AI Safety Summit: EU Flexes (Regulatory) Leadership Amidst Global Disagreements on AI Regulation
But also — EU-Australia FTA, Enlargement, ECB
Hi! This is Tuesday, 7 November 2023, and here’s the EU news you need this week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and Linkedin.
The Briefing
Last week, the first AI Safety Summit dedicated to the regulation of artificial intelligence (AI) was held at Bletchley Park, near London. It provided the European Union with an opportunity to promote its regulatory leadership, as its AI Act is nearing completion.
BLETCHLEY PARK • British Prime Minister Rishi Sunak convened 28 government representatives and a host of tech figures on November 1st and 2nd. During a recorded conversation, Rishi Sunak and Elon Musk discussed AI, with Musk describing it as the "most disruptive force in history."
The summit resulted in a joint declaration, signed among others by the EU and China, acknowledging the need to study the risks associated with the most dangerous AI applications, particularly in the field of generative AI. An international group of experts on AI, modeled after the Intergovernmental Panel on Climate Change (IPCC), would also be created.
NOT ALL ALIGNED • The President of the European Commission spoke at the summit. Ursula von der Leyen emphasized the role of the future European AI Office as a key interlocutor in global discussions on the subject, in conjunction with the AI Safety Institutes established in the United Kingdom and the United States in November 2023.
Even though all participants seemed convinced of the value of such summits for exchanging ideas, not all agree on the legislative path to take. The European proposal for the AI Act dates back to April 2021 and is expected to be adopted by the end of 2023. In contrast, the United States is in the early stages, with an executive order only adopted in November 2023. The British, on the other hand, seem to believe that regulating AI is premature, if not impossible, given the ongoing technological developments.
In the tech world, the signals have been contradictory at best. Sam Altman, CEO of OpenAI, the company behind ChatGPT, initially stated that his company would cease operations in Europe if the AI Act were to be passed. He later changed course by embarking on a global tour to encourage legislators to enact regulations and announcing plans to establish an office in France.
AI ACT • Whether there is international consensus or not, Europe is poised to lead the way and make AI a new example of the "Brussels effect," whereby companies and states around the world conform to European regulations. The European approach is currently the most advanced. The AI Act adopts a risk-based approach, where AI systems that can be used in various applications are analyzed and categorized based on the risks they pose to users.
Different risk levels entail varying degrees of regulation, up to a ban on the most harmful applications. Under the AI Act, generative AIs like ChatGPT will be subject to transparency requirements. They must indicate that the content was generated by AI, specify whether they were trained on copyrighted data, and be designed to prevent the generation of illegal content.
NEXT STEPS • Some aspects of the draft bill are still pending, partly due to the emergence of large language models (LLMs). The launch of ChatGPT in November 2022 challenged certain assumptions, including the belief that it is the application of the AI model that should be regulated (a risk-based approach), rather than the algorithm itself.
Trilogues—interinstitutional negotiations among the EU Council, Commission, and Parliament—-are nearing completion, and negotiators aim to adopt the text by December 6, 2023. If the AI Act is not adopted before Christmas, there are concerns that the timeline may slip, and its adoption could be postponed until after the European elections in June 2024.
In Case You Missed It
AUSTRALIA • For the second time since July, Australia has walked away from the negotiating table regarding a free trade agreement with the EU.
This agreement, which has been under negotiation for five years now, is expected to grant the EU better access to critical raw materials from Australia. From Canberra's perspective, the goal is to reduce dependence on China in terms of trade. One-third of Australia's exports are destined for China, while China represents 10% of the EU’s exports.
Similar to the situation in July, negotiations stumbled over the quotas for beef and lamb that Australia can export to the EU without paying customs duties. The EU had increased its initial proposal, but it still appears to be too low for Australia.
Several EU Member States, such as France and Ireland, strongly oppose the idea of revising these quotas upwards again, as they fear that their respective agricultural industries will be adversely affected by competition from Australian meats.
The post-Brexit free trade agreement between the UK and Australia, which has been in place since May 2023, has exacerbated these tensions. This agreement eliminates all UK tariffs on Australian meat, raising concerns among European producers about greater difficulties in competing with Australian producers in the British market.
"The favorable conditions of the free trade agreement between Australia and the UK, which have supplanted EU products in certain areas, have undoubtedly contributed to the EU's intransigence," commented Justin Brown, former Australian ambassador to the EU.
Despite recent progress towards a compromise, many technical details on which both parties had agreed were brought back to the negotiating table by Australia. The Australian Prime Minister eventually described the agreement as "not good enough" and put an end to the discussions, much to the surprise of European negotiators.
However, the agreement is not abandoned, and both parties are determined to finalize it, regardless of how long it takes. The future of the negotiations however appears uncertain, as the European elections in 2024 and the Australian parliamentary elections in 2025 could significantly delay any agreement.
"Like all major economies, the EU believes it has an advantage over Australia in terms of influence – it has less to gain from an agreement than Australia – and therefore, it won't feel compelled to change its position," added Brown, who is rather pessimistic about the future of the negotiations.
ENLARGEMENT• On November 2, Germany’s Annalena Baerbock proposed an innovative roadmap for the expansion of the EU.
The minister suggests ambitious reforms: the abolition of the current system that assigns one commissioner per EU country, changes to the unanimity rule, including in sensitive areas such as taxation and foreign policy, and the participation of candidate countries in the meetings of the Council and the European Council as observers.
The German Foreign Minister also proposes allowing candidate states, and especially young people from these candidate countries, to enjoy the benefits of the EU at an early stage (e.g., Erasmus for students). Germany aims to avoid "leaving a generation in the EU waiting room for the rest of their lives," recognizing the frustration caused by the lengthy accession process.
On November 8, the European Commission will release a report assessing the progress made by candidate countries, while European heads of state will decide on the possible start of formal negotiations, including with Ukraine, during the European Council on December 14 and 15.
ECB • Inflation in the Eurozone dropped to 2.9% in October, its lowest level since July 2021.
This figure is lower than economists' expectations of 3.1%. It represents a further decline from the 4.3% recorded in September. This comes after the European Central Bank (ECB) kept its reference deposit rate at 4% last week, ending a record streak of 10 consecutive rate hikes.
This sharp decline in inflation might be significantly slowed down, partly due to the Israel-Hamas conflict, which is driving up energy prices. Furthermore, inflation within the Eurozone varies greatly among countries, ranging from 7.8% in Slovakia to -1.7% in Belgium for the year up to October.
This decrease in inflation also occurs in the context of a 0.1% contraction of the Eurozone's economy in the third quarter. Data published on Monday by the German Federal Statistical Office confirmed that Germany is one of the world's weakest major economies, with its GDP declining by 0.1% in the third quarter.
Christine Lagarde has indicated that the ECB will not reduce borrowing costs before 2024, waiting for the next round of collective wage negotiation agreements with labor unions. The ECB President believes that wage growth is "critically important in determining inflation prospects."
What We’ve Been Reading
In the Financial Times, Henry Foy and Ian Johnston assess the challenge that Mario Draghi and Enrico Letta are tasked with. They are responsible for reporting on the restoration of European economic competitiveness and the future of the single market, respectively.
In a paper for the European Policy Centre, Andrew Duff provides a comprehensive overview of various proposals for the reform of European treaties.
This edition was prepared by Luna Ricci, Guillaume Renée, Kimia Vaye, Maxence de La Rochère, and Augustin Bourleaud. See you next week!