Over the past decade, the European Commission made tech regulation a top priority, passing a slew of new laws increasing the responsibility of platforms and attempting to thwart so-called digital “gatekeepers.” But Europe’s digital transformation is far from complete. The continent faces major challenges, from security to economic competitiveness.

A new Commission must now switch gears to ensure that Europe can compete on the world stage. That starts with tech. The continent trails the US and China in innovation and growth. Only four of the world’s top 50 tech companies are European. Catching up means embracing tech, not denigrating it, and dropping dreams of European digital sovereignty in favor of digital solidarity with democratic allies.

Task One: Take a Regulatory Pause

Over the past decade, the EU passed a series of impactful laws including the General Data Protection Regulation (GDPR) for privacy, the Digital Services Act (DSA) to combat illegal content, the AI Act for artificial intelligence, and the Digital Markets Act (DMA) to reign in “gatekeepers” blocking access to digital markets. After this tsunami of digital regulation, the EU needs to focus on innovation and implementation rather than new regulation.

The whirlwind of legislative activity relegated impact assessments to box-checking exercises, conducted and reviewed by the European Commission. Independent analysis should be performed to calculate and minimize the costs of excessive regulation.

This is not the time to pass more laws that may conflict with existing policies. It is the time to assess and focus on implementation. Enforcement needs to be improved. Compliance continues to differ from country to country, with national regulators often fighting with each other. Irish regulators approved Meta and other US companies’ plans to comply with GDPR privacy rules, only to be overruled by their German and French counterparts. Many of the digital service coordinators for the new Digital Services Act have yet to be appointed.

Task Two: Drop Digital Sovereignty, Embrace Digital Solidarity

Europe can’t go it alone when it comes to building a competitive tech sector. The new economies of scale required by AI and data aggregation require solutions that European companies will be challenged to provide. The danger is that Europeans will look to China to fill these needs, which would be a mistake.

Such a move would be self-defeating, as the only hyperscale cloud suppliers come from the US and China. Another priority should be taking Chinese equipment out of sensitive mobile phone networks. The best way to achieve this expensive but needed goal is to use the new US and Asian-developed Open RAN technology for mobile phone networks. Europe should emphasize collaboration with democratic allies.

Donald Trump’s election and his America First policies have renewed European calls for digital independence from the US. Some say Europe needs its “own technology stack.” Others insist, “Europe must learn to stand on its own two feet.”

These reactions, while understandable, are misguided. Despite potential transatlantic turbulence, Europe will only succeed in building tech winners by competing against and working with Silicon Valley. It will not meet its competitiveness challenge by discouraging innovative new technologies.

Task Three: Make the Digital Single Market a Reality

If transatlantic ties become an exercise in damage control, Europe must move by itself to boost its competitiveness by completing its much-ballyhooed Digital Single Market. Originally proposed in 2015, it has never been completed. Digital platforms still deal with national borders and national taxes. Plans for a so-called 28^th regime, a single European-wide corporate statute, remain blocked.

The European Union continues to lack a single capital market, making it difficult for companies to scale up. Access to capital is vital for scale-ups. Plans for an “Investment and Savings Union” should be accelerated. 

The EU is a very large market of nearly 500 million citizens. Untapped potential for European companies exists – if policymakers move away from excess regulation to encouraging innovation.

Task Four: Align on China 

The EU must accept that China and the US are not the same. Positive signs have emerged that Brussels is overcoming its historic reluctance to confront Beijing. The EU recently imposed tariffs on Chinese electric vehicles and is investigating whether Chinese wind turbines disrupt fair competition. The Netherlands responded to US pressure by forcing its flagship semiconductor supplier, ASML, to stop shipments of its most advanced technologies to China.

But Europe remains divided. Germany, with extensive business interests in China, remains cautious and whittled down the EU car tariffs. Berlin has moved slowly to remove Chinese companies from telecom networks providing key infrastructure. Other European countries, led by the Trump favorite Hungary, are welcoming billions of Chinese electric vehicle investments. Europe needs to align internally in confronting the China Challenge.

Task Five: Take Security Seriously

Technology is critical for security and defense policy. Securing vulnerable supply chains represents a key element of “derisking.”

Importantly, security is no longer a dirty word in Brussels. Former Italian Prime Minister Mario Draghi’s report on competitiveness is required reading. “Green transition” is out, and “security” is in. Three Commissioners-designates have the word security in their job titles. 

Brussels already surprised many by agreeing to impose strict export controls against Russia after the Ukraine invasion. If the US turns inward under President Trump, Europe will have to take the lead, doing its best to surprise the world by coordinating controls against Russia and China, protecting data flows, and securing reliable supplies of critical minerals.

Task Six: Unleash Artificial Intelligence

A favorable regulatory climate for AI is also necessary. The EU has passed a legally binding AI Act, while the US has focused on voluntary commitments and presidential executive orders.

Regulatory uncertainty on AI in Europe is slowing the rollout of AI products and services. Lack of clarity over European copyright rules represents a hurdle for European AI companies. If it proves impossible to loosen its restrictions on AI, Europe should at least simplify regulations to facilitate compliance.

Task Seven: Look for Small Wins with Washington

While it may prove difficult to deal with President Trump, Europe should try. Instead of racing ahead with regulation, it should propose to get ahead of the curve and attempt to coordinate transatlantic regulation on emerging technologies.

A good test case would be quantum computing. Both Europe and the US are investing billions in this highly advanced computing that could break existing encryption protections. Before the technology is deployed, the two sides could attempt to agree on the rules of engagement and guidelines, and better still, cooperate in building these very expensive machines.

A full-scale transatlantic free trade treaty seems out of the question, but deals remain possible, particularly on recognizing product standards. Consider medical devices. Companies currently must gain regulatory approval separately in Europe and the US. An agreement to allow US-approved products into Europe and EU-approved products into the US would unlock millions in savings — and speed up the distribution of life-saving products.

To many Europeans, these hopes seem like wishful thinking with Donald Trump in the White House. A reflex reaction in Brussels may be to retreat into disaster control. That would be a mistake. It will be important to keep communication alive and attempt to make progress on restoring European competitiveness.

Dr. Alina Polyakova is the President & CEO of the Center for European Policy Analysis.

Ronan Murphy is the Director of CEPA’s Digital Innovation Initiative.

Bill Echikson is a non-resident Senior Fellow at CEPA’s Digital Innovation Initiative.

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.