So lets take a concrete example. Let's imagine Facebook moves out of the EU in order to skirt EU law. How do they now operate in the EU? How do they make any money from the EU users?
If the EU has neighbors who have nukes, then that is a threat to the EU, and the EU needs their own nukes for deterrence. This far I follow. If the EU has neighbors who have lax data privacy laws, then that is their problem - it's not a problem in the EU because they can be barred from running businesses in the EU. Can they store the data from EU users who visit their online services? Sure. But they will have to offer free services to entice EU users to visit, because they can be blocked from running business in the EU. I don't see the business model for keeping this up.
They train off EU users' data irrespectively. Now the EU has to contend with not having LLMs (which may be fine, we don't yet know) or relying on a foreign foundation model.
Governments (probably rightly) view ai technology as strategic so will build legal regimes that improve ai. This means that they will have power over the ones that don’t.
The last 50 years have shown pretty clearly that nuclear disarmament was a strategic mistake for regimes that did it so they won’t make the same mistake with ai.