Hopes are high for generative AI. It is expected to do nothing less than resolve the productivity crisis in...


By Jochen Ditsche and Maria Mikhaylenko
Has the European AI economy been left behind? In terms of sheer number of AI startups and levels of investment, it's clear the US leads the field, trailed by China. The new EU AI Act, and its implications for both politics and business in Europe, must be examined within this context. Will the new regulation foster a competitive European AI economy? Or will it hamper both the creation and adoption of cutting-edge AI tools?
The political objective of the EU AI Act is unmistakable: to promote trustworthy AI across Europe. Approved by the European Parliament in March 2024 and pending endorsement from the Council, it is slated to be fully enforceable 24 months after it comes into effect (with some exceptions regarding this timeline). Representing a global first, the EU AI Act establishes a comprehensive legal framework for AI, aiming to ensure the trustworthiness of AI systems within Europe and beyond. As outlined by the European Commission, the Act mandates that AI systems adhere to fundamental rights, safety standards, and ethical principles while addressing risks associated with highly impactful AI models. To achieve this objective, the EU AI Act categorizes AI systems based on their risk level into four distinct categories: unacceptable, high risk, limited risk, and minimal risk.
But what are the consequences of the EU AI Act both for companies developing AI-based systems and for the broader economy adopting AI tools?
European developers of AI systems might be able to benefit from a number of new opportunities:
However, the Act could also pose challenges for European AI developers:
Healthcare: AI medical solutions in the EU are regulated under the Medical Devices Regulation (MDR) and In-Vitro Diagnostic Medical Devices Regulation (IVDR). The proposed EU AI Act will subject certain AI healthcare applications to strict regulations, especially those deemed high-risk. Clear guidelines are needed to help manufacturers navigate compliance with both existing medical device regulations and the forthcoming EU AI Act.
Financial services: In financial services, AI-powered assessments of creditworthiness, pricing, or risk may face tighter regulations in the future due to their potential high-risk nature. Stricter norms would ensure fairness, transparency, and compliance with laws, aiming to protect consumers and maintain market stability.
Automotive: The EU AI Act could offer clear legal guidelines for autonomous driving, defining roles and responsibilities for manufacturers, developers, and operators. This could simplify regulations for the technology. However, it would also bring new requirements, such as safety standards and ethical AI guidelines, which manufacturers must adhere to.
It isn't just companies operating directly in the AI development space – the new EU AI Act also presents a spectrum of opportunities and challenges for European companies utilizing AI systems.
The opportunities include:
The potential challenges include:
Adapting to a new regulatory landscape
It is currently unclear whether the EU AI Act will foster or hamper the EU AI industry and the economy at large. Thus far, reactions to the EU AI Act have been varied. While politicians commend its ethical standards, business leaders express concerns about potentially stifling innovation.
Ultimately, the consequences of the EU AI Act will depend on how effectively it balances these opportunities and challenges, and how businesses, policymakers, and society at large adapt to this new regulatory landscape. Success in navigating these complexities could position Europe as a global leader in ethical and responsible AI development while ensuring its competitiveness in the rapidly evolving AI industry .
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