California AI bill veto makes federal rules more unlikely

California AI bill veto makes federal rules more unlikely

Article tagsForecastingRegulationTelecommunicationsAmericasUnited StatesCountry AnalysisTechnology

What's happened?

On September 29th the California governor, Gavin Newson, vetoed the Safe and Secure Innovation for Frontier Artificial Intelligence Systems Act, known as SB 1047, which had passed the legislature at the end of August. The bill would have created stricter rules for AI models costing more than US$100m to train, such as mandating a kill switch or the need to take reasonable care to prevent major harm. The bill's veto by a Democratic governor in a very Democratic state suggests that it will be near impossible to pass any federal technology rules, whether relating to AI or any other areas, during the next administration, regardless of who wins the presidency and what shape Congress takes.

Why does it matter?

The bill would have created the strictest AI rules in the US, going much further than the federal Executive Order published on October 30th 2023. California itself passed one of the strictest privacy laws in the country in 2018, the California Consumer Privacy Act (CCPA), which gave residents the right to know which personal data have been collected about them, whether they have been sold, and to refuse that sale. However, no federal privacy rules have yet passed.

The AI bill had already been changed to make it more innovation-friendly before passing the legislature, but it was considered too restrictive in a state where some of the major US tech companies are headquartered. One rationale was that it would impair the US in its competition with China; however, China itself has some of the world's strictest AI rules, including the need for generated content to fit Socialist values.

The US has struggled to pass any meaningful tech regulation in the past decade, and this will remain the case. The Republican nominee, Donald Trump, has already said that he would remove the Executive Order, whereas the Democratic platform does not mention AI regulation. Even with executive backing, Congress is unlikely to pass any significant tech regulation, whether with a majority or split. This leaves the EU as the place with the strictest AI rules globally, under its AI Act.

What next?

California might pass another bill regulating AI, but thus bill would be unlikely to have much impact on the market. This means that US companies will continue to dominate the global AI and tech landscapes, and that innovation, rather than regulation, will drive US market trends. As we have seen with social media, this means that the US can perhaps benefit more from some of the positives that technology can bring, but the negatives will have a much greater impact too. Even if the catastrophic harms of AI have been exaggerated, some real harms, such as bias, privacy or lack of transparency, still exist.

The analysis featured in this article can be found in EIU's Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.

Tue, 01st Oct 2024Article tagsForecastingRegulationTelecommunicationsAmericasUnited StatesCountry AnalysisTechnology