By: Joseph Murgida
The Center for Strategic and International Studies (CSIS) recently released a study examining the significant financial toll that EU digital regulations have inflicted on American businesses. Large regulatory costs for businesses forces them to pursue revenue to pursue other ways of offsetting these costs, such as raising costs and laying off workers. The study’s conclusions ought to warn American lawmakers about the pitfalls of pursuing similar digital regulations within this country.
The clearest takeaway from this study is that raising cost burdens on technology companies have unforeseen ripple effects that affect other industries across the economy. The study found that the EU’s Digital Markets Act and Digital Services Act “conservatively entail some $22 billion to $50 billion in new compliance and operational costs to U.S. digital services providers and force them to forego critical business opportunities, such as being able to leverage proprietary data to develop new goods and services or even to offer European firms bundled services.” The study also noted that “If U.S. digital services raised their costs on U.S. companies by just 5 percent due to EU regulation, U.S. companies could incur over $97 billion in new costs.” Thus, the effects on US industries from these additional regulations expand beyond tech to every company and user that utilizes these services to increase their own productivity or for other beneficial purposes.
These additional costs, or preparations for them, may have contributed to layoffs occurring throughout the technology industry. The economically fragile state of these companies has also motivated them to hold off on hiring workers for open positions until they have confidently found the worker willing to get hired for the lowest wages and minimal benefits. Hiring practices that prioritize cost reduction over talent retention is a policy that companies only pursue when they cannot afford the benefits of attaining specialized highly skilled workers. Layoffs and recruiting policies geared away from finding top talent is a double whammy that will create a more dangerous online environment for users, as evident by multiple cross-industry cuts to the “trust and safety” teams of these companies.
Worse yet, the study finds that “the European Union’s gatekeeper designation criteria come across as uniquely targeted at U.S. companies [and] would privilege Chinese tech companies… making Europe vulnerable to Chinese cybersecurity and national security threats.” Recent acts of Chinese aggression make the importance of not overregulating US firms even more apparent.
European regulations have done enough to help China at the expense of American companies and consumers. American legislators should not exacerbate the burden on its own companies by replicating these burdensome, costly and harmful regulations. Any US bill that parallels the EU’s Digital Market Act and Digital Services Act must be rejected, as the existing bills are doing enough damage to American companies from across the pond.