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Innovate, protect, and influence: The EU’s technology trilemma and how to solve it

Critical and emerging technologies are essential to the European Union’s security and its economy – particularly to the green and digital transitions. But amid a deepening ‘tech war’ between the United States and China, these technologies are hotly geopolitically contested and at risk of being used for irresponsible and anti-democratic means. Indeed, the new European parliament will face difficult decisions over its technology agenda. When making them, the focus should be on maximising the EU’s influence in this sector and becoming a technology leader. Only with such an approach can the EU safeguard against these risks, ensure the bloc’s security, and its industries’ prosperity.

The EU should therefore focus its efforts on three strategic policy goals: driving innovation at home to guarantee control and access to cutting-edge technology; using EU regulatory power to ensure the use and adoption of safe, responsible, and accountable technologies both in the EU and globally; and protecting industries reliant on technology against supply chain disruptions and the weaponisation of dependencies.

However, each one of these goals comes with its own trade-offs. On the one hand, a light regulatory approach may succeed in fostering innovation but could fail to protect people’s rights. On the other hand, too much regulation risks disincentivising innovation and leading firms to move to other jurisdictions. Similarly, prioritising economic security may enhance the EU’s strategic autonomy, but can eventually slow down growth and limit the EU’s technological leadership. The first challenge for the EU’s next mandate will therefore be to understand these trade-offs and make clear choices centred on building its technological power. The second challenge will be to leverage this power to maximise its global influence through a pro-active global tech strategy.

Europe’s technology trade-offs

In terms of driving technological innovation, the EU has a lot of catching up to do. Europe is home to 7 frontier AI models, while China has 20 and the US has 109. In semiconductors, the EU depends on Asia for 75-90 per cent of its supply. And the EU’s top seven tech firms are 20 times smaller than their US counterparts in terms of the total value of stock.

Critics argue that this is caused by the trade-off between the EU’s aims of promoting innovation on the one hand, and ensuring the responsible use of technology on the other. The previous European Parliament numerous safety regulations aimed at protecting Europeans from the risks that critical and emerging technologies pose to the right to privacy, freedom of expression, and protection against discrimination. Industry advocates view this as creating a restrictive environment for technological innovation. But, even before the EU introduced technology-based regulation, Europe’s technology industry was lagging behind the US. Structural issues such as the fragmentation of the EU’s single market and a wider range of governmental decisions on education, immigration, intellectual property, taxes, and antitrust law have stifled technological innovation in Europe far more than poor regulation. Besides, not all innovation is beneficial to the welfare of European citizens or conducive to the EU’s influence abroad, as a growing number of academics, journalists, and even big tech senior executives are realising – an effect regulation aims to mitigate. Indeed, moving fast and breaking things may not always be a desirable policy goal. Deregulation, therefore, may not be the answer to such trade-off question and a more holistic strategy is necessary.

Trade-offs are also likely to emerge between the EU’s goal to drive innovation and its goal to protect industries dependent on technology, from AI firms to public infrastructure. The EU could import critical and emerging technologies at low prices to promote growth and technological change. However, this would make the bloc more dependent and vulnerable to disruptions in the flow of products, services, or data. Instead, the EU has rightly chosen to protect its industries by investing in developing critical and emerging technologies and building long-term resilience. It has adopted an industrial policy approach in areas that are capital-intensive, for example with the European Chips Act, which aims to protect the semiconductor industry. This is being done by mobilising public and private investments for advanced chip facilities and microchip research and development. At the same time, the parliament adopted an economic security strategy to de-risk the bloc’s dependencies in critical and emerging technologies.

Policymakers in Brussels and member state capitals have multiple tools at their disposal to continue to balance these trade-offs and boost the bloc’s technology sector. Ultimately, the next EU mandate must strive to build a technological industry that is resilient both in terms of technological disruptions and in terms of the risks posed to human rights. To achieve this, policy options include funding research and innovation, subsiding technological industries, making the internal market more competitive and attractive to firms and investors, launching visa programs that attract technical talent, and adopting EU-wide regulations that prioritise the adoption of responsible technologies.

How the EU can become a technology leader

Even if Brussels succeeds in navigating these trade-offs and builds a resilient technological industry, it would still need a strategy to achieve global influence and prevent other actors with different views on technology, security, and rights from limiting the EU’s options. In the past, the EU advanced its values in global tech governance through the ‘Brussels effect’, meaning that the EU’s consumer power and its internal market forced private companies to adopt its technology standards globally. That was the case with the General Data Protection Regulation where the EU set the international standard for data privacy. But this was at a time when technology was not yet on the geopolitical radar and not as widely contested as it is now.

Countries interested in mastering these technologies are now likely to deviate from the Brussels effect and set their national standards and regulations following alternative examples. For example, three different approaches of AI regulation have emerged between the EU, the US, and the United Kingdom, which provide other countries with alternative choices. At the same time, critical and emerging technologies such as AI, semiconductors, and quantum, have become the central object of the US-China competition, sucking the EU into a high-powered set of geopolitical tension around the control and deployment of these technologies.

Conscious of the need to cooperate with other democracies in governing emerging technologies if it is to diffuse and safeguard its values, the EU is working with like-minded allies. The EU should keep utilising existing forums such as the G7, the OECD, and, above all the EU-US Trade and Technology Council, to establish common understanding on ensuring safe and responsible uses of technology and in protecting Europe’s technology-related industries.

European policymakers must recognise that aligning with the US in critical and emerging technologies necessarily involves tensions

At the same time, European policymakers must recognise that aligning with the US in critical and emerging technologies necessarily involves tensions. The EU’s decision to halt ASML’s high-tech semiconductor exports to China, which was influenced by US pressure, showcased how exposed Brussels is to Washington’s demands. This does not mean that it’s not in the EU’s interest to help the US slow down China’s advances in the field. But it must be able to make these kinds of decisions on its own. This will be especially important if Donald Trump wins the US presidential election and promotes policies that run against the EU’s interests. Therefore, while cooperating with its partners to implement global standards, the EU must be able to de-risk its critical and emerging technologies from US actions. For example, the European semiconductor value chain is largely dependent on US intellectual property rights. By replacing these rights with European alternatives, the EU can build its own bargaining power in the field and ensure that the technological ties with the US remain mutually beneficial. Ultimately, the EU needs to be more proactive and stop relying on the Brussels effect to become an assertive global actor. A two-step process is needed for such shift to take place. Europe must first build its technological power and then use this leverage to become a global influential actor. To succeed in both tasks, EU policymakers will have to deal with complex trade-offs and increasing geopolitical tensions. But at stake is nothing less than Europe’s economic growth and security. It is up to the EU’s new parliament to take effective action.

The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.


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Author: euro news

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