Report

Sep 20, 2021

Action Plan for Technology and Foreign Policy

How Germany Can Compete in the Global Contest over Technology
COVER_AP_Technologie

The development and mastery of key technologies have formed the foundation for Germany’s prosperity. Whether in the case of cars, industrial goods, or chemicals, Germany’s economic strength is based on its products, which are highly regarded and in demand worldwide. This economic strength has shaped German foreign policy for decades. In the years of its economic miracle following the Second World War, Germany preferred to flex its economic muscles rather than to engage in saber-rattling. This approach was reinforced after the end of the Cold War. In the absence of the systemic rivalry with Communism, economic interests could be even more effectively combined with support for multilateralism and democratization under the banners of liberalization and globalization.

This Action Plan is an edited and slightly updated translation of the German text that was originally published on September 20, 2021, as part of the DGAP Report Smarte Souveränität (“Smart Sovereignty”). It was written in the framework of the project “Ideenwerkstatt Deutsche Außenpolitik,” which is funded by Stiftung Mercator.

An English PDF of this text can be found as a chapter in the DGAP Report “Smart Sovereignty.” Download the full report here.

Recommendations

1. Visibility of Technology Policy

2. Structural Reform
Making International Technology Policy More Visible and a Higher Political Priority
Developing and Systematically Implementing a Digital Agenda for the Federal Foreign Office
Developing and Deepening Expertise
Making Strategic Use of the Missions Abroad for Technology Policy

3. Strategy - Core Elements of a Technology Policy Approach
Grasping the Geopolitical Dimension of Technology and Acting Accordingly
Establishing Priorities for Technology Policy on the Basis of Overarching Objectives 

 

This approach rested on the belief that anyone would benefit from free trade, the rule of law, and multilateralism – a classic win-win situation. Authoritarianism and wars seemed like anachronisms from a dark past that was about to be left behind. Military might and geostrategic considerations are alien to this type of foreign policy thinking. This paradigm had its heyday around the turn of the millennium when many believed that, with the collapse of Communism and the triumph of globalization and liberalization, a new world order based on democratization, free trade, and multilateralism was emerging.

Twenty years on, no one is talking about a global triumph of liberal democracy anymore. The return of authoritarianism and the systemic rivalry between the United States and China have shaken the foundations of German foreign policy. The digital transformation, which is calling Germany’s leading role in key technologies into question, is also challenging these old paradigms. Please note that, here, the term “technology” will be used synonymously with digital technologies.

An Unaccustomed Role

The COVID-19 pandemic has laid bare the extent to which Germany lags behind when it comes to the digitalization of its economy, education system, and public administration. No matter whether the focus is on the use of data management systems in the private sector or on office software for the public sector – the most sought-after digital innovations generally do not come from German or European providers. The current discussion about “digital sovereignty” or “technological sovereignty” is, first and foremost, an admission of this weakness, as it is based on recognition of the fact that Germany has already lost, or is on the brink of losing, its own capacity to act when it comes to mastering digital technologies.

Germany’s foreign policy is still uncomfortable with the nexus between geopolitics and technology and its implications for the country’s capacity to act..

Germany finds itself in a new, unaccustomed role. In the context of digital transformation, it is not the innovator with the best solutions. Rather, it is mainly an attractive market to be seized by the established US tech giants, which are now being joined by new players from Asia and especially China.

Mastering new technologies has never been solely about economic competitiveness or ethical implications, even though these perspectives have dominated the discourse in Germany. In fact, Germany’s view of the development of new technologies, which is strongly shaped by its belief in free markets and competition, is unusual by international standards. As a result of its own historical experience and the success of the German economic model in a world characterized by globalization and the multilateral order, Germany regards the growing tendency to view the technology sector through the lens of geostrategic and security interests as threatening. Germany’s foreign policy is still uncomfortable with the nexus between geopolitics and technology and its implications for the country’s capacity to act.

An Industrial Policy Dilemma

A glance at the United States reveals how much its perspective differs from the German view. The United States has always closely linked its dominant global position with its lead in mastering key technologies – from the harnessing of the atomic bomb in the Second World War via the conquering of space in the Cold War to the use of digital technologies to obtain information for strategic advantages. The Defense Advanced Research Projects Agency (DARPA), an agency of the US Department of Defense, epitomizes this close integration of security interests and public funding for technological innovation. While the innovativeness of the US technology sector owes a great deal to top universities, entrepreneurial spirit, and private investment, it is also fueled by massive research and development investments from the defense budget. China, too, regards the technology sector as the key to greater prosperity and global influence, internal security, and military strength. Meanwhile, France, Germany’s main partner in the EU, also views the technology sector through the lens of national interests and geopolitics.

