United States-China Decoupling: Time for European Tech Sovereignty

Abstract

China's rise as a global technology power is challenging United States supremacy in many ways. Although the relationship between the US and China has seen its ups and downs over the years, it is only since 2017 that the US's relations with China have shifted from engagement to confrontation. Little change can be expected under the Joe Biden presidency. Europe is caught in the crossfire of this conflict, and needs to design its own technology policy. The US still has a leading position globally in major key technologies, but China's success in catching up and its growing competitiveness in emerging technologies is challenging the US's leadership role. In order to contain China's technological rise, perceived as a threat to its national economy and its security, the US government under President Donald Trump had taken specific policy measures - including screening Chinese investment in the US, new export restrictions, and limiting knowledge transfer to China. These restrictions have disrupted the technology supply chains of Chinese companies, but spurred their efforts to improve research and technology performance at the same time. European companies have been concerned about the interruption of global supply chains due to the US-China tech "Cold War," as well as worried about the associated costs of dealing with two separate technology blocs in the future. The incoming US government aspires to closer cooperation with its traditional allies on issues related to its "strategic competition" with China. The European Union has to decide whether to join a US-led anti-China tech alliance or design an independent China tech policy instead. As both the US and China are of similar economic importance to the EU, taking sides in the geopolitical rivalry between the two superpowers will come at a high cost for Europe - and especially for European companies. The EU should rely more on its counterbalancing power and aim at higher tech sovereignty, while striving for multilateral, open, and rule-based technological cooperation.