European Sovereignty or a shadow of protectionism? –

European Sovereignty or a shadow of protectionism? –

The EU should temper its vigorous pursuit of sovereignty through regulatory power. It should instead lead to an alternative model of international digital cooperation based on setting common technological standards with other democratic nations.

Cecilia Bonefeld-Dahl is the director-general of DIGITALEUROPE. 

European sovereignty, the Brussels effect or digital self-sufficiency are among the buzzwords used nowadays to describe the tidal wave of regulations that have come out of Europe in the past year and a half. 

Last February, the European Commission proposed a draft regulation on chips to bolster the EU stronghold in the semiconductor industry by injecting millions in public funds to boost domestic chips production capacity. The proposal has been followed by a sweeping package of regulations to govern other critical digital policies such as the Data Act, the Digital Services Act and the Digital Markets Act.

This regulatory race has gotten tighter and even fiercer, with rulebooks and new policies popping up worldwide. Earlier in May, the Japanese parliament passed a bill to ‘’guard’’ critical technology and protect Japanese supply chains. The bill is also meant to set up a system of “secret patents” to be siloed in Japan, preventing any major tech innovation used by other players to develop nuclear power or other disruptive military equipment.

Last March, the Biden Administration announced more steps to enforce his ‘’Made in America” commitments- applying to federal procurement, including for high-tech products. The new rules came to impose additional ‘’Buy America” restrictions, a law that dates back to 1933 and that pushes federal agencies to only accept procurement bids submitted by American companies. 

This frantic international race to break down dependencies and attain self-sufficiency is slowly inching towards a modern form of national protectionism. The threat of fragmentation is becoming a reality, adding fuel to the fire. With a world economy still reeling from the pandemic effect and a shocking Russian invasion of Ukraine that generated a huge upward spike in inflation, it is no longer a secret that we are heading straight to a global economic recession. 

European companies primarily rely on international markets because, according to the European Commission’s trade review, 85% of global growth by 2024 is expected to occur outside the EU. In addition, market fragmentation between member states means emerging companies must look abroad for growth.

The EU has embarked on a rulemaking journey to assert itself in the global tech race while underrating the importance of global rules and international regulatory convergence with key like-minded partners.

Regulatory divergence will only generate confusion and add up to the pile of obstacles preventing European businesses from thriving, as well as non-European businesses from investing in Europe. In addition, many of the critical technologies needed by Europe, like microchips and secure cloud solutions, cannot be delivered without EU-headquartered companies and international partners.

Today, we see a race to the bottom, with European businesses increasingly excluded from foreign markets and the growing maze of EU rules set to prevent international investors and innovators from setting foot in the European market. It also means that EU businesses and consumers will not get access to the best and most innovative technologies available.

Take the example of cybersecurity, which is a top priority given the situation in Ukraine. If we want to make our cloud secure from cyber-attacks, any new regulations must be mutually recognised by our strategic allies –which is not the case with the current EU Cybersecurity Certification Scheme. Does this make Europe safer? No, blocking the exchange of critical information with our closest allies would weaken our security and isolate us further from the rest of the world. 

Furthermore, restricting data flows in and out of Europe in the name of sovereignty will not only have a substantial adverse economic impact- a complete ban on cross-border flows of personal data could contract the EU GDP between 1.9 and 3.0 per cent—€264 billion to €420 billion- but it will also hinder our efforts to work together with close allies and risk further retaliatory measures. 

More than ever, the EU needs to step up as a leader of digital cooperation instead of being a sovereignty pioneer. We should stop playing the referee role and become the unifier. Just as the US and the EU united through the Trade and Technology Council to impose harsh economic sanctions on Russia, they should find ways to set technology standards together and fend off the looming recession. 

An impactful transatlantic partnership could quickly have a positive spillover effect and expand to other open, democratic, and rule-bound societies. 

Europe has a historic opportunity to lead the community of democratic nations toward an alternative model of digital cooperation, reversing the trend towards protectionism in the name of sovereignty and focusing instead on growth and solidarity with our friends and allies.

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