive bankruptcy laws across the EU have made failure so costly that European entrepreneurs often shy away from the kind of risk-taking required for ambitious technological ventures.

Finally, the innovation deficit in Europe can be partly attributed to the EU’s inability to attract the world’s best innovative talent through a proactive migration policy. Universities are a key entry point for immigrant talent, often leading to integration of graduates into the labor market, as seen in the US. However, there are emerging concerns, such as currently prepared Dutch legislation that might restrict Chinese students from studying in European universities. Blanket restrictions like these could hinder the movement of vital human talent. Europe should not only encourage more foreign students but also provide them clear pathways for residency and facilitate their integration into the labor markets and professional networks. Additionally, it’s crucial for Europe to be seen as a place where aspiring entrepreneurs can succeed. This involves creating a cohesive digital single market, ensuring accessible funding, and allowing fair compensation for innovations. In the US, innovators often find a more conducive environment with supportive universities, a vibrant venture capital scene, and fewer restrictions on profiting from their innovations. To make Europe more attractive for starting and growing a tech business, it’s essential to foster openness in universities and the labor market and enhance the overall startup ecosystem. By doing so, Europe can become a more appealing destination for the global talent driving technological progress.

All this suggest that choosing to regulate the tech industry in the name of safeguarding individual rights and societal freedoms is not where the innovation problem lies in Europe. This observation should also alleviate the concerns of American policymakers and other stakeholders about the expected consequences of endorsing EU-style digital regulations.

The EU has also been criticized for its efforts to set guardrails for AI. Critics have expressed concern that the EU is moving too fast with regulation at the time when there is not even sufficient understanding of how AI will evolve. Regulating fast-evolving technologies like AI is undeniably challenging, but this shouldn’t lead to inaction. While there may be a temptation to adopt a ‘wait-and-see’ approach, especially with emerging technologies like AI, this approach has its costs. Delaying regulation can further entrench the position of current market leaders, making it even harder to regulate them effectively later. The power of these frontrunners is already a challenge, and their growing influence only increases the urgency for regulation. Despite the difficulties, early regulation, even without complete knowledge of fast-moving technology, is necessary. The cost of waiting is too high, and proactive regulation is essential.

The concept of ‘future-proof’ regulation comes into play here. It is important to develop agile frameworks that can adapt to evolving technologies. This may involve granting more authority to bodies like the European Commission to interpret and adjust regulations as technology changes.

When speaking about the EU’s regulatory approach, you seem to mostly refer to policymakers in Brussels. But are all Members States on board with the same policy, or are some driving the approach more than others? 

There’s no uniform stance across all EU member states regarding the details of digital policies. While the basic commitment to fundamental rights is shared, nuances exist. For instance, France, given its recent experiences with terrorism, is more inclined towards national security exceptions than Germany, which tends to have an absolutist approach towards data privacy and fundamental rights.

Similarly, France favors a more protectionist industrial policy, advocating for technological sovereignty. This contrasts with the Nordic countries, which emphasize the benefits of global economic openness, especially for their export-oriented economies. These internal tensions are reflected in the EU model and sometimes challenge its coherence and legitimacy. For example, Poland and Hungary have in recent years compromised EU commitments to rights and democracy, undermining the EU’s credibility in advocating these principles globally.

However, these differences across member states can also sometimes lead to more balanced regulation. Since EU legislation must accommodate diverse viewpoints within the Union, it often represents a compromise, making it more adaptable as a model for various jurisdictions. This inherent need for compromise in Brussels is, in a way, a strength of the EU’s legislative process.

One important voice is now missing in these negotiation dynamics: that of the UK. Has Brexit changed the EU’s approach to the regulation of the digital economy?

The UK has traditionally been a voice for market-driven approaches within the EU. Yet, it’s interesting to note that it hasn’t diverged much from the EU’s approach post-Brexit and has implemented stringent regulations in the digital economy. Its Online Safety Bill, for instance, is in some aspects even more stringent than the EU’s DSA. The UK has also exhibited a firm stance in competition law, demonstrated by its initial opposition (yet subsequent approval) of Microsoft’s acquisition of Activision. In preparing legislation similar to the EU’s DMA, the UK shows it isn’t using its regulatory independence to dismantle rights-driven regulations. It appears to be navigating a middle path, between the US and EU models, and less inclined towards highly prescriptive legislation. Overall, I view the UK as primarily rights-driven, though it does incorporate some market-driven aspects.

