Europe's Quest for Technological Sovereignty: A Feasible Path Amidst Global Rivalries

[Celerity]

The European Union must pursue robust industrial policies to counter technological dependencies and safeguard its future prosperity and stability.

https://www.socialeurope.eu/europes-quest-for-technological-sovereignty-a-feasible-path-amidst-global-rivalries



The era of unbridled hyperglobalisation, characterised by a relaxed attitude towards dependencies on other countries’ resources, productive capacities, and technological competencies, has ended. Recent global disruptions – from critical product shortages during the COVID-19 pandemic to energy price surges following Russia’s invasion of Ukraine, and the intensifying geopolitical and geoeconomic rivalry between China and the United States – have forced the European Union to reassess its traditionally liberal approach to trade, investment, and technology. A surge in protectionist policies, coupled with the pervasive influence of Silicon Valley’s “surveillance capitalism” and the increasing willingness to weaponise economic dependencies, now threatens the EU’s autonomy and sovereignty. This is particularly critical in areas vital for its future prosperity and stability, such as the green and digital transitions, and healthcare. The erosion of domestic productive and technological competencies due to outsourcing and offshoring, leading to the expansion of efficient but fragile, highly concentrated, and often China-centric global value chains, is now recognised as a primary concern demanding industrial policies previously considered undesirable.

Consequently, economic and, specifically, technological dependencies have become a significant threat to both the EU’s economy and its autonomous policymaking. As the Draghi-Report aptly acknowledges, “If the EU does not act, we risk being vulnerable to coercion.” Countries with strong technological foundations benefit from path dependencies, positive dynamic scale effects arising from accumulated knowledge, and crucial network effects, particularly in digital technologies. Thus, technology-gap models of economic development suggest that a lack of competencies in key technologies can precipitate a vicious circle of relative decline and divergence.

From Technological Dependence to Technological Sovereignty?

Given that mastery and availability of technologies are essential for a successful twin transition and sustained productivity growth, technological dependencies are viewed as a significant source of structural vulnerability for the EU’s socioeconomic development. In 2019, former Internal Market Commissioner Thierry Breton cautioned against an “over-reliance on foreign technology in strategic sectors of the economy”. He advocated for the EU to strive for “technological sovereignty”, a concept initially applied to digital technologies, such as 5G, but since extended to other critical technologies.

A widely accepted definition proposes that technological sovereignty is a jurisdiction’s ability “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.” This does not equate to national autarky, as sourcing technology from abroad remains a viable option. In the case of imports, technological autonomy is achieved when there are no non-competing imports of goods and services related to key technologies. This implies that domestic firms should be capable of providing substitutes and surge capacity for key technologies in the event of supply chain disruptions or geopolitical tensions. While this may incur short-term static inefficiencies and costs, it is essential to retain the “ability to act” in accordance with European values in a world marked by geopolitical conflict and assertive national self-interest. More broadly, technological sovereignty can be considered a prerequisite for the wider concept of economic sovereignty, which in turn underpins the EU’s objective of strategic autonomy.

snip

Table 1: Performance of top 1000 world leading firms in R&D, 2005-2023