Tuesday, June 18, 2024

Europe’s Risky Specialization Away from Digital Technologies

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Europe’s high concentration in mature industries is risky. First, tech is disrupting every sector of the economy, from transportation with autonomous vehicles to healthcare with artificial intelligence. All traditional industries potentially risk facing “disruptive” competition due to the technological advances made by leading American and Chinese tech players. We have already seen Amazon “disrupt” physical retail stores; likewise, YouTube, Netflix and TikTok are “disrupting” a number of major national broadcast media. The car has been an engine on wheels for 100 years. Tomorrow, it could become a computer on wheels. The most advanced players in autonomous vehicles are found in Silicon Valley and (likely) China – not in Stuttgart, Munich or Sochaux. 

Second, tech is essential for military force and strategic independence. England crushed China in 1842 thanks to its innovative steamships. The combustion engine allowed the United States to land in Normandy in 1944 with cruisers, bombers and tanks. And, just last year, when Russia thought it could capture Kyiv in a matter of days with its plethora of tanks, its forces were greeted with Javelin anti-tank missiles, American satellite intelligence, Starlink communications, drones, HIMARS precision rocket and missile launchers, all of which are products of American Tech. Meanwhile, the Biden administration deprived Russian forces of precision weapons by blocking technology exports to Russia. A dash of American tech versus a tide of Russian tanks, and the war changed direction.

Lastly, there has been a major change in the geopolitical landscape, one where China is also becoming a tech power, directly threatening US dominance. In October 2021, CIA Director William Burns warned the American public that “the main arena for competition and rivalry between China and the US will be advanced technologies“.

China will have an increasing number of opportunities to exert pressure on European countries if Europe remains dependent. How can we export Airbuses and BMWs to China if Europeans refuse to use Alibaba’s artificial intelligence and Huawei’s 5G? 

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