The EU’s is pursuing a new strategy for creating a “Digital Single Market”. The aim is to fuel innovation and give rise to EU digital giants. The effort to reduce reliance on US digital platforms should not come as a surprise as even Washington is growing increasingly concerned about the invasive economic and political power of their own tech-giants. Technological sovereignty, a critical strategy pursued by both China and Russia, has now made its way to Brussels.
The Single Market for goods made the EU a locomotive for economic growth and laid the foundation for its power and attractiveness. Increased economic connectivity between member states provided material wealth for its citizens, which translated into political loyalties and internal cohesion as a geoeconomic bloc. However, developed economies have moved towards services as the dominant source of GDP and new jobs, and the EU has not made impressive advancements in implementing the Single Market for services. Thus, the EU is in decline due to a flawed equation - it delivers less material gains to its member states, yet demands the transfer of more sovereign powers to Brussels.
In the 19th century, large powers such as the US, Germany and Russia linked industrial power to nation-building as excessive economic reliance on Britain undermined political sovereignty. Technological sovereignty remains a condition for great power stature, and is becoming even more important as digital technologies concentrate economic power at unprecedented levels. The Fourth Industrial Revolution is characterised by the digital space manipulating the physical world with AI, automation, robotics, and self-driving cars. Over the next few years, digital giants will continue to conquer manufacturing, transportation, agriculture, renewable energy, financial services delivery services, retail, food preparation, construction, logistics, medical services and other industries that previously belonged to the physical world. Economic and political power is shifting towards a few powerful digital monopolies, and governments of states or geoeconomic blocs will need to regulate the digital domain to remain sovereign.
Both China and Russia are working towards territorialising the digital realm and give preference to domestic tech-giants. In the absence of a “Single Digital Market”, there has not developed any EU equivalents to Google, Amazon, Apple, Facebook, Microsoft or other digital giants to strengthen and unify the EU as a geoeconomic bloc. The EU thus risks technological colonisation as foreign powers will dominate and the EU market and its data. Excessive reliance on foreign digital platforms reduces both economic prowess and political sovereignty. Reliance on foreign technologies such as 5G platforms presents the Europeans with an ultimatum of having their data mined by and being spied on by either the Americans or the Chinese.
The US is increasingly using economic statecraft against both adversaries and allies. The EU has grown weary that technological dependence on the US is used by Washington to extend its legal reach. For example, the EU’s reliance on SWIFT enables the US to extend its legal jurisdiction over the EU and a French bank was fined almost $9 billion for not complying with US sanctions. US law even replaces international law as the US unilaterally withdrew from the Iranian nuclear deal and then threatened to sanction European states if they still abide by the deal. US Treasury Secretary Steven Mnuchin warned G7 finance ministers: “If you want to participate in the dollar system you abide by US sanctions”. US control over EU legal space with extraterritoriality increases as digital technologies become more prevalent in the economy. For example, the US Cloud Act (Clarifying Lawful Overseas Use of Data) of 2018 allows US corporations to extract data from foreign companies stored by US cloud service providers. The Cloud Act undermines domestic privacy laws and grants the US an economic advantage by harvesting EU data to train its AI algorithms and develop leading software solutions.
Repatriating supply chains and establishing technological sovereignty unravels the interdependent global economy that has defined globalisation and will fuel trade wars in the years to come. However, new technologies are creating an extreme concentration of power in capital intensive digital industries, and national/regional borders are an important counter-balance to maintain socio-economic and political stability.