Versailles, Ukraine, and Digital Sovereignty

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As European leaders gathered last week in Versailles to condemn Russia, their French hosts used the summit to push a protectionist agenda.

The two-day meeting took place in the opulent 17th-century palace of France’s Sun King, built when the country was the world’s leading power. The leaders dined in the same Hall of Mirrors where the Western Allies carved out a new map of Europe in 1919 after World War I. They agreed to implement the sanctions imposed on Russia following its invasion of Ukraine.

At the same time, President Emmanuel Macron seemed inspired by the lavish setting to see the Covid pandemic and the war in Ukraine as an opportunity to pursue a more protectionist European digital industrial policy. In a declaration from Versailles, the leaders agreed that Europe should be less dependent on the rest of the world.

The French call it digital sovereigntydigital sovereignty. The goal is to make the continent self-sufficient in critical digital technologies, from semiconductors to the cloud. While ostensibly directed against authoritarians led by China and Russia, the proposed rules could instead end up hurting the United States, Japan, South Korea and other like-minded democratic partners.

Although EU free trade countries such as the Netherlands have been skeptical, the conflict in Ukraine appears to have pushed this agenda forward. “We need to strengthen our open strategic autonomy, which France has been asking for for a long time,” Dutch Prime Minister Mark Rutte told Sciences Po on Wednesday at a pre-summit event in Paris.

Certainly, it is positive that the Russian invasion caused the main states of the EU, notably Germany, to invest in their own defense, to oppose autocratic regimes and to monitor the behavior of companies affiliated with the authoritarian states, such as Gazprom, RT and Huawei.

But the invasion should strengthen transatlantic ties, instead of potentially weakening them. Take EU trade policy. European governments have long worried about state-affiliated foreign companies that, thanks to dubious state support, are able to undermine European companies. At Versailles, EU leaders promised to “complete our trade and competition policy toolbox with instruments to tackle the distorting effects of foreign subsidies”.

The review and obligations of this EU proposal will not be the responsibility of Russian (banned from Europe) and Chinese state-owned companies. Instead, the burden will fall on companies in the EU’s closest trading partners and allies. Major industry groups from the US, Australia, Japan, India and South Korea fear the complex proposal will hamper their ability to invest and do business in the EU.

The Versailles Declaration committed to diversifying Europe’s energy supplies and routes, importing liquid natural gas, and diversifying semiconductor supply value chains. Much-needed foreign investment is needed to achieve these goals.

Similarly, on digital technologies, leaders pledged swift passage of a range of legislative proposals ranging from the Digital Markets Act (DMA) to new regulations promoting European semiconductors and cloud computing. Curiously, all these proposals have in common that they do not target Chinese or Russian companies. They focus on American “big tech”. In fact, the DMA targets a handful of US platforms. EU cloud policies increasingly seek to support a few European champions at the expense of US market leaders.

Similarly, Europe’s proposed new data law will prohibit these same US “gatekeepers” from participating in parts of Europe’s new data markets and will make it more difficult for companies subject to foreign laws to transfer data to abroad or even to process data in Europe.

Another priority for digital sovereignty is to strengthen European cybersecurity, especially after the Russian invasion of Ukraine. French leaders say the solution is to boost local industry. “Current circumstances have reminded us how important it is for us to strengthen the sovereignty we have over our infrastructures,” said Thierry Breton, European Commissioner for the Internal Market, after meeting the ministers in charge of cybersecurity.

Russia’s attack on Ukraine and threats against EU countries should strengthen the transatlantic digital partnership. It should not be used to justify EU restrictions on Western companies.

William Echikson is CEPA’s Bandwidth Editor.

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