Addressing these deficiencies is essential if the EU is to engage with allies and defend the interests of its member states in the intensifying debate over technology transfers. In a worst-case scenario for Europe, the US could come out with a full-fledged list of US export controls in 2020 and Europe would be powerless to deliver a collective response. Then US secondary sanctions could come into play. Against this backdrop, the least bad option for the EU may be to break its multi-year deadlock and conclude a limited deal under the Croatian presidency of the EU in the first half of 2020, even if it stops short of giving the Commission the greater autonomy it is seeking. The bloc could then pivot quickly during Germany’s presidency in the second half of the year to a focused appraisal of emerging technology risks.
The Commission, building on a series of informal workshops it has organized, could be given a coordinating mandate, like the one it received for investment screening and 5G. Still, if the Commission does not get the greater autonomy on export controls that it has sought, the EU will remain reliant on the multilateral regime process and struggle to respond to the US push in a joined-up manner.
3.2 Pushing technology transfers up the political priority list
“On content, the emerging technology issue is very similar to 5G and investment screening. But as far as the political attention goes there is a big difference. This simply isn’t a top priority.”
—— Senior official from a large EU member state14
Although officials in some European member states have begun to wrestle with the question of restrictions on emerging technologies, progress has been hindered by a lack of political attention at the highest levels. This was not the case for investment screening. In early 2017, the German, French and Italian governments, unsettled by a flurry of Chinese acquisitions on the Continent, asked the European Commission to take a closer look at Europe’s foreign investment rules. The Commission produced a proposal half a year later, and by the end of 2018 an agreement had been clinched between the Commission, Parliament and Council to centralize scrutiny of foreign investments.
The comparatively slow progress on reform of the EU’s dual-use export control regime shows that giving the European Commission more powers in this domain is not at the top of the political priority list. The irony, as several European officials pointed out, is that technology leakage via exports is greater than with FDI. While the United States sees export controls and FDI screening as closely linked, complementary tools, European politicians are only slowly waking up to potential risks tied to technology exports. In Europe, the discussion has focused mainly on human rights violations in relation to cyber-surveillance and, more recently, trade with entities in China’s western Xinjiang region.
Complicating the discussion at the EU level is the fact that only a handful of advanced technology-producing states (Germany, France, the Netherlands, Sweden and Finland among them) will be directly affected by US controls.
Therefore, the issue is not a priority for the majority of member states. This will make it difficult to develop an EU consensus on emerging technologies and puts the burden on bigger member states, like Germany and France, to use their clout to push the issue higher up the EU agenda. In order to avert a situation where Europe must scramble to react to US actions, these states will need to drive the discussion forward in 2020.
3.3 Tackling the technology-security nexus
“You need to create the structures to deal with the nexus of trade and security. It is difficult enough to do this at the national level. Just imagine how tough it will be in the EU.”
—— Senior official from a Benelux country
In a world where questions about technology, trade and security are ever more closely intertwined, member states and EU institutions must ensure they have the structures in place to address this nexus. Europe’s fraught debate over 5G has shown that countries like Germany still have a ways to go in this regard.
In Berlin, ministries with conflicting interests that are run by members of rival parties, have struggled to conduct a balanced, fact-based discussion that addresses complex questions about technology, economic competitiveness and national security in a holistic way. In Brussels, Commission President Ursula von der Leyen must ensure that her team of commissioners – notably those focused on trade, industrial policy and digital challenges – are working seamlessly with the European External Action Service to address these questions.
Inter-ministerial working groups have been set up in countries like Germany and the Netherlands to address emerging technology questions. And since late 2019, the European Commission has been arranging voluntary workshops for member states to help them get a better understanding of the security questions related to new technologies like artificial intelligence, quantum computing and additive manufacturing.
But for now, this is soft coordination without a clear political mandate or direct flow into policymaking channels. Old, siloed structures that treat economic and security issues separately are ill-suited for tackling a new nexus that is likely to grow in importance in the years ahead, spurred on by the US focus on restricting the export of sensitive technologies to China.
Against this backdrop, the idea of setting up national security council-type structures in member states like Germany and at the EU level warrants a closer look15. Allies on the front line of the US-China technology war can offer valuable lessons. Japan, for example, is creating an economic statecraft function within its own National Security Secretariat, which will include officials seconded from key ministries as well as outside experts. Japanese ministries are setting up units to address emerging security challenges that would feed into this new body16.