On July 18, we hosted an event, “The Costs of Making Way for DMA,” where experts highlighted the implications for American national security, privacy, and economic growth if countries around the world follow Europe’s lead in regulating American online marketplaces. Non-discrimination rules in trade agreements are a cornerstone of continued free trade and innovation. Laws like the European Union’s (EU’s) Digital Markets Act (DMA) and Digital Services Act (DSA) are examples of sweeping regulatory frameworks that could undermine the non-discrimination principles we have with our trading partners. Under the guise of promoting competition, these laws target American companies for having large enterprise values and penalize them for not complying with new regulations around opening their code and allowing malware to remain on their platforms. The first-order costs of these laws could be between $22 billion and $50 billion on American companies, without considering second-order effects like those targeted companies passing on this cost to other businesses that depend on their services. Especially since DMA includes rules that force large platforms to carry software they believe could be problematic, legal challenges will proliferate for companies of all sizes.
“You’re going to have the law department, not the engineers, deciding what you move forward.” – Shane Tews, Nonresident Senior Fellow, American Enterprise Institute
This event featured three policy experts in the areas of trade, national security, and innovation to discuss the effects of these laws on American companies of all sizes. In addition to the costs to large and small businesses, penalizing American platforms and software leaves the door open for competitors based in China to seize market share and influence. The norms that the United States and European countries have built prioritize fairness, competition, and freedom, whereas online marketplaces owned partially by the Chinese Communist Party (CCP) would be compelled to prioritize surveillance and authoritarianism.
“If you’re worried about American or European surveillance laws, you should be really worried about a world where China wins and is surveilling the world.” – Jamil Jaffer, founder and executive director, National Security Institute
Our panelists explained the importance of non-discrimination rules in trade and the way that DMA would undermine crucial cybersecurity safeguards. Opening up codes and requiring access exceptions for any reason would weaken encryption and invite malicious hackers to steal valuable data.
“You can’t sort of leave a backdoor open on encryption. Either there is a backdoor, or there is not, and a backdoor is really a front door.” – Shane Tews
Find the rest of the conversation on our YouTube channel. And find our white paper on DMA here.