Technological innovation fuels economic growth and has long been the foundation of national power and global influence. If the coronavirus pandemic is to be halted, if global warming is to be slowed, and if economic growth is to recover, technology will play a critical role. Technology offers the opportunity to protect and improve our world. But it also poses fundamental challenges.
Technological leadership—in the realm of national security, business competitiveness, and standard setting—has become an increasingly important objective for Europe and the United States: domestically, internationally, and within the transatlantic relationship. But as leaders in the creation of cutting-edge technologies, such as advanced communications, artificial intelligence, and synthetic biology, Europe and the United States are finding that the speed of innovation is outpacing the development of international rules for the use of these innovations.
The nations that best nurture entrepreneurs, invest in research and development, foster markets for advanced technologies, set new standards, and afford all their people access to new technologies, will lead the technology-driven world of the future.
"China has become a major player in the global technological game and promises to be an even greater force in the future."
Europe and the United States have long been technological rivals as well as partners. Competition has often limited cooperation. In the 1960s and 1970s, Europeans worried about U.S. dominance of nascent computer technologies. More recently Europeans have decried the rise of U.S. digital platforms, even while many of their consumers and small businesses have used these platforms extensively. At the same time Europeans hold their own in cutting-edge industries including life sciences, autos, nanotechnology, and telecommunications. And they have ambitions to create their own industrial digital platforms.
But the competitive dynamics are shifting. China has become a major player in the global technological game and promises to be an even greater force in the future. Neither Americans nor Europeans have the talent or the resources to prevail against such competition on their own.
China is already the world’s top producer, exporter, and user of wind turbines, solar panels, and batteries.39 It also accounts for 60 percent of global electric-vehicle sales.40
Most prominently in the recent transatlantic debate over technology, Beijing is rapidly deploying 5G telecommunications equipment, the backbone of the coming Internet of Things. It leads Europe and the United States in the size of its 5G home market, its technology, and the ease of domestic rollout.41 And, largely through subsidies, it is also the lowest-cost supplier. This poses a challenge for Europe and the United States. While Europe has two domestic producers of 5G technology: Ericsson and Nokia, the United States has none.
Similarly, China, Europe, and the United States are now emerging as the main competitors for global leadership in artificial intelligence (AI). In the race to extract information of economic, security, and national security value from the massive quantities of data now generated by the modern economy, the United States currently leads, China is rapidly catching up, and the European Union lags behind.42
China’s large market, its global lead in investment in AI, pervasive surveillance technology, and disregard for privacy promises to afford it access to more data than is currently available in either the United States or Europe. Meanwhile, Americans and Europeans differ over how to protect the privacy of personal data. And neither society has addressed how to equitably share the economic benefits created by the new digital economy.
"In their technological rivalry with China, European and U.S. ambitions for technological leadership belie China’s current advantages."
The terrain for all future technological competition is set through standards setting and subsequent adoption of these technologies by users and developers, who then build other applications and services on top of these technologies or platforms. The foundational nature of standards setting cannot be underestimated.
The European Union sees itself as a “standard-setting superpower.” The United States has relied on its past technological leadership to dictate standards. But China is using its market preeminence to establish new hardware and software norms, while attempting to globalize those norms by being more active in the international standards-setting bodies that were once the preserve of Europe and the United States.
As global technological competition has intensified, some Europeans have advocated “technological sovereignty” as a means of keeping pace with American and Chinese rivals. But sovereignty implies an ability to compete on an equal footing with China and the United States, built on a commensurate market, financial resources, and scientific talent.
In their technological rivalry with China, European and U.S. ambitions for technological leadership belie China’s current advantages. European organizations account for about a fifth of global research and development spending and U.S. organizations more than a quarter.43 But if current trends remain unchanged, China’s spending on research and development, which already exceeds that of any individual European nation, is on track to outpace the United States within the next decade.44 Moreover, while transatlantic businesses do more R&D than government and that spending has steadily risen, most of that increase has gone toward applied research rather than basic research, the seed corn of invention.
