A long-awaited report by Mario Draghi, former President of the European Central Bank and ex-Prime Minister of Italy, on EU economic competitiveness has finally come out. Overall, it says that Europe needs to radically change its approach to innovation, regulation, and industrial policy to remain competitive globally, especially compared to the US and China. It may indicate a change in EU's approach to digital markets and emerging technologies, especially AI, from more safety-focused to more competition-focused, although it's not clear how consequential this will be. 

The Draghi report shows Europe is behind in AI, saying "Around 70% of foundational AI models have been developed in the US since 2017." It gives warning that "With the world on the cusp of an AI revolution, Europe cannot afford to remain stuck in the 'middle technologies and industries' of the previous century."

The report is critical of regulatory barriers in the tech sector, particularly for young companies. It notes that "the EU now has around 100 tech-focused laws and over 270 regulators active in digital networks across all Member States." It says that many EU laws take a precautionary approach, which can hamper innovation, and uses compute thresholds to illustrate this: "the AI Act imposes additional regulatory requirements on general purpose AI models that exceed a pre-defined threshold of computational power – a threshold which some state-of-the-art models already exceed."

It argues that these regulatory burdens disproportionately affect smaller companies. The report suggests that "only larger companies – which are often non-EU based – have the financial capacity and incentive to bear the costs of complying. Young innovative tech companies may choose not to operate in the EU at all."

Even with these problems, the report says that "Integrating AI 'vertically' into European industry will be a critical factor in unlocking higher productivity." It thinks AI will "reduce inventories in the automotive sector, accelerate the time to market from R&I and increase labour productivity."

To address these issues, the report recommends "The EU should promote cross-industry coordination and data sharing to accelerate the integration of AI into European industry." It proposes that participating companies "would benefit from EU funding for model development and a specific set of exemptions regarding competition and AI experimentation." Notably, it doesn't mention AI risks and safety overall. 

For what it's worth, I find Draghi's assessment mostly on point regarding the EU's lack of economic competitiveness in general, but I do worry about what it may mean for frontier AI regulation worldwide.