But Brexit has certainly shifted the balance in digital policy debates within the EU. With the UK’s voice absent, there’s more room for the Franco-German industrial policy perspective to dominate. The free-trade Nordic coalition, technologically innovative and savvy, is trying to counterbalance these more protectionist voices. However, without the UK’s economic weight, these Nordic countries are less influential. France, on the other hand, has successfully nudged the EU towards a strategy reminiscent of China’s state-driven model, engaging in subsidy races, export controls, and investment restrictions. 

So the EU now seems to develop an industrial policy for the digital economy. Is this approach appropriate to achieve the goal of fostering the development of the tech sector in Europe, in your view?

I understand the need for greater technological sovereignty in response to complex geopolitical challenges, but I question whether Europe can achieve that sovereignty through subsidies alone. Spending billions to slightly reduce dependency on foreign semiconductors seems unsustainable. Instead, I advocate for a more creative approach to sovereignty, focusing on bolstering European technological capabilities. This could include completing the digital single market and the Capital Markets Union, enabling tech companies to scale and fund themselves within the EU. We should also reconsider overly punitive bankruptcy laws that hinder risk-taking and develop a comprehensive talent strategy to attract global talent to the EU. To me, this is far more vital and effective than resorting to costly industrial policy and harmful protectionism. 

Europeans should remember that Brussels has the power to export both beneficial and detrimental regulations. The Brussels Effect is a potent tool that could entrench protectionism as a global norm. Thus, I urge caution against protectionist regulations that have the potential to undermine, not enhance, the competitiveness of European industry.

Another interesting aspect that you point out in your book is that the three “digital empires” tend to export their models abroad. You have already argued that the American market-driven model is waning in popularity in both the US and abroad. Is China more successful? 

China’s approach to exporting its digital model is largely infrastructure-focused. This involves building key components of digital societies in various regions, including Asia, Africa, Latin America, and parts of Europe. The infrastructure encompasses 5G networks, undersea cables, data centers, and smart city technologies, including surveillance systems, as part of the Digital Silk Road initiative.

By building this digital backbone, China not only lays the groundwork for future technological development compatible with its technologies but also ensures subsequent opportunities for Chinese vendors to maintain and expand upon this infrastructure. This strategy significantly increases the presence and influence of Chinese companies in these regions.

Chinese digital infrastructure power is particularly effective because it meets a vital need for digital development in these regions. The affordability and availability of Chinese infrastructure make it a pragmatic choice for many countries, especially when alternatives from European companies may be more expensive and thus less accessible. Thus, China is skillfully expanding its sphere of influence and shaping the path of digital development in various parts of the world.

As a result, the Chinese State-led model seems to be gaining ground in other jurisdictions, as you show in your book. How much of this expansion is due to Chinese influence, rather than pragmatic policymaking by governments that recognize that they cannot foster a competitive digital economy alone, but could leverage digital technologies to entrench their power?

The world is increasingly leaning towards authoritarianism, with a growing number of governments seeking greater control over their societies. In this context, the Chinese state-driven approach often serves as a model that resonates for ideological and political reasons. Its example has proven wrong the assumption that freedom is somehow inherent in the character of the internet. China has also shown how restrictive policies can coexist with a culture of dynamic innovation. Contrary to a common view in democracies, a state-driven, authoritarian regulatory model can demonstrably sustain a dynamic culture of private entrepreneurship that can fuel technological progress and economic growth. It is these apparent features that make it difficult for the West to sustain the narrative that freedom is necessary for innovation and wealth, making the Chinese model attractive to countries seeking economic growth alongside political control.

The reasons for emulating the Chinese model vary.  For some governments, it’s an ideological alignment with authoritarianism, while for others, it’s a pragmatic decision based on their development priorities, needs, and challenges. Developing nations that need a path to digital development often prioritize immediate economic needs over secondary concerns like surveillance. In these contexts, privacy might be seen as a luxury, with citizens more focused on basic needs and physical safety.

