European autonomy in technology is about freedom to operate through strategic ownership, collaboration, and access

By Willem Jonker, CEO of EIT Digital

During the past decade, Europe started to realise that its freedom to operate in technology got increasingly narrower in deep tech areas like digital, energy, or pharmaceuticals due to a combination of dominant non-EU players and increasing geopolitical tensions. This has led to a European debate on technology sovereignty and strategic autonomy, to strengthen Europe’s position in key technology areas.

The need for such strong European position is widely recognised, but many raise at the same time concerns that efforts to achieve technology sovereignty and strategic autonomy for Europe may lead to increased protectionism and isolationism.

We argue that strategic autonomy in technology is about freedom to operate, and that such freedom is achieved through collaboration rather than isolationism. The path towards enhanced European sovereignty in digital starts with a thorough analysis of existing and emerging key technologies, and an assessment of their strategic importance for Europe in terms of required ownership, co-ownership, or guaranteed access.

The meaning of tech sovereignty

Depending on who you ask, the terms “technology sovereignty” and “digital sovereignty”, discussed in the framework of “strategic autonomy”, enjoy different interpretations. Princeton University’s Miguelángel Verde Garrido defines it as the “alignment of information and communications infrastructure and technology to the laws, needs and interests of the country in which users are located.” Germany’s Fraunhofer Institute describes it as “the ability of a state or a federation of states to provide the technologies it deems critical for its welfare, competitiveness, and ability to act, and to be able to develop these or source them from other economic areas without one-sided structural dependency.” Fraunhofer’s study positions this definition in contrast to more restrictive ones of comprehensive technology autarky that questions the international division of labour and globalization and aims at providing every technology classified as critical.

Calls for enhanced European technology sovereignty are not a new phenomenon, but the dependence on global supply chains and non-European hard- and software providers became increasingly apparent during the COVID-19 pandemic and its negative impact on international trade and transport. 92% of data from the West is hosted in the US. And there are no European companies in the Top 20 of global tech brands. These are among some of the facts that motivated in March 2021 the prime ministers of Estonia, Finland, Denmark and Germany to call on the European Union to speed up "digital sovereignty" and the completion of the "digital single market".

In her State of the Union address on 15 September 2021, European Commission President Ursula von der Leyen stressed again the importance of investing in European tech sovereignty. Pointing specifically at the dependence of Europe’s economy on semi-conductors, von der Leyen presented a proposal for a new European Chips Act.

At the same time, there are growing concerns that European tech sovereignty may lead to protectionism and isolationism. The European Council on Foreign Relations acknowledged that to protect an open multilateral order, Europeans need to promote new rules permitting them to take action against countries that undermine the international system. Europe must, however, not relinquish its rules-based approach or lapse into protectionism. Industry association BusinessEurope emphasised that “the common understanding [of tech sovereignty] needs to be improved. There are merits in discussing this further, but there are fears as well that the concept could be misused for unilateral, protectionist approaches.” The Institute for Security Studies recognized the EU’s ambition to diversify its trade and build sovereignty in key digital technology areas, but cautioned that it could not do so while abandoning market openness.

In a 2020 report, Brussels think tank ECIPE warns in this respect about isolationistic and protectionist approaches as “favoured by the EU’s two largest countries will have a disproportionately negative impact on Europe’s smaller open economies, whose companies and citizens could be deprived from cutting-edge technologies, new economic opportunities and partnerships on global markets, undermining these economies’ development and international competitiveness. Any EU-imposed technology protectionism along the lines suggested by some policymakers in large EU Member States would leave the entire EU worse off. It would disproportionately hurt countries in Europe’s northern, eastern and southern countries more than the large countries whose economies are generally more diverse than Europe’s smaller Member States.

We return to the definition of technology sovereignty by the Fraunhofer Institute focussing on the ability to develop or source technologies from other economic areas without one-sided structural dependency. If Europe wants to achieve digital sovereignty or autonomy, the relevant questions to ask are, what are the essential technologies critical for Europe’s welfare, competitiveness, and ability to act, and is Europe able to develop them, should Europe own them, or ensure guaranteed access to them without becoming one-sided structural dependent?

The complexity of technology ecosystems

These questions are not easy to answer. Technologies are seldom self-contained or stand-alone. Complex technologies are often composed of many components and are deployed in complex system environments in which they interact with other technologies. Digital systems are often a complex combination of hardware and software.

To get a better understanding of the challenges of digital autonomy and ways for Europe to achieve this, consider some of the digital technologies that are currently seen as vital for Europe: AI, cybersecurity, big data and cloud, mobile technology, semiconductor technology, quantum computing, and photonics. These technologies have different characteristics, complexities, dynamics, and varying European positions. Also, there are all kinds of interdependencies between these technologies. And to complicate matters even further, strategic digital autonomy is not only about the digital technologies themselves, but also about the ability to apply digital technology in other sectors, such as mobility, logistics, industry, finance, health etc.

