Digital technology has become a key dimension of geopolitical, economic, and normative power with states like China and the United States racing to claim the mantle of technological leadership. Others like Canada, Israel, Japan, and the UK are following.

The EU has recognized that the instruments at its disposal are increasingly limited to its regulatory power, leveraging the desire of technology actors to access the vast European market. But relative marketsize decline and steady erosion of innovation vis-à-vis peer competitors – even on Europe’s own competitive turf (automobiles, appliances, and industrial Internet of Things (IIoT)) – are beginning to take a heavier toll on Europe’s strategic outlook toward 2030. This has significant – and often still underappreciated – geopolitical implications for Europe’s future.

As the EU has moved from a narrative around the Digital Single Market (DSM) to one around digital sovereignty, leaders have seen a growth in defensive action aimed at managing digital spaces – particularly in information and communication technology services (ICT) – and a new jolt of tech-industrial policy activity, most recently seen in the pandemic-inspired Recovery and Resilience Facility (RFF). The European Union has begun to coalesce around the notion of “digital sovereignty” as the leitmotif of its efforts, but has yet to tackle shades of difference between key players. The quest for digital sovereignty, which combines narrative power with rhetorical ambiguity, can at times paper over hard choices about strategic policy objectives, particularly between France and Germany, for the sake of consensus building.

Six realities frame the EU’s approach as it tries to forge unity for a more forceful, geopolitically-minded digital tech policy. First, Europe’s digital market remains fragmented. Second, technology itself has taken on a more general-purpose nature, with applications across sectors. Third, the geopolitical environment – particularly US-China tech competition – has raised the potential for the development of separate technology stacks. Fourth, the coronavirus pandemic has fueled the acceleration of Europe’s digital dependences on external actors and consolidated the dominance of Big Tech. Fifth, there has been a global renaissance in tech industrial policy. And finally, data governance is an increasingly contested space with the specter of digital localization looming large.