Global tech supply chains are fragile and withstand shock after shock. After the Covid-19 pandemic and the assault against Huawei, the Russian invasion of Ukraine underlines once more the importance of the geopolitics of technology for governments and companies. What can be done to reduce our vulnerabilities and cultivate our strengths? Technology interdependence is a double-edged sword. Europe can target Russian procurement of semiconductor technology in cooperation with the United States and G7 countries. But Russia can retaliate by cutting access to neon gases and palladium, causing severe damage to the value chain. The case is a telling example for a European problem that goes beyond the semiconductor industry. Europe faces a long-term resilience and competitiveness challenge, for which it has two main tools to act: industrial policies and controls over technology transfers.
In this new situation of weaponization of tech supply chains, Europe is navigating the US-China rivalry. The European Union (EU) is fine-tuning its defensive toolbox to prevent unwanted transfers of European technology to China-but the scope of such instruments goes beyond this country of concern alone. Europe has most often adjusted to US decisions to cut China’s access to specific technologies on the basis of a shared transatlantic risk assessment. In some cases, however, especially in sectors such as aeronautics or cutting-edge electronics, the extraterritorial application of US measures is perceived in Europe as unfair US commercial practice.
Overall, the EU’s approach to managing tech transfers has already undergone significant change. Like counterparts in the US and Japan, European policymakers and regulators constantly reinforce and expand the toolbox of defensive mechanisms. However, more effort is needed because keeping up with the fast-paced technological innovation in the private sector is a huge challenge.
Placing trust in market-based mechanisms and openness is in the EU’s DNA. Everywhere else, export/investment controls and industrial policies are instruments to enhance international competitiveness. In parallel, Europe’s preference for multilateral diplomacy is challenged by the return of bipolar competition-building an efficient multilateral system for regulating technology transfers seems an overly ambitious task. For Europe, adjusting to these realities is a matter of strategic relevance in the international system.