The Biggest Loser: Is the European Union on course to become the big loser in the global tech race?

Global analysts say that the United States and China are in a race to achieve the most advanced technological breakthroughs. The winner will likely dominate the global economy through the end of the century. Sometimes India and Japan are mentioned as third players in this fierce global competition. But the European Union is barely mentioned, if at all.

Of course, the European Union is hardly lagging in the race to regulate the tech industry. The European Commission's proposed Digital Markets Act aims at stopping the largest tech platforms from squashing their rivals. In February, the Commission released a plan to shore up its influence in creating global technology standards in areas such as 6G and quantum computing. The Commission is also working on its Digital Services Act, aimed at how tech companies police content on their platforms. And Europe is ahead in the area of data privacy.

But will such efforts actually advance European innovation? European policymakers say one of their big disappointments is that once one of their young tech geniuses starts to gain traction, they often move to Silicon Valley where the tech community is immense and funding is easily found without Europe's regulatory hassles.

Is the European Union on course to become the big tech loser? Or is there a lot more happening on the tech front than has been reported for public consumption?

MARJORY S. BLUMENTHAL

Senior Fellow and Director, Technology and International Affairs Program, Carnegie Endowment for International Peace

When people refer to "global tech," caricatures emerge. They include dominant U.S. big tech companies and big Chinese rivals benefiting from experiences serving a huge, data-rich domestic market. This big rivalry seems to crowd out Europe, especially the countries in the European Union. When it comes to technology, the European Union's major offering--as a European ambassador lamented to me last year--is regulation, not innovation. But however easy it might be to conclude that, it would miss the bigger picture. Here are three observations why.

First, engineering and manufacturing strengths in several EU countries position them well for the growing Internet of Things. IOT involves cyber-physical systems, which combine information and communication technologies with products that engage the physical world in different ways. In this arena, the European Union is already strong in automated vehicles, for example (and other mobility-related technology).

Second, within the European Union, Estonia has modeled a broad embrace of information and communications technology in public administration and civic life, in particular, gaining efficiencies and broad societal benefits. Although Estonia's pioneering steps painted a cybersecurity target on the nation, it has become a global leader in developing policies to respond to the challenges that accompany cyber-dependency.

And third, while the European Union's approaches to data protection seem conservative and constraining, they also force companies to think through options for handling data and other aspects of how they do business. There is seldom only one way to do things, as cloud-service providers bowing to demands for local data storage have demonstrated. The discipline imposed by EU policies could, in the long run, motivate new kinds of innovation shaped by EU sensibilities. In the meantime, the recent calls by big tech firms for comprehensive U.S. privacy policy might portend a smaller gap in U.S. and EU policy environments sooner rather than later.

Beyond those three observations, there is a mechanism that the European Commission and individual European governments could lean on more: international collaboration in research and development. EU and U.S. researchers collaborate extensively today, building bottom-up, person-to-person connections and sometimes company-to-company ones. Growing that activity, of course, is a goal of the U.S.-EU Trade and Technology Council. If governments can transcend a zero-sum worldview, and if the European Union can boost its support for technology transfer and venture capital, both this fabric of connections and its benefits to the European Union can grow. At a time when uncertainty about U.S. motives and its support for its allies and partners persists, the European Union has an opportunity to put its money where its mouth is. If it does--and that is a big if--the European Union would be able to build on its solid foundations to become a stronger force in tech.

MARCO ANNUNZIATA

Co-founder, Annunziata + Desai Advisors

The global tech competition is more like the Olympics than a single race: it plays out across different disciplines, and in some of these Europe can hold its own. There is little doubt that Europe stands at a significant disadvantage in the development of key cutting-edge technologies, from artificial intelligence to robotics to quantum computing. Its venture capital sector is severely undersized, the emphasis on regulation and legislation discourages risk-taking, and the United States still exerts an irresistible attraction on European academic and entrepreneurial talent. While some European universities remain centers of excellence in specific areas, all this makes it harder to create the virtuous circle between pure academic research and innovation in startups and large tech companies that powers technological progress in the United States. Meanwhile, China's progress in artificial intelligence benefits from its willingness to collect and use data with little if any ethical and democratic restraint.

Europe's focus on regulation does have its advantages. Some recent technological advances have demonstrated the potential for major adverse social and health consequences. In the case of social media, for example, curbing its negative impact could yield important benefits. But Europe's more risk-averse culture implies it will likely continue to lag behind in the development of cutting-edge technological innovation. Leading the innovation race requires courageous risk-taking and flexible...