Considering the reality of hyperconnected international innovation systems and economies, and the complexity of digital autonomy it becomes immediately clear that Europe will not be able to realise digital autonomy in isolation on its own. Europe’s challenge is to achieve technological sovereignty that enhances its competitiveness and position in the global economy without turning the continent into an isolated, seemingly protected island that is disconnected from the rest of the world. For that to happen, Europe must work on a much more in-depth analysis of its dependence on technologies and map out a comprehensive and sustainable long-term strategy rather than reacting in a relatively ad hoc manner to short term phenomena. The starting point for Europe’s approach must be a deep understanding of technological developments, of existing vital and emerging technologies and their role for the European economy and society. Thorough assessments will allow Europe to categorise the relevant technologies, determine which of them we ought to own, share with others, or simply need access to, and develop strategic positions for the respective technology sectors.

Own, share or access

Technological autonomy brings together geopolitics and industrial value chains. In our global world most industrial value chains are covering multiple geographies. Digital technology is no exception. On the contrary, digital technology is not only global, but also drives globalisation. The key industry players in digital technology are often indicated as big tech. Therefore, an important aspect of digital autonomy is the relationship between governments and digital technology, that is often provided through big tech. This relationship between governments and big tech is complex and one of mutual dependency. The making and shaping of the digital society is a constant interaction between governments, that develop, deploy, and enforce the regulation framework that governs the digital domain, and big tech, that delivers digital products and services that create the digital world and needs to comply with these regulatory frameworks. Especially in the digital domain technological developments are going so fast that often digital technology is deployed before proper regulation frameworks are in place. As a result, big tech has a big influence on the frameworks that governments will put in place. The relationship between big tech and governments varies across the three power blocks US, China, and the EU, however all these blocks can interfere with big tech business in the context of geopolitics. Having strategic big tech companies within your borders gives serious geopolitical leverage. So, when we speak of owning, sharing, or accessing specific technologies we mean having a certain control over the industry that delivers this technology, which often is determined by the geographic location of that industry. Next to the production side, there is of course the market side. Governments do have regulation power over their markets. And especially large markets do give governments leverage towards technology providers.

Owning a critical digital technology means having the industry that provides that technology within your borders. Note that ownership is not exclusive. Other governments may have other industry providers of that technology within their borders as well. Ownership in this definition does also not mean full control. Control can be exercised in different ways, ranging from the government as shareholder to government as regulator. An alternative to owning is sharing, which means governments joining forces on industries that deliver technology critical for their welfare and competitiveness. Both owning and sharing are long term efforts and require strategic planning and endurance in implementation. In cases where owning or sharing is not an option, securing access remains. In this case there is more dependency since access might be stopped unilaterally.

Europe’s current approach towards digital sovereignty

The European approach towards digital sovereignty is a combination of regulation and innovation. Through regulation Europe is addressing the creation of a digital domain where rights of various stakeholders are balanced and respected. Most known are GDPR, and more recent the DSA and DMA. GDPR is considered a leading initiative and sees follow-up across the world. The European regulation is leveraging the Digital Single Market strategy. While Europe is well positioned with respect to regulation, on the innovation side there are more concerns. Since the beginning of this century Europe has been largely absent when it came to the creation of the new digital industry. Europe is starting to address the digital innovation side of the coin. Based on the strong European research infrastructures, also in digital, increasingly initiatives are deployed to increase the market uptake amongst others through the creation of new industry players. Examples are the EIT, the EIC, and the new Digital Europe Programme. According to EU Commissioner for Internal Market Thierry Breton, Europe’s technological sovereignty from external players (in particular in cyberspace) rests on three inseparable pillars: “computing power, control over our data and secure connectivity.” To support sovereignty in these crucial areas, the Digital Europe Programme aims to boost the EU’s innovation power and to increase investment amongst others in AI, supercomputing, cybersecurity, as well as digital skills.

Artificial Intelligenceis a technology area in which Europe has strong research and talent, and a strong evolving regulatory framework. But for many reasons, Europe is underperforming when it comes to rolling out AI. A fragmented digital market, difficulties in attracting human capital and external investment, and the lack of commercial competitiveness led to Europe lagging behind globally. A recent working paper of the European Parliament Special Committee on Artificial Intelligence therefore clearly stated that “to level the competitive playing field and catch up with the US and China in terms of AI investment, the EU needs to forge strong alliances worldwide with likeminded partners and overcome regulatory divergences revolving around privacy rights, data flows and taxation.”

In super computing, through its European High Performance Computing Joint Undertaking, the EU invests €7 billion for the 2021-2027 period to deploy in the EU a world-class supercomputing and data infrastructure. However, Europe is still far from self-sufficient in this area. Germany recently unveiled a powerful quantum computer in Stuttgart. The facility would be run by the Fraunhofer Institute, but is built by US big tech firm IBM. And to date, the U.S. and China still hold most patents on quantum computers and related technology.

