What They’re Are Saying: Over-Regulation Of Firms Will Hurt U.S. Competitiveness
As Mark Jamison noted recently for AEI, “China is seeking to create national champions in tech. Europe is hoping that its regulations will ensure that the next generation of tech leaders is European.” Ahead of the White House AI meeting, below is recent commentary on the U.S. tech strategy in the context of Europe and China:
AEI’s Mark Jamison argued Europe’s response to competition has been to increase regulation of foreign services in order to protect European companies’ growth above all else. “American antitrust practices are driven by customer welfare. EU antitrust is driven by many factors, including a desire on the part of EU officials to replace US tech companies with European ones.” (Mark Jamison, “Five Myths That Cloud People’s Thinking About Tech Markets,” American Enterprise Institute, 12/19/17)
DisCo’s Isabelle Styslinger highlighted that China’s state-sponsorship has created fast growth, but state-directed support won’t foment competition and innovation over the long term. “Baidu’s vice-chairman and chief operating officer, Lu Qi, stated that, although ‘the US is still by far the best in terms of top-tier talent… China is closing the gap fast,’ thanks to the ‘infrastructure and… friendly policy environment’ President Xi Jinping’s initiatives have helped create.” (Isabelle Styslinger, “Chinese Tech Firms’ Global Rise,” Disruptive Competition Project, 4/6/19)
(“China’s Tech Industry Is Catching Up With Silicon Valley,” The Economist, 2/16/18)
AEI’s Jim Pethokoukis believes America should embrace the challenge from global competitors – pressure to compete is the marketplace mechanism for innovation. “Nor should we be against China advancing its tech prowess. In an internet-connected, globalized economy, national economies gain from each others’ advances. As Harvard’s Amar Bhide argues in The Venturesome Economy, ‘the expansion of the global supply of cutting-edge research, regardless of where it originates, is a good thing.’ America’s global tech competition doesn’t have to be a zero-sum game. Indeed, given the interdependent nature of American and Chinese companies, policymakers must make sure it isn’t. The only realistic path forward for America is to continue to push the technological frontier and race ahead of competitors. That primarily means it needs to continue to do what it does best: Create bold and innovative new tech firms that will eventually become tech giants.” (Jim Pethokoukis, “How America Can Win Its Tech War With China,” The Week, 4/20/18)
MIT researchers found overregulation would have negative consequences for innovative startups, stifling competition. “Our results suggest that the commonly used consent‐based approach may disproportionately benefit firms that offer a larger scope of services. Therefore, though privacy regulation imposes costs on all firms, it is small firms and new firms that are most adversely affected. We then show that this negative effect will be particularly severe for goods where the price mechanism does not mediate the effect, such as the advertising‐supported Internet.” (James Campbell, Avi Goldfarb, and Catherine Tucker, “Privacy Regulation And Market Structure,” Journal Of Economics & Management Strategy, 2/10/15)