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On 1 July, the U.S. Senate voted 99-1 to remove the 10-year moratorium on state regulation of artificial intelligence from its reconciliation bill.
Artificial intelligence governance is set to become a defining issue in the geopolitics of global digital trade. The U.S. and EU, major players in the digital economy, have signaled their respective policy positions for the development, growth and governance of AI — differing notably on balancing AI innovation and development with appropriate governance frameworks and regulatory oversight.
In January 2025, U.S. President Donald Trump rescinded the former Biden administration's executive order on AI safety with the clear aim of deregulating the federal government's use of AI. In early June 2025, the U.S. House of Representatives passed President Donald Trump's spending and tax bill, which included a 10-year moratorium on all state and local laws related to artificial intelligence. The Senate, however, overwhelmingly voted to remove the proposed moratorium. The U.S. does not have any comprehensive federal legislation or regulations on the development of AI, or prohibiting or restricting its use. The result could be a fragmented approach to AI governance with states adopting varying legislative approaches to the regulation of AI.
The U.S. position stands in stark contrast to the EU, which passed the AI Act in August 2024 — widely regarded as pioneering legislation that will ensure ethical, trustworthy and responsible AI development. The European Commission is working with European standardization organizations to draft the necessary AI standards to complement the act's provisions.
This contrasting approach is not new to the digital landscape. The U.S. and EU navigated the invalidated EU-U.S. Privacy Shield's evolution to the EU-U.S. Data Privacy Framework in order to comply with data transfer requirements of the EU General Data Protection Regulation and its predecessor the EU Data Protection Directive.
As the geopolitical clash over AI governance evolves, the policy positions which Latin America and the Caribbean adopt will require careful observation in the context of the digital economy. According to the 2023 UN Trade and Development statistics on digitally deliverable services, those services made up 35% of Latin America and the Caribbean's total services exports. That compares to 65.6% in North America, 60% in Europe and 51.4% in Asia.
The 2023 Digital Government Index for Latin America and the Caribbean, published by the Organisation for Economic Co-operation and Development and the Inter-American Development Bank, noted the region made significant progress in strengthening digital government institutions to "enhance public services and improve governance through digital government strategies."
The report also noted, however, that few countries in the region are proactively engaging emerging technologies like AI, with only 22% establishing a comprehensive AI strategy for the public sector. The report also recorded that 78% of countries in the region have not "established frameworks for the trustworthy management of algorithms."
It is in this context that the region finds itself wedged between the competing policy frameworks of the EU and the U.S. on AI governance. Interestingly, most data protection legislation in Latin America and the Caribbean adopt core principles similar to the GDPR, with specific requirements varying by jurisdiction.
Since the AI Act builds on and complements the GDPR framework, Latin America and the Caribbean could naturally lean toward the EU model for developing its legislative frameworks governing AI, while leveraging existing data protection and privacy frameworks.
While there is interplay between the AI Act and the GDPR on the protection of fundamental rights and freedoms related to personal data and privacy, the AI Act's focus on AI systems creates an underlying objective linked to product liability and safety. As the act's opening recital states, its objective is to lay down a framework for "the development, the placing on the market, the putting into service and the use of AI systems."
The challenge for Latin America and the Caribbean will be whether the region will be driven by the development of AI technology and its potential economic benefits or a governance framework centered around protecting individuals' rights and freedoms, including their right to personal data protection.
The current geopolitical environment in international trade is volatile given U.S. tariff policies which have led to significant fluctuation in prices of goods and services, especially digitally deliverable exports. It will be interesting to see whether the tariff war will be a determining factor in shaping the region's position on AI governance.
The 2023 OECD-IDB Digital Government Index highlighted the region's lag in the consistent development of tools, digital infrastructure and software and noted it consequently ranks low in the design and delivery of public services and responsible and strategic public-sector AI use. The OECD's Survey on Digital Government indicated Latin American and Caribbean countries showed 22% progress as compared to 53% in the OECD in the area of implementation.
Given that countries in Latin America and the Caribbean may have to rely on U.S. imports of AI hardware to develop AI systems, the region will have to decide, when faced with the U.S.' new tariff strategy and related negotiation tactics, whether it embraces the U.S. position on AI development and regulation, seeks alternative suppliers or asserts its digital sovereignty and independence.
Jason Grant, CIPM, is an attorney from Trinidad and Tobago and served as a member of a multidisciplinary committee to fully operationalize the country's data protection legislation.
