Because it's very hard to compete against monopolies when there are network effects. What you can do is regulate them. The US government has been working very hard in the last decades to prevent that.
Recommended: https://pluralistic.net/2026/01/01/39c3/#the-new-coalition
I don't think the thing holding back Europe's tech market is that the US encourages allies to not allow backdooring proprietary software, or the cries that it's unfair that the US doesn't strangle their own tech market with equally burdensome regulation. The problem Europe's tech industry has faced is that the EU killed it in the crib with regulations, and now there's more fear of "what if there are bad side effects in being successful" than there is fear of never being successful.
Yes, it'd be great if there was a thriving market of mid-sized EU tech companies working in a well-regulated and consumer friendly market. There just isn't, though. I'm generally a fan of Doctorow, but the idea that the EU is just a few hackers reverse-engineering a new client for teams/youtube/whatsapp away from that world is hard for me to see.
"Encouraging allies" is a pretty damn generous interpretation of it.
Regarding what's "holding back Europe's tech market", I think that Europe has a different culture. Not having big monopolies is a feature, not a bug. In that sense, the regulations don't fail.
But it is very difficult to compete with monopolies unless you become one and lock your position. If the regulations prevent that (and again, that's a feature), then it becomes impossible.
Trying an analogy:
If we impose strict animal welfare rules on our own chicken farmers, that's a feature. But if we then allow unlimited imports of cheaper chicken raised with no such rules, it becomes unfair to our farmers, doesn't it?