During our previous conversation about “Brussels Effect”, you concluded by acknowledging the evolving nature of the dynamics underpinning the influence of the EU’s regulatory model abroad, especially considering the relative shrinking of the European market. Considering the recent geopolitical and economic shifts, do you observe an erosion of the “Brussels Effect” in the digital realm? Or are there new dynamics emerging that redefine its influence and scope?

I don’t necessarily see the Brussels Effect eroding in the digital realm. The EU has been able to extend its influence across the global markets by leveraging its vast regulatory power to shape foreign tech companies’ and governments’ data privacy policies. Whereas the US exports its private power and China its infrastructure power, the EU’s primary export in the digital sphere is, no doubt, its regulatory power—a form of power that neither foreign tech companies nor other governments, including the US and China, can fully evade. This regulatory power externalizes the European rights-driven regulatory model around the world, enabling the EU to play a leading role alongside the US and China in shaping the global digital economy.

Despite recent challenges, Europe has continued to introduce significant digital regulations, such as the DSA, the DMA—and hopefully soon also the AI Act—along with legislation related to climate change like the Green Deal. These initiatives are likely to continue exerting global influence. For instance, authorities’ and researchers’ increased access to information about platforms’ business models and algorithms under the DSA will shed light on these platforms’ global practices, to the extent that these companies do not develop and deploy separate algorithms for Europe. The results of those investigations will be made public worldwide, enhancing transparency and accountability in other markets as well. And, to the extent the DSA will successfully force large platforms to better prepare for systemic risks, such as election interference, these additional investments in risk mitigation measures are likely to affect these companies’ global risk management strategies. The DSA may also provide a template for other governments to pursue regulation in this space, leading to the de jure Brussels Effect, and underscoring the EU’s ability to influence foreign legislation in this domain. Already, the EU’s disinformation and hate speech codes have inspired foreign lawmakers, prompting legislative reforms. 

The EU is also paving the way for enhanced competition law enforcement in the digital economy worldwide. For instance, the EU’s multiple investigations into Google since 2010 have received prominent attention worldwide, and several jurisdictions have pursued very similar cases against Google, including Russia, Brazil, Turkey, South Korea, and Japan. Apple, Amazon, Google, and Meta were facing over seventy antitrust investigations around the world in the summer of 2021. Interestingly, over fifty of those cases were brought in the past two years, showing the growing momentum that has recently been building around the world as countries move away from the American market-driven model and embrace—if not directly imitate—the European rights-driven model. The EU is now also showing the way for governments looking to strengthen their regulatory instruments to better contain large tech companies’ market power and the harmful conduct associated with that power. The EU’s pathbreaking DMA, which was adopted in 2022, is being closely watched around the world, with several governments introducing or considering similar regulations.

Overall, there is a noticeable shift globally towards the European approach to regulation of the digital economy, especially as the allure of the American market-driven model diminishes.

But I am concerned about how Europe is utilizing this global regulatory power. There’s a trend now towards protectionism, which I caution against. For instance, if Europe starts using competition policy as a tool for industrial policy to promote European champions, as suggested in the Franco-German Manifesto for a European Industrial Policy, it could inadvertently become a major exporter of techno-protectionism. This could have unintended consequences: emerging economies may also prefer their own national champions over potential European acquirers. 

The nature of the impact of the “Brussels Effect” on global standards could change if Europe does not carefully consider the implications of its regulatory power: Europe should be mindful of how its policies are perceived and replicated globally. 

So the “Brussels Effect” seems as strong as ever for the regulation of the digital economy. Yet, as you point out, many countries are primarily concerned not about privacy and other fundamental rights, but about the economic opportunities other “digital empires” offer, especially China. The EU sometimes seems to attempt to offer a substitute for Chinese infrastructure investments, through projects such as the Global Gateway Initiative. Do you expect these attempts to be successful? 

