A recent ITIF webinar on the impact of foreign regulations on U.S. tech leadership and security underscored a simple yet significant point: The time for EU-style digital regulation—if there ever was one—is over. For partners like South Korea, which stands at a crossroads in shaping and regulating its digital markets, the stakes are especially high. The only winner from Seoul emulating Europe’s precautionary, anti-innovation model is China. The losers are democratic allies.
Michael Brown, former director of the Defense Innovation Unit at the U.S. Department of Defense, highlighted how tightly intertwined technology, military capability, and economic prosperity are in today’s U.S.–China techno-economic competition. Leadership in AI, high-performance computing, and networking is no longer purely commercial—these sectors now constitute the backbone of national security. Brown warned that data localization weakens AI performance by fragmenting training sets, while short-term financial pressures in capital markets erode long-term R&D and manufacturing capacity. Sustained competitiveness, he argued, requires tax and disclosure policies that incentivize patient investment.
Stephen Ezell, vice president of global innovation policy at ITIF, pointed out that frontier innovation depends on scale, global markets, and intellectual property. Yet foreign fines and discriminatory rules drain the revenues needed to reinvest in the next wave of technologies. For example, he explained that the EU’s Digital Markets Act—designed primarily to target American firms—undermines core WTO principles of reciprocity and nondiscrimination. Similar patterns are now visible in Korea, where regulators have taken steps that risk targeting U.S. companies. Ezell stressed that what matters more than “digital sovereignty” is building digital capability and spreading advanced technologies to SMEs. He called for an allied leadership strategy spanning export controls, FDI screening, standards, R&D, and workforce development, noting the NATO Innovation Fund as a constructive model.
Christina Alfonso, president of the Council on Global Competition and Innovation, warned that heavy-handed rules by allies can inadvertently strengthen China by raising costs and slowing innovation. With data centers, submarine cables, and satellites already requiring massive capital, additional regulatory burdens risk undermining long-term infrastructure investment. Alfonso argued that forums such as the U.S.–EU Trade and Technology Council should evolve into true decision-making bodies for AI and quantum technologies. She also urged mobilizing private capital, from asset managers and pension funds to family offices, into “national security investments” that strengthen critical technologies.
For Korea, the lesson is clear: Emulating Europe’s regulatory instincts will not deliver digital competitiveness; it will only weaken the allies’ collective position against China’s techno-economic ambitions and trade threats. Following the EU’s defensive model risks isolation and lost competitiveness, while a partnership-based approach positions Korea to help shape global standards. The smart path for all democratic allies is to co-invest, co-develop, and co-regulate emerging technologies. A strategy grounded in coordination—not fragmented sovereignty or EU-style constraint—offers Korea its strongest route to innovation, security, and sustainable growth.
