The EU and China in the international technological geopolitical order

The EU does not present any battle to lead the technological transition led by China, or it does so timidly, accompanying large investments with regulations focused on linear improvements in its consolidated sectors. Click on the link at the end of the text and discover the complete report on The EU and China in the international technological geopolitical order.

Executive report

Investment Agreement between the European Union and China

The unprecedented economic growth that China has experienced in recent decades has disrupted the liberal order designed after World War II in which the United States was the hegemonic power, causing a new reality in which the structural confrontation with the North American country for leadership, technological in this case, is key; as is the need for the EU to play its own role so as not to end up having to radically position itself with one of the two powers.

China and the Union have been strengthening economic and financial ties that have led to dependence, and are currently strategic partners as they are extremely important to each other in economic terms.. Furthermore, they are very relevant economies and actors for international relations and global governance. Their relations, in economic, political and cooperation terms, are based on more than 50 dialogues held in summits, forums and ministerial conferences, in addition to the EU-China bilateral summits, held since 1998. And, they are governed by a realistic and multifaceted (for the European perspective), by the new Strategic Cooperation Agenda 2020, which seeks to guarantee fair, balanced and mutually beneficial relations.

In this line, On December 30, 2020, the actors announced the investment agreement (CAI, of Comprehensive Agreement on Investment). One of the most ambitious for China since its economic opening, and very useful for the European Union by introducing regulations for technology transfer, Chinese public companies, public subsidies, sustainable development or the elimination of quantitative restrictions on joint ventures, among others. It even brings them closer to reciprocity in the manufacturing and services sector, by granting China greater freedom of access in fields such as finance, health, biological research, telecommunications and digital clouds, computing or international maritime transport. 5G networks being the ones that will constitute the backbone of future economic and social development. The CAI is thus constituted as a reflection of the European strategy towards China, which identifies Beijing as a partner, competitor and rival, but not as an enemy.

For its part, China's official discourse is favorable to the Union; However, it is making efforts to improve its bilateral relations with member states directly, especially those on the periphery, to serve its own interests and ignore EU regulations. Each approach and consequent response to each member state being different; which could cause fractures at the institutional level. In fact, Germany even proposed, during its presidency of the EU Council, a 27 + 1 (China) forum. Now, at the moment the member states, having their own relations with China, are taking advantage of the situation. They continue to take the United States as their most important ally, while they seek the benefits of closer economic relations with the Asian giant.

Geopoliticization of technology

In this framework, the relevance of the EU as a global actor whose fundamental pillars are the promotion of multilateralism and political values ​​could end, and technology would have a lot to do with it. For him European Political Strategy Center (2019) Whoever controls digital technology will have more and more economic, social and political influence in a context of geopoliticization of technology. Digitalization has changed the rules of the game, even threatening the survival of traditional practices in the medium and long term; a process similar to that which caused the industrialization or outsourcing of previous technological revolutions. In the coming decades, the combination of technologies such as AI (Artificial Intelligence), the Internet of Things or blockchain They promise a phase of exponential growth that will take other disciplines such as biotechnology, medicine or physics to unknown levels. The cure of diseases, the fight against climate change or the understanding of the universe will depend on the promotion of the digital economy and its technologies. 

Therefore, given this perspective, it would be a mistake to stay out of the promising era of acceleration of global knowledge, which requires agile economies. In the case of the current Union, it has been doing so since the 70s with the US, when it began to promote economies of scale with the eEurope plans (1999, 2002 and 2005) without optimal results, while in the US and European markets In Asia, a wave of young companies like Google or Tencent were taking the pulse of disruption and leading global economic growth. 

In October 2019, with the report EU Coordinated risk assessment of the cybersecurity of 5G networks The importance of 5G was detected, but the responses were not as expected. Although strategic autonomy is totally necessary, this involves technological autonomy, and The Union and its member states continue to position themselves with the United States while winking at Beijing and seeking to learn “the language of power.” There are sectors that advocate rethinking strategic autonomy in the digital age, especially when companies like Ericsson and Nokia have tools to implement 5G networks. However, the lack of coordinated funds for research (such as Horizon 2020) makes the EU uncompetitive (Moreno and Pedreño, 2020)1. 