The size and potential of China’s market also poses a challenge for future U.S. and European technological leadership. China has nearly twice the combined population of the United States and the European Union.45 Its share of the world economy based on purchasing price is already comparable to that of either the United States or the European Union. Scale matters for many emerging technologies—such as AI and genomic biology—that require huge quantities of data to realize their potential. Together the combined U.S. and European markets offer such scale. Alone they do not, but China does.
Collaboration is fundamental to successful scientific inquiry. Given the growing cost and complexity of technological innovation and the diffusion of scientific talent, even economies as large as the European Union and the United States cannot hope to be primus inter pares in all key technologies. But they can strive to be global leaders collectively through an allied technology strategy drawing on the deep roots of existing collaboration. Transatlantic technological sovereignty, grounded in Western values and interests but open to the world, is the best hope for Europe and the United States to develop the technologies needed to combat climate change, to overcome future pandemics, to restart economic growth, to defend their people, and to compete with China.
With these issues in mind, the Task Force recommends:
• Jointly Support Emerging-Technology R&D: Europe and the United States should jointly provide greater financial and regulatory incentives for transatlantic science and technology partnerships, including pre-competitive collaboration on R&D in artificial intelligence and data science, advanced battery storage, advanced semiconductors, genomics and synthetic biology, autonomous vehicles, smart-building technology, 5G and successor generations of telecommunications technology, quantum information systems, and robotics.
• Lead International Standard Setting: Europe and the United States should reassert their leadership in international standards-setting bodies, and mutually develop and recognize each other’s standards as they relate to emerging technologies.
• Promote Technology Partnerships: The United States and Europe—recognizing that cutting-edge technologies tend to emerge as a product of regional technology ecosystems, such as Silicon Valley and Dublin, made up of networks of technology firms, capital markets, and research universities—should develop targeted tax incentives and investment schemes to promote closer linkages between emerging U.S. and European technology clusters.
• Update Export Controls: The United States and Europe, building on recent reforms of U.S. law, should update the technology controls of the Wassenaar Arrangement, the multilateral export-control regime for conventional arms and dual-use technologies, with regard to trade with China, Russia, Iran, and others. The new arrangement should include items such as AI, robotics, 3D printing, quantum computing, semiconductor manufacturing equipment, surveillance equipment, and other emerging and foundational technologies with significant national security value.
• Aid the Digital Buildout in the Developing World: The United States and European governments, building on existing efforts, should create a digital development fund to help countries in Africa, Asia, and Latin America to buy Nokia or Ericsson broadband technology, so that Huawei does not become imbedded in those telecommunications markets with all of the attendant technological and data collection benefits accruing to Beijing, and provide technical assistance to develop the legal framework to ensure transparency in ownership and protection of privacy.
• Create Legal and Ethical Standards on Emerging Technologies: Europe and the United States should jointly develop ethical and legal standards on artificial intelligence, synthetic biology, and other new technologies that promise great advances in health, energy, and food production, but also raise questions about consumer safety, ecological stability, privacy, and weaponization. This collaboration should include a common approach to risk assessment and management. Such standard setting should involve multiple stakeholders including government regulators, private business, and representatives of environmental, consumer, faith, and civil and human rights groups.
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39 “A New World–The Geopolitics of the Energy Transformation,” Global Commission on the Geopolitics of Energy Transformation, 2019.
40 Trefor Moss, “China Slips in Its Rush to Embrace Electric Vehicles,” The Wall Street Journal, September 26, 2019.
41 Colin Blackman and Simon Forge, “5G Deployment–State of Play in Europe, USA, and Asia,” European Parliament Committee on Industry, Research and Energy, April 2019.
42 Daniel Castro, Michael McLaughlin, and Eline Chivot, “Who is Winning the AI Race: China, the EU, or the United States?”, Center for Data Innovation, August 19, 2019.
43 Daniel S. Hamilton and Joseph P. Quinlan, “The Transatlantic Economy: Annual Survey of Jobs, Trade and Investment between the United States and Europe,” Foreign Policy Institute, Johns Hopkins University, 2020.
44 William Alan Reinsch, Jonathan Lesh, Lydia Murray, and John Hoffner, “Taking Stock of Government Involvement in Research and Development,” Center for Strategic and International Studies, June 2020.
45 “China, U.S., and EU are the largest economies in the World,” Eurostat, May 19, 2020.