Europe faces mounting pressure from Washington to abandon its cautious approach to AI regulation and join a US-led semiconductor alliance, even as a major transatlantic study reveals that the real obstacles to European tech competitiveness extend far beyond the EU's rulebooks. The tension reflects a deeper misunderstanding about what's actually holding back European AI innovation, and it's creating a critical moment for how the two sides will cooperate on technology.

What Is Pax Silica and Why Does Washington Want Europe to Join?

In December, the United States launched Pax Silica, a global club designed to counter China's dominance in artificial intelligence by securing the supply chains that power AI systems . The initiative focuses on critical minerals, semiconductors, energy, and hardware. U.S. Under Secretary of State for Economic Affairs Jacob Helberg visited Brussels this week to pressure the European Union into formal negotiations about joining the alliance.

However, representatives from EU countries failed to give approval for the European Commission to begin those talks on Friday, according to Politico . Only two individual EU nations, Sweden and Greece, have signed the Pax Silica declaration so far. The Netherlands, home to ASML, which manufactures the world's most advanced semiconductor production equipment, participated in the inaugural summit but declined to sign.

"Pax Silica is knitting together the trusted network the AI race requires. Europe belongs in that network. The question is whether Brussels will let it show up," said Jacob Helberg, U.S. Under Secretary of State for Economic Affairs.

Jacob Helberg, U.S. Under Secretary of State for Economic Affairs

Is Europe Really Just Regulating AI to Death?

Helberg didn't stop at pushing Pax Silica. He also launched a fresh attack on Europe's digital regulations, claiming the EU is "regulating its way into irrelevance" . He specifically criticized the AI Act, Digital Services Act, Digital Markets Act, and Data Act as "innovation killers." This reflects a long-standing American complaint that Europe prioritizes consumer protection and competition rules over technological advancement.

But a major new study from the German Marshall Fund challenges this oversimplified narrative. Researchers conducted a transatlantic exchange in December 2025, bringing together a bipartisan delegation of US state lawmakers with European Parliament members, European Commission staff, and AI innovators . The findings complicate the familiar "US innovates, Europe regulates" stereotype that dominates transatlantic tech debates.

The study found that many EU officials actually support the Commission's simplification agenda, which aims to "radically lighten the regulatory load and related costs" and improve enforcement . The Commission's November 2025 Digital Omnibus proposal would even loosen or eliminate some requirements of the AI Act. This suggests Europe is not monolithically committed to heavy-handed regulation, despite how it appears from Washington.

What Are the Real Barriers to European AI Competitiveness?

The German Marshall Fund research revealed something crucial: regulation is not the primary obstacle holding back European AI innovation. Instead, structural barriers span the entire AI value chain, from financing to infrastructure to talent . The study identified several interconnected challenges that go far beyond what any single regulation can address.

• Fragmented Capital Markets: Europe lacks the unified venture ecosystem that fuels US tech growth, with capital spread across multiple countries and regulatory regimes rather than concentrated in innovation hubs.
• Industrial Infrastructure Gaps: The AI value chain requires investments in natural resources, network infrastructure, and manufacturing capacity that Europe has not yet coordinated at scale.
• Data and Investment Coordination: Public and private investments in AI infrastructure remain siloed, preventing the kind of coordinated ecosystem development that characterizes Silicon Valley.

The 2024 Draghi Report, a major European competitiveness analysis, highlighted regulation as a significant roadblock, but the study tour revealed that "bloc-wide obstacles far beyond regulation impact that competitiveness" . This distinction matters enormously for how policymakers should actually address the problem.

Where Can the US and Europe Actually Agree on AI?

Despite the heated rhetoric, the German Marshall Fund study identified two areas where transatlantic cooperation is genuinely possible. The first is children's safety online. Lawmakers on both sides of the Atlantic expressed universal interest in protecting minors from AI harms, including chatbot effects on mental health, AI-generated child sexual abuse material, and privacy-protecting age verification methods .

The second area involves what researchers call "AI redlines," use cases that present unacceptable risk to civil rights or national security . Examples include social scoring systems and malicious cyberattacks on critical infrastructure. Both the US and EU recognize these as areas requiring guardrails, even if they disagree on how broadly to regulate AI overall.

How to Bridge the Transatlantic AI Divide

• Launch a Structured Dialogue: US and European policymakers should establish a regular AI dialogue focused on children's safety and AI redlines, creating a formal mechanism for sharing best practices and lessons learned from both jurisdictions.
• Create a Knowledge-Sharing Repository: Establish a centralized dashboard or database managed by a neutral third party to track transparency reports, audit results, and red-teaming initiatives from both sides of the Atlantic, allowing policymakers to learn from each other's successes and failures.
• Invest in Cross-Sectoral Expertise: Both US and European legislatures should develop deeper cross-sectoral AI expertise, moving beyond traditional regulatory committees to understand the full AI value chain, from semiconductors to data to deployment.
• Reframe Competitiveness Beyond Regulation: Governments should leverage their roles as market makers to enhance competitiveness and set standards, rather than assuming that deregulation alone will solve structural competitive disadvantages.

The timing of this research is significant. The Trump administration's National Security Strategy criticized Europe's "failed focus on regulatory suffocation" just days before the German Marshall Fund delegation arrived in Brussels . Meanwhile, the EU has vowed to maintain its regulatory standards. European Commission President Ursula von der Leyen stated that "we set our own standards, we set our own regulations" .

What the new research suggests is that both sides are operating from incomplete information. American officials assume that loosening EU regulations will unlock European innovation. European officials assume that maintaining strong guardrails is compatible with competitiveness. The reality is more nuanced: Europe's competitive challenges are real, but they stem from fragmented capital markets, infrastructure gaps, and coordination failures rather than from the existence of rules themselves .

The decision on whether the EU will formally join Pax Silica remains unresolved, but the broader lesson is clear. If the US and Europe want to compete effectively against China while maintaining their respective values, they need to move past the tired "innovation versus regulation" debate and focus on the actual structural barriers that determine who wins the AI race.