The European Commission itself in its report Web 2.0: where does Europe stand? recognized the weak business situation in the ICT sector and the urgency of proposing common policies that would promote the digital sector. The effects of the European delay are noticeable in most of its sectors, although they have not yet reached their peak. There is still enough analog demand to sustain companies that have not started their reinvention processes. It even seems that traditional specialization can be positive. More than a decade after the last financial crisis, we still lack appropriate technological development and transformation strategies.

Although the Union has tried to define itself as a digital leader normatively, it will never be able to impose global regulation while being technologically dependent on the rest of the technological powers. It must, then, seek global pacts in which a large majority of countries form rules of the game that are widely adopted at the international level. China is fully aware of this and will use it to its advantage. The intensity of disruptive changes generates competitive differences and a significant gap both between companies and between countries, with geopolitical frictions that we are already witnessing and that threaten the economic order shaped by globalization. AND This can affect the economic development of the European Union. 

China's technology policy

If Europe and the US dominated the changes of each new technological paradigm since the First Industrial Revolution, and at the end of the 20th century. XX China still preserved feudal structures and its wealth per inhabitant was lower than the average of the countries of Sub-Saharan Africa; Today, China matches US investment in digital companies. Pintends to stop being the world's factory to be its brain, and disruptive technologies are key to this. China's technological policy has been implemented through a strong commitment to attracting companies, developing talent and purchasing technology, but also by promoting its own technological sector. Proactive, state-driven Chinese economic and industrial policies such as MIC25 aim to create national champions and help them become global leaders in strategic high-tech sectors.. 

China began to promote its strategy GoGlobal in 1999 in terms of disruption with the idea of ​​taking advantage of the advantages that international markets could offer, and selected companies like Huawei to be beneficiaries. Today, these technology companies are the fundamental pillar of their great technological geopolitical strategy. That is why China keeps its domestic markets for its champions, protecting them from competition through selective market opening, investment restrictions, closure of its public procurement market, localization obligations (including data) and limiting foreign companies' access to state-funded programs. In addition, it grants them heavy subsidies and favors them in terms of protection of intellectual property rights.  

Along these lines, the Asian giant has boosted its public investment in Artificial Intelligence with impressive values. Investment expectations are 10.000 billion dollars until 2030, to which are added the individual initiative of each region and the raising of international funds. In total, more than 70.000 billion dollars estimated in 2020 alone, framed in MIC2025 to lead the new technological era; and the construction of the Mentougou technology park (Beijing) is an example of this. The expected impact of AI over the next decade will be $16 trillion, a sufficient amount to drive changes in global geopolitical and economic leadership. And those that benefit from this will be the economies that best orient their strategies towards the renewal of the productive fabric, computational thinking or an open data policy. 

An example of all this has been the management of COVID-19. In China, AI and Big Data have served to control the pandemic in record time by tracking hundreds of millions of smartphones, obtaining the information necessary to contain the outbreak: the designed algorithms estimated whether an individual had been exposed to the virus from the location of known infected cases. Those who had shared space with the carriers of the virus also became potentially infected. For its part, in the EU we have the same technology, but Privacy laws prevent governments from collecting and exploiting individualized data, so the Asian alternative was not valid. The cost of digital inefficiency and delay has already translated into thousands of human lives and a dramatic economic and social impact.

The EU does not present any battle to lead this transition, or it does so timidly by accompanying large investments with regulations focused on linear improvements in its consolidated sectors. A technological gap is opening up that brings us closer to the abyss of economic slowdown, unemployment and public debt. (Moreno and Pedreño, 2020). 

1 MORENO, L. and PEDREÑO, A. (2020). Europe versus the US and China. Preventing decline in the era of artificial intelligence. KDP Publishing. ISBN: 8409212110