Dealing with the geopolitical consequences of technological developments
by Alice Pannier, for the Dutch Parliament
Last updated 10 February 2021

The US-China technological competition and challenges for Europe
Any examination of the geopolitical issues associated with current technological
development must grapple with the context of the return of a “great power competition”
between the US and China. Technology underpins their competition in all dimensions: a
commercial problem is combined with a security problem and with a societal problem. In
other words, technological developments are both a cause and a consequence of
geopolitical competition. The US-China competition has accelerated since around 2016-2017,
in the context of the Trump Administration and of Beijing’s “Made in China” strategy on the
other hand. The recent US sanctions against Chinese companies that resulted from bilateral
tensions have had indirect effects on European companies and global value chains. Therefore,
Europe can hardly stay out of these tensions.
The sharp differences between the US and the Chinese technological policy models
suggest that they, individually, pose very distinct sets of challenges to Europe. Both the US
and China are economic competitors to Europe and dominant in different segments of the
global tech market, but the US model poses mostly privacy problems while the Chinese model
poses primarily security risks and ethical problems. The Covid crisis has further demonstrated
the essential role of digital technologies in ensuring the continuity of social life, businesses
and administrations. In Europe, both factors have accelerated the reflection on the need for
a degree of European sovereignty over data and technologies.
Indeed, the competition between the two powers and the critical importance of
technologies mean that Europe has no choice but to do what it has long avoided doing,
which is to play power politics (even if through the EU’s “normative power” or “market
power”). Therefore, Europe is in the process of design its own technology model, which,
although it logically is close to the US, still diverges from the former, due to differences in
political cultures between Europe and the US, as well as competing commercial interests.
In approaching the global tech competition, however, Europe is faced with
difficulties to which China and the US are not. Firstly, while the US and China are engaged
in a bilateral race with each other, the EU, for its part, is caught in the challenge of designing
a technology policy that addresses both sets of challenges at the same time.
Secondly, the EU is a hybrid polity. Addressing the challenges raised by emerging
technologies and global competition requires a transversal approach, considering e.g., the
development of AI in high-risk domains such as defense, healthcare, transport, energy, public
sector. While states like the US or China can combine economic, industrial, military and
regulatory actions and decisions to conduct consistent and effective tech policies. The EU and
its member states, by contrast, have a harder time coming up with a consistent strategy
across the board.
Thirdly, the US and China also have, nationally, large digital spaces, thriving digital
markets, and large amounts of data collected under their jurisdiction. As a whole, the
European Union hosts few global digital players and has a fragmented digital market.
Moreover, as a values-based political actor, the EU is concerned with privacy, regulation of
the private sector, and a care for the ethics of technology to a larger extent than do other
actors. In a similar vein, there are also, in Europe, debates about or political oppositions to

developing AI, robotics and biotechnologies, or to using defense budgets to fund research
into military applications of such technologies.
Finally, Europe is divided when it comes to assessing the strategic risks posed by the
power of US big tech companies or reliance on Chinese telecommunications providers. This
is, in part, because technology is only one component of European states’ relations with the
US or China: security and economic interests may pull individual European countries either
towards the US, or towards China, or both simultaneously, thus bringing any strategymaking to a standstill.
All of these problems are currently being addressed but, on the whole, EU technology
policy has thus far been more focused on norms, regulations and protective mechanisms than
on engaging as a full participant in the global technological competition.
Policy Work in Progress
Despite the push and pull effects of US and Chinese links, and the complexity of designing
a coherent European technology policy, the EU has taken several policy steps over the past
3 to 5 years1. All these measures remain work in progress and are being complemented with
measures taken by European governments individually, as illustrated here with the case of
France. All in all, Europeans have followed 4 lines of effort: data privacy; the protection of
infrastructure and industry; the security of supply chains; and investment in research and
innovation.
Data: The European Union – which for 80% of its data management depends on US
companies – has been a regional vehicle and a global standard-setter for protective measures
taken regarding privacy of individual data, as illustrated with the GDPR. With the launch of
Gaïa-X, the objective is to offer new levels of protection for industrial and institutional data
against espionage, through a European federated data infrastructure project -- or “sovereign
cloud”. Another, related goal is curbing the monopolistic position of US digital companies in
Europe as well as harnessing the economics and societal benefits of European data. In France,
the government is considering forcing large French companies to store their most sensitive
data (business secrets, R&D) in a “trusted cloud”.
Critical infrastructure and industry: Europeans have endeavored to protect key
infrastructure and industry from takeover, and supply chains from disruption and security
risks. In areas like 5G infrastructure and Foreign Direct Investment, the EU has only achieved
to guide member states into enforcing policies to assess risks and protect their national
assets and infrastructure. This resulted in the de facto exclusion of Huawei from the 5G
networks of several though not all EU member states. Some countries, like France take further
steps, this time towards US companies. France chose to prevent the takeover of Photonis
(night vision binocular specialist) by the American Teledyne by imposing that the French
public investment bank BPI maintain a minority share in the company and veto rights on the
operations and management of its branches. The decision was justified by the French
government to guarantee French economic security and defense industrial sovereignty.
Supply chains: Another axis of effort, particularly in the context of the Covid crisis, has
been the examination of supply chains and a concern with their resilience, the
diversification of suppliers, and the need to relocate certain production chains (e.g.,
semiconductors or lithium batteries manufacturing). In January 2021, in its updated Strategic
Review, the French ministry for the Armed Forces has called for a more precise assessment

