Pinpointing Europe's digital dependencies
From computer chips and cloud computing to artificial intelligence, Germany and the rest of Europe want to become less dependent on digital technologies from abroad by driving forward their own innovations. The Center for Advanced Security, Strategic and Integration Studies (CASSIS) at the University of Bonn has now prepared a policy brief, in cooperation with the Vodafone Institute for Society and Communications, Vodafone's European think tank. The paper tackles the continent's "digital trade deficit" and shows how hidden trade dependencies on the U.S. and China are raising questions about the effectiveness of current European strategies.
Although strong growth in digital trade would appear to lay firm foundations for meeting the targets set by the European Commission for its "Digital Decade," closer analysis reveals hidden weaknesses with the potential to jeopardize future progress—specifically, Ireland's disproportionately strong influence on the continent's digital trade balance. Looking more closely, Europe's digital trade surplus actually turns out to be a digital trade deficit.
Because U.S. tech corporations have a disproportionately large presence in Ireland and get cheap access to European markets, this "Ireland effect" is distorting Europe's trade statistics and restricting its digital autonomy. Without these U.S. firms being in Ireland, the EU would have a massive digital deficit. "Between 2022 and 2024, this deficit cost Europe over $350 billion, which is nearly 40% of the defense spending planned for the years to 2030," says Assistant Professor Maximilian Mayer, a member of the Individuals & Societies Transdisciplinary Research Area at the University of Bonn and coordinator of the project at CASSIS.
The study also highlights Europe's excessive dependence on China in the trade involving digital goods. In light of this significant imbalance and the Ireland effect, it is becoming clear that Europe is being squeezed between the two digital giants—China and the U.S.—according to the analysis. It also suggests that this reality is putting a question mark over Europe's economic gains, increasing its geopolitical vulnerability and restricting its digital autonomy.
The authors are advising the European Commission to continue strengthening Europe's manufacturing industry and competitiveness, further reduce its dependence on China for the trade in digital goods, and adopt a political language that identifies autonomy and sovereignty as common goals and fosters new, multifaceted technology partnerships with the public and private sectors.
"The analysis shows that Europe's digital dependencies are greater than the statistics would suggest," says Michael Jungwirth, Director Public Policy & External Affairs at Vodafone Germany and Public Policy Director Vodafone Group. "What we need now is a coherent trade and industry policy that genuinely strengthens digital resilience—for an economically and geopolitically sovereign Europe."
Digital dependence index to be revamped
CASSIS's Digital Independence Index (DDI) shows how well this is going by providing a figure for how vulnerable European countries are compared to their counterparts elsewhere in the world. The indicators include how dependent an EU country is on electronic components or communications equipment from abroad. The index also illustrates the extent of a country's reliance on foreign companies for computer software, operating systems and patents. Says Mayer, "The DDI uses a large number of indicators to highlight the challenges and areas of potential involved in reducing technological dependencies in a globalized economy with a high degree of labor specialization."
Having focused primarily on the G20 member states up until now, the DDI is to be overhauled, updated and expanded to include over 50 nations across the globe. This will ensure much better coverage, including of many smaller countries in Europe, Africa and Asia. "This will bring a great many benefits for several reasons," adds Mayer. "Not only will the measurements be more extensive in geographical terms, we'll also be able to illustrate global and regional trends as well as patterns in digital capacities, vulnerabilities and costs." The Vodafone Institute will also be supporting the work to update and expand the DDI during its year-long partnership. In addition, the DDI's web page is being redesigned to make it even clearer and more accessible to users and further improve its analysis features.
More information:
Digital trade trap? A wake-up call for the EU's Digital Decade, www.vodafone-institut.de/wp-co … s-digital-decade.pdf
Provided by University of Bonn
