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Macron and Merkel Are Caught in a New Cold War

Lionel Laurent

(Bloomberg Opinion) -- “Technological sovereignty” is one of the European Union’s buzzwords of the moment, conjuring up an image of a safe and secure space for zettabytes of home-grown data, free from interference or capture by the U.S. and China.

Both France’s Emmanuel Macron and Germany’s Angela Merkel have used the phrase to kick-start all sorts of initiatives, from artificial intelligence programs to state-backed cloud computing. The new European Commission president Ursula Von der Leyen has etched the concept into her political guidelines.

It’s a noble goal, if only because it acknowledges Europe is anything but technologically sovereign right now. The internet behemoths are in America and China — Alphabet Inc., Facebook Inc., Amazon.com Inc., Alibaba Group Holding Ltd — and an estimated 92% of the Western world’s data is stored in the U.S., according to the CEPS think tank. China accounts for more than one-third of global patent applications for 5G mobile technology. Amazon boasts that 80% of blue-chip German companies on the DAX exchange use its cloud services business AWS. 

The trigger to do something about it is the race for supremacy between Beijing and Washington, which is spilling over into the tech sector and undercutting the EU’s ability to protect its turf. President Donald Trump’s ban on Huawei Technologies Co. and his attempts to bully allies into doing the same was a wake-up call, however valid his security concerns. The U.S. “Cloud Act,” which forces American businesses to hand over data if ordered regardless of where it’s stored, was another. Both China and the U.S. see the EU as an easy mark in the global tech tussle. And they’re right. 

Europe’s problem is that recapturing sovereignty is neither easy nor cheap. Take cloud computing, one area where France and Germany are eyeing the building of “sovereign” domestic infrastructure for use by national and European companies. This is a $220 billion global market dominated by U.S. suppliers with market values of close to $1 trillion, which invests tens of billions of dollars every year on infrastructure. Their power isn’t just technological: When Microsoft Corp. spends $7.5 billion on an acquisition such as GitHub, a forum for open-source coding, it’s bringing valuable developers into its own orbit. Likewise, Amazon’s AWS has the scale, cheap pricing and perks that lock in customers.

France and Germany won’t win a head-on battle in this field. Paris is still smarting from a failed attempt years ago at building a sovereign cloud for the princely sum of 150 million euros ($165 million). Germany has Gaia-X, which looks like a common space for the sharing of data by the leading lights of the DAX , from SAP SE to Siemens  AG. It’s hard to see how such initiatives will lead to true digital sovereignty, though; not just because of a lack of serious investment, but because it’s hard to avoid using U.S. cloud tech.

Still, it wouldn’t be a bad thing if this trend led to France and Germany collaborating more — laying the groundwork for more ambitious spending — and to Brussels doing what it does best: setting the rules of engagement for tech companies everywhere. Digital commissioner Margrethe Vestager is already demanding tougher enforcement of data protection laws and taking a consistently muscular approach to antitrust violations by the Silicon Valley and Seattle giants. It’s not sovereignty, but it’s a start.

To contact the author of this story: Lionel Laurent at llaurent2@bloomberg.net

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.

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