Earlier this month, the European Union unveiled its rather unimaginatively named European Technological Sovereignty Package. One imagines that had this been a proposal emanating from the US Congress, it would have had a punchier and more bombastic name; the Safeguarding America Act or some such. Name aside, though, the package was certainly ambitious. As European Commission President Ursula von der Leyen explained:
We cannot afford to depend on others for the technologies that keep our hospitals running, our energy grids stable and our services secure. This is about protecting our citizens, defending our interests and making our own choices. Europe has the talent, the research excellence, the industrial base and the Single Market. Together, we must turn these strengths into technological sovereignty.
A series of planned measures aims to generate more European autonomy in areas such as chips, cloud computing and other aspects of digital infrastructure. The overall goal is to reduce dependencies on other countries (notably in this case, the United States) and to build economic resilience.
In a more geopolitically tumultuous world, and a world in which the Atlantic alliance certainly seems shakier than it has for decades, such proposals are hardly surprising.
And nor, a cynic might note, are they an especially surprising package of proposals to be emerging from Brussels. There has long been a deep vein of thought in Europe which argues for the promotion of European champions in various industries and seeks, whether possible, to shield European sectors from global competitive pressure. One person’s ‘building economic resilience’ is, after all, often another’s ‘non-tariff barrier protectionism’.
What is much more interesting is not that European leaders are suggesting such an agenda, but that European conomic experts increasingly think they are making a solid case.
Asked first whether “EU countries’ current reliance on non-European digital infrastructure – including cloud computing, AI, microchips, software and data centres – carries substantial economic risks in the medium term”? 80% of respondents, weighted by confidence, either agreed or strongly agreed. As Franklin Allen of Imperial College London put it, “given the current geopolitical situation, it is very important Europe has its capabilities in these areas”. Or, as Jan Pieter Krahnen of the Goethe Institute Frankfurt, explained: “in the age of geopolitical (and geo-economic) rivalry, the dependency on several basic technological inputs creates a classical hold-up situation that not only limits Europe’s value added services, but also creates choke points that restrict international policy options”.
Asked next whether, “By securing critical supply chains (such as advanced semiconductors), scaling local cloud data centres and funding open source alternatives, the EU’s technological sovereignty package will substantially reduce economic risks in the medium term?” 68% – again weighted by confidence, either strongly agreed or agreed, although with around one third of the panel uncertain.
Finally, the panel was asked whether such measures would not only increase resilience but would also increase growth? Asked whether “by securing critical supply chains (such as advanced semiconductors), scaling local cloud data centres and funding open source alternatives, the EU’s technological sovereignty package will substantially increase the long-term productivity and innovation capacity of European tech firms”? This time around, support was weaker but still present. Weighted, once again, by confidence, just over half of respondents expressed agreement, while around one third were uncertain.
On this third question, many panellists offered up some illuminating views. For Olivier Blanchard of the Peterson Institute, there was a clear trade-off at play, “likely to be some cost in developing our own products. So, on net, may decrease expected growth rate, but increase resilience”. A point echoed by Kjetil Storesletten of the University of Minnesota, who argued that “the advantage of technological independence is mainly to reduce geopolitical risk. Expected growth is probably maximized by relying on US technology”.
As Pol Antras of Harvard, who was uncertain, noted: “it may be VERY expensive to do so, so this will entail its own economic risks” (his emphasis).
The recent poll is worth viewing in conjunction with several others over the last year. It was notable, for example, in February that support for a Digital Euro (or more technically a European Central Bank-launched central bank digital currency) was both high and, in most cases, explicitly tied to the need to safeguard European payment systems and financial sector autonomy. Equally notable in April, the panel was much more supportive of calls for ‘Buy European’ rules in certain sectors than your columnist expected them to be. In May, the panel was much more divided on the question of using merger policy to help build European champions than, I expect, would have been the case a decade ago.
In other words, notions about building more domestic economic resilience, avoiding economic chokepoints, removing the economic leverage of other countries and – in general – a wider economic security agenda are all gaining more support amongst the European experts. In the more volatile world of the 2020s, the kinds of things which would have been dismissed as simple protectionism a couple of decades before are now being taken more seriously.