The EU faces a unique challenge in exporting its regulatory model: it shows the path for sophisticated, rights-protective regulations, while many nations simply lack basic infrastructure and prioritize obtaining that infrastructure. The main issue with the Global Gateway Initiative is that the EU doesn’t have a financial leverage comparable to that of China. To compete, the EU would need offer recipient countries substantial investment and attractive financing conditions, which are currently not on par with what China offers, especially given the fewer regulatory strings attached to the investments granted by China.

The EU needs a cohesive European economic diplomacy, which is currently lacking. For instance, when European companies like Nokia and Ericsson offer alternatives to Huawei’s 5G networks to other countries, they rely on support from their national governments, Finland and Sweden, which cannot match the level of funding or political backing provided by the Chinese government to their own companies. European governments need to coordinate to unify their efforts at the EU level, not just in terms of funding, but also in diplomatic engagement. This involves building relationships with these countries and elucidating the implications of choosing Chinese versus European infrastructure. The EU should also recognize the necessity for capacity building and direct economic assistance to third countries as part of its digital strategy. Winning over these countries requires more than just the appeal of European ideas and values. It also needs tangible financial incentives and skillful diplomacy.

The current political, economic, and geopolitical tensions seem to bear on the appeal of the leading competing regulatory models. You have already mentioned the new-found zeal for industrial policy within the EU, which may reflect in part geopolitical concerns. Do you observe a more general trend at the global level towards isolationism?

The political environment today offers fertile ground for a kind of techno-protectionism or digital nationalism. Even before the onset of the Covid-19 pandemic, economic nationalism was gaining ground, undermining institutions that sustain market openness and rule-based international cooperation. Governments around the world are now increasingly trading economic openness for industrial policy with strong nationalist undertones. They are limiting foreign investment, restricting exports, and subsidizing domestic production in pursuit of a broader structural change in the economy. The outbreak of the COVID-19 pandemic, and now the military conflicts in Ukraine and Israel-Palestine, further reinforce these trends. This leads to a partial fragmentation of the digital economy, with restricted flows of data, technology, and investments, spurring a global quest for technological sovereignty.

But I would caution that achieving complete technological self-sufficiency is hardly a feasible goal for most countries, including the leading technological powers the US and China, given how integrated the digital economy is today. This is especially true in sectors like semiconductors, where ecosystems are deeply integrated and the costs of replication are prohibitively high. Consequently, a full decoupling in areas such as semiconductor supply chains is highly unlikely. Countries are therefore compelled to maintain a level of coexistence, despite the pressures towards decoupling.

In my book, I discuss the current dynamic as placing countries “between rivalry and restraint.” This situation encapsulates the ongoing tension between escalatory pressures and the need for de-escalation. There’s a constant balancing act between commercial interests that encourage continued economic engagement and national security concerns that impose limits on this engagement. So far, we haven’t seen an extreme shift towards either full-blown escalation or lasting truce, but instead we find ourselves constantly navigating these complex and often conflicting interests.

Considering these interdependencies, in an ideal world, the regulation of the digital economy would be a matter for multi-party—or multi-stakeholder—governance on an international scale. How do the three “digital empires” position themselves in the broader conversation about international governance in the digital realm?

The US, and to a certain extent Europe, have traditionally favored a multi-stakeholder approach to governing the digital economy. This model values the participation of both states and private entities, such as technology companies, in setting standards and governance frameworks. It’s predicated on the belief that rules developed through public-private collaboration are more effective.

China, however, has been less comfortable with this model, perceiving it as giving excessive power to European and American companies. It has advocated for moving these discussions to institutions like the UN, where states are the primary actors, and China can exert influence over developing countries. Despite its efforts, the UN has not become the central hub for these conversations, leading China to also increase its involvement in multi-stakeholder organizations and standards-setting bodies.

But there are some ongoing efforts, like in the field of artificial intelligence, where the UN is attempting to set governance frameworks. While the UN’s status as a multinational forum is advantageous, its credibility has been challenged due to the dysfunction of the Security Council and the current low trust levels among key global players. Generally, involving technologically advanced democracies such as Europe, the US, Canada, Australia, South Korea, and Japan can lead to more consensus among those like-minded allies. However, excluding a major player like China means leaving out a significant portion of development from any governance model. UN-based agreements tend to be more inclusive but often result in less profound agreements due to the diverse interests and ideologies of member countries.

