By: Klon Kitchen
06/13/2023
As originally appeared in The Messenger.
In today’s interconnected world, digital sovereignty is as indispensable as territorial sovereignty. However, how a nation exercises and safeguards this right can profoundly influence its economic, social, political and national security interests.
Overly restrictive strategies can stifle growth and development in both physical and digital realms. For instance, a maximalist approach to digital sovereignty could suffocate the emergence of an innovative and thriving tech base. Striking a balance between security and growth is crucial.
A concerning trend is emerging among some of the United States’s closest allies. To bolster their domestic innovation bases, they are increasingly limiting or severing ties with American technology companies. These countries, many of which are otherwise strong U.S. allies, are treating American tech firms as competitors. They regulate them heavily, impose excessive fines and may even risk the exploitation of their intellectual property.
Take, for example, a proposal to ban all U.S. cloud service providers in vital European Union (EU) industries like health care and financial services — unless they do so jointly with European companies and, even then, can only have a minority stake. Pending regulations might compel U.S. companies to share data, intellectual property and profits with their EU counterparts. Future EU plans may significantly hamper the progress of artificial intelligence (AI) technology, compounding the inherent growth obstacles in the EU and potentially paving the way for China’s state-funded tech giants to spread digital authoritarianism in the region.
This antagonistic approach is not just a foreign phenomenon. Some U.S. policymakers also buy into the narrative that the U.S. is “falling behind” the EU in tech regulation. They advocate for a more robust regulatory scheme, yet this viewpoint misses the bigger picture.
The goal should not be a robust tech regulatory scheme but an agile, responsible, and thriving tech innovation industry. Overbearing regulations have smothered the EU tech industry, making it more susceptible to the allure of cheaper but potentially dangerous offerings from China.
For example, a November 2022 report by the Center for Strategic and International Studies reveals that 16% of European companies would switch from a U.S. to a Chinese tech provider if faced with increased costs due to tech regulations like the EU Digital Markets Act. While surely unintended, this is a completely foreseeable consequence the United States should not repeat.
Rather than lowering ourselves to the standards of others, we should strive to elevate our allies to our level. We should assist them in developing stronger innovation bases and free, fair markets. Just as we need partners with high-performing and interoperable military capabilities, we require partners with similar innovation bases.
The Obama administration first acknowledged the growing importance of technology in global security, a stance that was further amplified by the Trump administration’s aggressive countering of China’s cyber threats and “military-civil fusion” strategy. The Biden administration has expressed plans to form global alliances centered on technological interests, but there is still much work to be done.
Recently, the U.S.-EU Trade and Technology Council (TTC) held its fourth ministerial meeting. U.S. Trade Representative Katherine Tai, Secretary of Commerce Gina Raimondo and Secretary of State Anthony Blinken met with the EU’s Executive Vice Presidents Valdis Dombrovskis and Margrethe Vestager. The meeting concluded with a promising joint statement to “strengthen our bilateral coordination” against Chinese “non-market policies and practices designed to reinforce dependencies” and to increase our mutual resistance to economic coercion. However, it fell short of engaging meaningfully on preventing these same tactics from being deployed by America’s allies.
It is dangerous — but not surprising — when we encounter Chinese economic coercion. But to have U.S. partners and allies working against our mutual interests in a similar fashion is unfair and dangerous to all parties. It must stop.
This is why it is essential to avoid impulsive regulation that could stifle our tech industry’s potential. Instead, let us inspire our allies, foster creativity and innovation, as well as promote cooperation in the digital domain. In doing so, we can secure not just our digital sovereignty but also the enduring growth and prosperity that comes from thriving in our increasingly interconnected world.
Klon Kitchen is a managing director at the international strategic advisory firm Beacon Global Strategies and a non-resident senior fellow at the American Enterprise Institute.
