The EU prides itself on the fact that its internal controls ultimately regulate the world. The Brussels effect, Anu Bradford called it. Now, with its new laws on the digital market, digital services, artificial intelligence (AI), and data and data governance, the EU not only controls all these new sectors within its borders – given its size, the market – outside itself. However, as they say, referees don’t win games even if the EU makes the call ahead of others. There is considerable debate over whether excessive regulation stifles innovation. According to the latest European Innovation Scoreboard According to the European Commission (2023), the EU often finds itself in fourth place in terms of business processes, product innovations (third place), international scientific co-publications or new doctorates. The big innovation powers are the US and China, followed by Canada.
Meanwhile, Washington continues to impose sanctions or limitations on Europe. For example, the Dutch company ASLM – which exported state-of-the-art ultra-violet photolithography (UVE) machines to China for making sophisticated chips – proves that Europe is indeed capable of innovation. China and Russia are making significant advances in that technology. And yet the truth remains: the EU regulates, but the US rules.
Europe (the EU and the United Kingdom, notable for R+D+i) can generate high levels of digital innovation by addressing five factors:: human factor; Construction of a single market for a new era; Creating a capital market especially for venture capital; the current deficit of the European defense sector; And the lack of European champions, beyond national players.
In terms of the human factor, STEM subjects (Science, Technology, Engineering, Mathematics) Europe trains its students well, but not in sufficient numbers. After training, many leave for America and especially Silicon Valley. Some scientists and technicians from abroad come to work in the old continent.
America is a powerful magnet, attracting talent not only from Europe but also from China and other countries. It’s no coincidence that the CEOs of IBM, Alphabet (Google), Microsoft, Tesla, and Nvidia all come from outside the U.S. Meanwhile, China is the global leader. STEM students (2020 data) counts approximately 30,000 STEM scholars or postdoctoral researchers operating in the United States. Despite attempts by both the Trump and Biden administrations to complicate this for the Chinese, the Majority International students in the US come from India and China. Innovation in the world’s first power is the product of imported brains. The brain drain from Europe and other countries supports this to the detriment of Europe and the Global South in particular.
The example of France is illustrative. Already in 2017, almost 70,000 French imports lived in California, Silicon Valley – still the world’s leading point for innovation.. A few weeks ago, California Governor Gavin Newsom recommended French is becoming an official language in Silicon Valley, thanks to the growing influence of French technology and the increasing influx of French startups.
Second factor – The EU lacks a true single market – Former Italian Prime Minister Enrico Letta clearly stated in his report to the European Commission, notably ’More than the market’. America and China were able to take full advantage of Europe’s market. As Letta rightly points out, the single market is a product of a time when both the EU and the world were „smaller” and simpler and less integrated, and many of today’s protagonists have yet to enter the scene. What is needed now is not simply completion, but a renewal and adaptation of the single market to a much wider global world, without the limitations imposed by the Cold War or the unipolar era that followed. To this end, Letta proposes to add a fifth aspect to the EU’s four freedoms (free movement of capital, goods, people and services) to promote research, innovation and education within the EU. Letta’s report, along with Mario Draghi’s report on how to increase the competitiveness of the European economy, seeks to make Europe sovereign and free itself from the technological slavery of the US (and China, to some extent). can still preserve its social model.
A third factor was underlined by Leta Lack of a real capital market in the EU, especially for venture capital, as well as the imperative to facilitate the creation of new companies. Many frustrated entrepreneurs and investors in the EU leave for the US, where starting a startup and finding investors is much easier, and failure is valued as a learning tool. These entrepreneurs are also part of the first factor (the human factor) – the brain drain or entrepreneurial drain that works in favor of the US and against the EU. Europe must overcome national interests and create that market.
The fourth factor Absence of an adequate European defense industry. While the development of civilian applications has been central to the latest stages of the technological revolution, the defense industries — largely driven by the Pentagon — have been decisive for investment and a catalyst for American innovation. This was the original force behind the Internet, and today it is driving artificial intelligence to dominate. Europe has had some success and learned some lessons from programs that expand to a few countries, as in the case of Airbus, in the civil and military sectors. However, no matter how much it spends (which is nothing compared to the US) Europe does not have a Union-wide defense sector. It doesn’t even boast its own DARPA (Defense Advanced Research Projects Agency), which can drive a lot of innovation. The industry is now national, especially among the largest member states, causing concern for others. Today, even these big players are not enough – they need a European dimension. Although progress has been made in this area, there is no strategic or geopolitical vision within the EU; Meanwhile, Washington supports European security until it buys American weapons.
This brings us to the fifth factor: The lack of European (and not only national) champions to compete with the giants of America and China Digitization and other related developments like Deep Tech. There is no European Google – perhaps none needed – no European Amazon or Meta or Microsoft. There are Chinese rivals, but none from Europe, where Western neoliberalism is being replaced by massive injections of public money. Even here, European countries lag behind the US in economic contributions.
It is commendable that the European Union has mandated a single charging-port model (USB Type C) for mobile phones, tablets and other devices. Consumers are very grateful. This forced synchronization, which the market failed to achieve, is now being imposed as a global norm. Despite being at the forefront of the early generations of mobile technology, Europe no longer manufactures mobile phones. At the dawn of the digital age Europe demanded an innovative edge in the digital sector. But further opportunities were missed and decisions were not made. The challenge now is to ensure that Europe does not see itself defeated or its innovation crippled by the ongoing technological competition between China and the US.