It’s crucial in this area to manage our expectations. One practical approach could be the creation of a global body of independent experts, akin to the Intergovernmental Panel for Climate Change, focused on AI regulation. Such a body could advance scientific knowledge and support better governance across nations, which seems more feasible than negotiating a detailed treaty within the UN framework.

If international cooperation is not always feasible, and considering the evolving technological, economic, and geopolitical factors, do you expect the leading regulatory models to converge or to diverge further? 

President Biden’s recent Executive Order on AI Safety provides one pertinent example how the US is moving towards a European style of digital governance. This indicates a strong commitment to protecting rights and mitigating the harmful effects of AI. However, the US faces limitations in its legislative capacity due to a divided and polarized Congress, making executive orders a more viable option for regulations.

The US approach, as reflected in the Executive Order, seems to favor sectoral regulation. It aims to empower various agencies within their domains to enforce existing legislation, extending its application to AI. This method differs from the EU’s AI Act, which is horizontal in its approach and therefore binding across a wide economic spectrum. Much of the US Executive Order comprises best practices and remains voluntary for companies, making it less constraining but still indicative of the shifting US’s priorities and expectations.

There’s a growing alignment in the goals of the US and EU, which can be fostered through institutionalized dialogue, such as the one taking place in the Trade and Technology Council. This cooperation is beneficial for both sides. However, there’s uncertainty regarding the next US administration and how this might affect the current trajectory of transatlantic cooperation on regulation. The Trump presidency was a stark reminder for Europeans of the vulnerability of these relations to American electoral cycles, and there is an underlying concern about the sustainability of this collaborative approach after the next presidential elections.

You have your own views on the way in which the “battle for the soul of the digital economy” should be fought, calling for a more inclusive and democratic approach to digital governance and a new digital constitutional order. What are the key components of your desired approach to the regulation of the digital economy? And what practical steps that can be taken to achieve this goal?

Our primary task now is to demonstrate that liberal democracy can effectively govern the digital economy. This is vital, as the alternative is governance by authoritarian regimes or unregulated tech companies. In the current landscape, the US struggles with legislation, Europe faces enforcement challenges, and China enforces authoritatively. This scenario risks making the victory of the European model appear hollow if the market-driven model prevails in practice and tech companies remain ungoverned.

Despite these challenges, I want to emphasize that governments are not destined to lose their vertical battles against tech companies, and techno-democracies are not certain to fail in their horizontal battle against techno-autocracies. But governments, particularly in the US, need to reclaim and effectively deploy their regulatory authority. They have the power to rewrite laws governing tech companies, but this requires political will. 

Similarly, Europe needs to prove its ability to enforce its regulations effectively. The EU has repeatedly acknowledged that its enforcement record to date leaves much to be desired and knows that it must find a way to translate its stated values and adopted laws into concrete progress on the ground. The enforcement of new regulations like the DMA, DSA, and AI Act will be a critical test case. It will send a message about the feasibility and impact of the European regulatory model in shaping market outcomes and aligning the digital economy with democratic values. Enforcement agencies need sufficient human and monetary resources to match the power of tech companies. This involves staffing agencies with experts and empowering them to leverage their authority effectively. Regulators must strategically choose their battles, using various tools like competition laws, data privacy laws, and content moderation laws, to send clear signals to the market.

Tech companies, too, must recognize that they cannot afford to be in constant opposition to regulators. Tech companies now suffer from a deep reputational and trust deficit with policymakers and the public, making it difficult for them to take a combative stand against the regulators without triggering an even harsher backlash. Afraid of antagonizing regulators even more, tech companies are likely to pick their vertical battles and fight only some of them, while conceding others. A cooperative approach, where tech companies voluntarily work with regulators, will lead to a more predictable, governable, and stable digital economy. The shift towards a more regulated digital economy is inevitable, and embracing this change is key to creating a more democratic and inclusive digital landscape.

This interview is edited based on a conversation with Anu Bradford, supplemented with excerpted arguments as they appear in the book.