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Europe Faces Pressure As Tech Competition Heats Up Between U.S. And China

Lacking a powerful technology sector of its own, the European Union has instead tried to carve out a space in the digital economy as the world’s regulatory superpower, leading the charge on privacy rights and data protection by leveraging its enormous single market against Goliaths like Google and Facebook.

But a number of recent examples have made it clear that for Europe, increasingly, that is not enough. The rapid pace of technological change — including artificial intelligence and facial recognition — is mingling ever more with national security concerns that European leaders have been slow to grasp and respond to, analysts say.

As global technology shapes up into a battleground between China and the United States, Europe is finding it harder to set the rules of the road while others in Beijing and Washington are in the driver’s seat.

“Europe needs to get its act together,” said Marietje Schaake, international policy director at the Cyber Policy Center of Stanford University and a former member of the European Parliament. “I worry the tempo is too slow for the pace at which changes are forthcoming.”

The most recent example is TikTok, the wildly popular Chinese short video app, which the Trump administration has challenged by using many of the same national security arguments it employed against Huawei, the Chinese telecommunications giant, and its bid to become the globe’s dominant 5G provider.

Time and again, such disputes have left European leaders, regulators and industries squeezed between Beijing and Washington, risking retaliation against carmakers, financial services firms or agriculture companies if they choose one side over the other.

In response, European leaders have belatedly embarked on a generational project toward “digital sovereignty,” mixing tougher rules against foreign tech companies with efforts to boost local innovation.

Margrethe Vestager, the European Commission vice president in charge of digital issues, has called it a “new phase” for technology policy in the region.

But those policies will take years to shift the balance meaningfully in Europe’s favor, analysts say, and many question whether they are really enough to close the technology gap with the United States and China.

One reason Brussels risks falling behind is that security remains the responsibility of individual member nations, not one ceded to the European Union, Ms. Schaake said.

“TikTok confronts Europe with the weaknesses of its digital and national security policies,” she said. “Europe is naïve about certain of the technologies coming from China and the United States, and just says that anyone doing business in Europe has to respect our rights and regulations.”

After months of debate, some European leaders are coming around to views closer to those held in Washington, where President Trump has moved to try to force the sale of TikTok’s U.S. operations to an American company, charging that the company’s Chinese ties present a national security threat.

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It has used the same argument against Huawei, the telecommunications giant, though both companies deny any explicit link to the Chinese government.

In Europe, the American point of view on Huawei, backed by the threat of secondary sanctions, has gained ground, most recently in Britain, where a ban was adopted in July.

But most Europeans mostly still see TikTok not as a security threat, but as a risk to privacy. Even if the White House-orchestrated TikTok sale goes through, the European operations will remain under the ownership of the Chinese parent company, ByteDance.

TikTok uses both facial recognition and artificial intelligence, important technologies that are not regulated by the United States or the European Union. “With the combination of competition, artificial intelligence and security, it makes sense why some policymakers are concerned,” said Andreas Aktoudianakis, a digital policy analyst with the European Policy Center, a research institution in Brussels.

“Europe wants to regulate artificial intelligence and other technologies, but it’s slow and there’s no real timeline,” he added. “We’re late to catch the train.”

Gerard de Graaf, director for the digital single market for the European Commission, said that the European Union needed “a lot more cooperation among member states on the issue of security.”

Europe has no major social media platforms, he conceded in a seminar at Bruegel, a Brussels research institution, but is doing well in financial technology, robotics and 5G. “It’s not that the E.U. is way behind everyone else,” he said, “but we have challenges.”

But Francesca Bria, chair of the Italian National Innovation Fund, argued that Europe risked being squashed between the Chinese state model — which is represented by Huawei, WeChat, Alibaba, Tencent and TikTok, with their state subsidies — and the “big company, big tech surveillance” of the American giants.

“If we fail to regain digital sovereignty,” she said, “we risk becoming a colony caught between the U.S. and China,” with risks to democracy.

American tech shares alone are more valuable than the whole European stock market, Ms. Bria said. “Europe needs to remain relevant as a global economic power, not just a regulatory power,” she said.

The weaknesses are stark. The world’s most popular smartphones are made in China, South Korea and the United States. The biggest social media and online shopping platforms come from American and Chinese companies, as do the largest providers of cloud computing and artificial intelligence services.

Europe has been missing from the list of the world’s most influential technology companies since the fall of Nokia about a decade ago. For reasons including lack of venture capital, language barriers and a cultural aversion to risk, European companies have struggled to match the entrepreneurial pace in a technology industry now dominated by mobile devices, internet services and online communication tools.

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Europe has attempted to influence the digital economy through regulation, adopting tough data protection rules and aggressively enforcing antitrust laws.

But European leaders are realizing the limits of those efforts, particularly as its citizens depend on Amazon, Apple, Facebook and Google in the absence of European alternatives. The biggest European technology company is Germany’s SAP, a business software provider that competes with American companies like Microsoft and Oracle.

Along with privacy and security issues, TikTok also raises questions about disinformation and about censorship exercised by the company on issues of sensitivity to China. The European Data Protection Board said in June that it would set up a task force to assess TikTok’s activities across the bloc.

But it is not clear what European agency would take the lead, especially since TikTok in July shifted data protection functions to Dublin. That might give the Irish Data Protection Commission oversight of the company when it comes to privacy issues. But the agency has faced criticism in the past for not being more aggressive.

Noah Barkin, a senior visiting fellow at the German Marshall Fund, said Europe’s lack of influence ultimately stemmed from its dearth of influential tech businesses. Europe will face these difficulties for years as China and the United States battle for tech supremacy.

“Europe hasn’t developed its own global digital companies to compete with the big U.S. and Chinese firms, and ultimately that’s what digital sovereignty is all about,” Mr. Barkin said. “It can’t just be a regulator.”

Europe’s plans for “digital sovereignty” are still vague, said Rebecca Arcesati, an analyst with the Mercator Institute for China Studies in Berlin.

“This is a talking point, but it is a long way before Europe can develop its own digital champions,” she said. “It may be too late.”

Fabrice Pothier, chief strategy officer at the Rasmussen Global consulting firm in Brussels, said American pressure was forcing Europe to recalibrate its relationship with China, particularly on technology matters.

“It’s a wake-up call to Europe,” he said. “There is no such thing as a benign technology and network operator from China.”

On this matter, the Trump administration is “not necessarily wrong,” he said. “Europe is generally behind the curve.”

Steven Erlanger reported from Brussels, and Adam Satariano from London. Monika Pronczuk contributed research from Brussels.

Source: nytimes

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