Another recent initiative is the earlier mentioned European Chips Act. Microchips made in Europe represent less than 10% of today’s European market. And despite the EU’s plans to increase the domestic production capacity it is questionable whether the necessary volume can and in fact needs to be reached in Europe. Caution is voiced: “the European Chips Act requires acknowledgement that decoupling of the global semiconductor value chain is an illusion. European interests are best served by an open ecosystem that remains focused on attracting investment, accelerating innovation and adding market value. Diversification and mutual interdependence promote resilience and prevent one-sided dependencies."

GAIA-X is another relevant example, demonstrating Europe’s efforts to retain control over its data. The initiative develops a federation of data infrastructure and service providers for Europe, allowing for sovereign data exchange over sovereign data infrastructure, based on European rules and regulations. The ecosystem is also open to non-European actors, but these must respect the European regulatory framework. The role and influence of these non-European actors has led to a debate within GAIA-X.

Other related and relevant initiatives are the European Battery Alliance and the European Raw Materials Alliance. Through its raw materials initiative and the European innovation partnership on raw materials, the European Union tries to ensure fair and sustainable supply of raw materials from global markets on the one hand, to enhance sustainable supply of raw materials from within the EU on the other, and aims at improving resource efficiency and supply of 'secondary raw materials' through recycling.

The way ahead towards Europe’s digital sovereignty

The essence of a successful approach to digital sovereignty is to work on both sides of the coin along the same principle: freedom of choice. For the regulation side of the coin this means creating a fair digital marketplace with balancing stakeholder interests and avoiding dominant digital players. For the innovation side of the coin this means creating freedom of choice through support and development of digital industry players in core digital technologies.

Since the development of regulation is at the heart of governments’ competency, this is still the more manageable side of the coin. And Europe is making significant progress here. The more difficult side of the coin is the digital innovation strategy given the reality of complex and hyperconnected international industrial ecosystems.

When it comes to innovation and digital, Europe is making significant steps. Digital is next to climate one of the two top priorities of the EU and its member states. Also, there is a growing focus on entrepreneurship and innovation ecosystems that support the creation of new industries, based on the observations that Europe has a strong research and technology base, while at the same time it should step up significantly when it comes to bringing research results to the market.

The first step is to build a strong consensus on what digital sovereignty or digital autonomy concretely means. This requires a deep analysis of the European position on various digital technologies that should cover the relative position of Europe towards non-European actors and should include aspects like EU R&D strength, EU industry strength, EU talent base and skills levels. Not only should such analysis cover the technology itself but take the complete industrial value chain into consideration, including that of critical subcomponents. The analysis should both cover the current state in terms of own, share and access, as well as the desired state. The outcome of this analysis should serve as the basis for the innovation priorities of the EU and its member states, including choices on who does what.

To realise these priorities, effective Public-Private-Partnerships are needed to complement public sector efforts – and to ensure that investments are channelled into the most impactful strategic technologies. The private sector will have to take responsibility and play a significant part in financing and developing capabilities, especially in cases where it is considered vital to  own a technology.

At the same time Europe should foster strategic relationships at a global level to share or get access to technologies or vital components. Without such collaboration, Europe would have to completely own and control a wide range of technologies, and such approach would go way beyond our continent’s capacity and capabilities. It would, not at last, be an underestimation of the creativity and economic power of the rest of the world. To successfully foster such relationships Europe should carefully analyse its objectives and strengths, and the way it wants to avoid one-sided structural dependency.

Europe has demonstrated that it is capable to team up behind critical technologies to achieve a strategic position. Successful examples include Airbus, the Galileo satellite navigation system, and the European Space Agency ESA. More recently the European Battery Alliance and the Raw Materials Alliance were established to enhance Europe’s position in these areas. In addition to these coalitions, the EU set up various initiatives to strengthen Europe’s position in digital technologies, such as the Key Digital Technologies partnership.

While these initiatives certainly help to increase the overall digital competitiveness of the EU and its member states, they are often hampered by complexity due to the large number of stakeholders involved. This then often leads to diffusion of objectives and outcomes, and as a result does not bring about the global digital industry players that Europe lacks.

In order to achieve digital autonomy and drive the emergence of global digital industry players from Europe, we need technology, talent, investments, and markets. Out of these four, Europe is strong on technology and talent due to its competitive research and education systems. When it comes to investment, Europe needs to catch up with research and step up its efforts in digital innovation and digital entrepreneurship. And when it comes to markets Europe has to further speed up its efforts on the Digital Single Market.

However, all that is not enough to obtain digital sovereignty or autonomy. For that to achieve, combined private and public investments of critical mass are needed to build specific global digital industry players. For the European Commission and the Members States’ governments this requires a much stronger alignment behind public investments for the development of concrete digital industries by the EU and its members. Only such concerted effort will enable Europe to succeed in its common goal to achieve digital autonomy.

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