Why Europe is losing the global tech war
Europe’s tech future is at risk from fierce competition from the U.S. and China, existing and developing Big Tech, and primarily its own flawed competitiveness obsession.
As part of his confrontational stance toward Europe, U.S. Trump could end up weaponizing critical technologies. The European Union should appreciate the nature of this threat instead of focusing on competing with the U.S. as an economic ally. It is more a matter of tech independence, even though this is a challenge in the intertwined global tech world. To achieve true tech sovereignty, the EU should transcend its narrow focus on competitiveness and deregulation and adopt a far more ambitious strategy.
After passing several landmark tech bills in recent years, the EU is now seeking to boost innovation and enhance competitiveness. Building on former European Central Bank President Mario Draghi’s influential 2024 report, the European Commission recently published the Competitiveness Compass, its road map for implementing Draghi’s recommendations.
Europe’s growing anxiety about competitiveness is fueled by its inability to challenge U.S.-based and Chinese tech giants in the marketplace. As the Draghi report points out, the productivity gap between the U.S. and the EU largely reflects the relative weakness of Europe’s tech sector. Recent remarks by European Commission President Ursula von der Leyen and Tech Commissioner Henna Virkkunen suggest that policymakers have taken Draghi’s message to heart, making competitiveness the central focus of EU tech policy. One major difference between the U.S. and the EU is that in the U.S. technology development is driven by private entrepreneurs whereas in the EU, it is primarily driven by the state. No bureaucracy versus vast bureaucracy.
The singular focus in the EU is both insufficient and potentially counterproductive at a time of technological and geopolitical upheaval. While pursuing competitiveness could reduce Big Tech’s influence over Europe’s economy and democratic institutions, it could just as easily entrench it. European leaders’ current fixation on deregulation, turbocharged by the Draghi report, leaves EU policymaking increasingly vulnerable to lobbying by powerful corporate interests and risks legitimizing policies that are incompatible with fundamental European values. Either way, the regulations have clearly hampered European tech development, and it is difficult to change course as government bureaucracy is so engrained in the European soul.
As a result, the European Commission’s deregulatory measures, including its recent decision to shelve draft Artificial Intelligence (AI) and privacy rules, and its forthcoming simplification of tech legislation are more likely to benefit entrenched tech giants than they are to support startups and small and medium-size enterprises. Meanwhile, Europe’s hasty and uncritical push for “AI competitiveness” risks reinforcing Big Tech’s tightening grip on the AI technology stack.
It should come as no surprise that the Draghi report’s deregulatory agenda was warmly received in Silicon Valley. Politicians in the EU argue that Europe’s most urgent task is to defend its citizens’ rights, sovereignty, and core values from increasingly hostile American tech giants. Maybe there are concerned about free speech and not being able to monitor its citizens. The continent’s deep dependence on US-controlled digital infrastructure, from semiconductors and cloud computing to undersea cables, undermines its competitiveness by shutting out homegrown alternatives. Europe is simply far behind both the U.S. and China when it comes to technology and innovation.
Europe’s weak technology infrastructure and technological dependence gives a handful of corporations and the U.S. government outsize power over its technological development. This power could be used to stifle the growth of Europe’s tech sector by restricting access to advanced chips, or by making access to cloud computing contingent on light-touch regulation of U.S. tech firms.
Efforts to develop homegrown European alternatives to Big Tech’s digital infrastructure have been gaining momentum despite regulations and EU bureaucracy. A notable example is the so-called “Eurostack” initiative, which should be viewed as a key step in defending Europe’s ability to act independently. In an increasingly volatile geopolitical landscape, sovereignty is about more than competitiveness; it is about security, resilience, and self-determination. Europe might not have a choice. By tackling its technological dependencies, protecting democratic governance, and upholding fundamental rights, it can foster the kind of competitiveness it truly needs.
The problem for Europe is that they are far behind both the U.S. and China. Europe lacks the dynamic entrepreneurship needed for avant-garde technology solutions and the EU is built to centralize, to slow down, to put restrictions in place and is not helping the situation. Trump might will increase tariffs on technology products from Europe, making it even more difficult for the Europeans to compete. They might try to find their own tech solutions, but the market is to global and they would most likely not be able to catch up and certainly not be any kind of technology market leader. Europe should instead focus on cooperating with the U.S., embrace the Trump-Musk technology agenda, set mutually fair-trade tariffs and work closer together.