1 This short paper only covers a small share of the great variety of EU policy initiatives takes over the past few

years.

and mapping of Europe’s critical dependencies, especially in raw materials used in high-tech
factories.
Investment in Research and Innovation: There is a need to address Europe’s
competitiveness problem in fields of emerging technologies, where European companies are
too few, too small or too expensive. The loss of the UK is also a blow to the EU’s innovation
base. Several funding schemes have been created or adapted at the EU level, to be more
adapted to “disruptive innovation” and help start-ups “scale up” (e.g., European innovation
Council created in 2017; the 2018 Digital Europe Program for AI development and the
production of supercomputers). A significant share (20%) of the Covid recovery package will
be dedicated to “digital transformation”. But at this point, European private and public
investment figures remain well below those of the US government, or individual US private
companies. There are further discussions ongoing about creating synergies between the EU’s
civilian, space and defense research programs. In the same vein, France is advocating for the
establishment of a well endowed European “DARPA”. At the national level too, the ministry
for the Armed Forces has come up with new funding mechanisms (DefInvest, DefInnov) to
leverage civilian innovations with defense applications.
Transatlantic efforts and their limits
The close political, defense and security links with the US mean that the need for
transatlantic cooperation on emerging technologies evident. In particular, Europeans and the
US must work together to build an international technological order that respects human
rights principles and curbs the rise of illiberal practices, wherever they emanate from.
Nonetheless, when it comes to dealing with China, Europe and the US are on the same side
of the table, but not in the same seat, not least given European trade links with and
dependencies on China. During the Trump presidency, US unilateralism and pressures over
allies, and extraterritorial sanctions have made transatlantic cooperation difficult as they had
consequences on European companies. Besides, outside of the Trump administration’s
bullying attitude, Europeans have tended to disagree with the “decoupling” strategy.
Today, European awareness of the risks posed by Chinese technological rise and the
export of its illiberal model has grown, especially in the context of the Covid crisis. This,
combined with the incoming Biden administration, means that transatlantic dialogue and
cooperation will resume and will undoubtedly be more fruitful over the next years. However,
Europeans have a different assessment of the global shifts in the balance of power. Where
the dominant vision in the US is a return to a bipolar international system, the EU sees a
multipolar world where it can play a full role. Democratic “clubs” – such as the “D10” or the
“T12” – are, by definition, exclusive, will be insufficient in a complex, multipolar, and
interdependent world where global standards are needed. They need to be completed with
multilateral efforts, and to include the European Union.
Ways ahead for the EU and its Member States
In the months ahead, in addition to protective measures on data, big tech regulation, and new
investment plans, Europeans should seek to address their technological dependencies and be
proactive on the global scene by:
- Engaging in a collective exercise to map more precisely Europe’s dependencies or risks
concerning critical raw materials and electronic components but also IT infrastructure (5G
networks, satellites, data centers, information and communication platforms).

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Defining which technologies, infrastructure and governance mechanisms should be
developed or maintained nationally, at the EU level, at the transatlantic (EU-US or
NATO) level, or with other partners.
Engaging with partners across the globe, by promoting a multi-stakeholder and a
human-centered approach to technologies.
Renewing effort at Europe-US dialogue and convergence in addressing both transatlantic
matters of taxation of big tech companies, data flows, US sanctions and their
consequences for Europe; and China-related issues including risks in ICT supply chains,
export controls, FDI screening, joint work on technical standards and norms, etc.