German foreign policy lacks a compass to help it position itself in the international contest in the technology sector.

German foreign policy, by contrast, lacks a compass to help it position itself in the international contest in the technology sector. The realization that Germany has fallen behind other countries, particularly when it comes to key digital technologies, has led to a focus on the domestic technology sector. The “digital sovereignty” debate also shows, however, that German policy-makers are still very uncomfortable with an industrial policy approach, mainly due to fears that Germany taking its own industrial policy measures will encourage an international shift to greater protectionism.

DARPA was an important example and model for the establishment of Germany’s Federal Agency for Disruptive Innovation. Nonetheless, military and civilian support for new technologies is still strictly separated in Germany, unlike in the United States, China, or France. Particularly in the technology sector, the United States remains Germany’s most important partner outside the EU. At the same time, Germany is seeking ways to emancipate itself from the US tech sector to create more space for its own capabilities and innovations.

A Pawn in the Contest Between the United States and China

There are good reasons why Germany is reluctant to seek clear answers to the question of how it can reduce its dependencies and strengthen its own capabilities. This not only requires identifying short-term, medium-term, and long-term opportunities for action that are based on a deep understanding of the technology sector, but also a willingness to set priorities and accept the associated costs. As things stand today, German technology policy already suffers from major contradictions and conflicts of interest. The biggest problem is that these contradictions will only continue to grow if Germany fails to act.

Germany faces a major challenge when it comes to positioning itself in terms of technology policy in the international context. Closer links with the United States in the tech sector will inevitably lead to sharper confrontations with China. Developing domestic technological capabilities to reduce dependence on US companies is unrealistic in the short term and would be a high-risk and expensive approach. The same can be said of any attempt, together with European partners, to chart a separate course between the United States and China. This would result in Germany and the EU permanently becoming a battleground in the confrontation between Chinese and US interests.

A foretaste of this was provided by the debate on the role of the Chinese telecommunications equipment provider Huawei in the development of Germany’s 5G network. For almost two years, the United States and China tried to influence the decision of Germany’s federal government through various channels. The obvious lack of agreement within the government created more opportunities for external intervention and thus invited even greater external pressure. The 5G debate is evidence that an overt inability to agree on an unambiguous position massively increases the political price of taking a decision that either China or the United States does not like. To avoid such high-pressure campaigns, the German government needs to increase its ability to identify key trends and issues in the tech sector early on as well as their implications for its interests. And that is not enough. Based on such monitoring and analysis, Berlin also needs to formulate clear policy positions that have the support of all relevant stakeholders within the government – no easy task given the legacy of infighting among ministries and parties within the ruling coalition.


Key Challenges for German Technology Policy

Weaknesses in the Commercialization of Innovation

By shortening innovation cycles and changing business models, digitalization is transforming the foundations for Germany’s future prosperity. Compared to physical products like machines or vehicles, software-driven applications such as platform markets can be developed more quickly and rolled out globally via the internet. This creates many opportunities for disruptive innovation by new market entrants. But the key motto behind market disruptions has not changed: There is no innovation without innovators.

Germany can compete with the world’s leading innovation ecosystems for the brightest minds if it improves the conditions for research and start-ups.

In principle, Germany’s systems for education, science, and research mean it is well placed when it comes to the development of technological innovations. Its reputation and high quality of life enable Germany to attract international talent and top researchers. If it proactively seeks to attract international scientists and innovators, while simultaneously improving the conditions for research and start-ups, Germany can compete with the world’s leading innovation ecosystems for the brightest minds.

However, technological innovations can only be consistently translated into economic success if products can be rolled out and production scaled up quickly. As is shown by the United States and, increasingly, China, this requires a strong ecosystem in which – besides entrepreneurial drive – investors with the necessary capital resources and agile public funding instruments play a key role. Strengthening Germany’s position as a hub for innovation must therefore be a priority in the next electoral term.

Technology Policy as a Highly Complex, Cross-Cutting Issue

Technology policy is a cross-cutting issue and must be dealt with accordingly. Support for and the use of technologies in the domestic market always also have implications for Germany’s position in the international economy. This is particularly true of digital technologies that make use of the possibilities offered by global online connectivity. This is an area where boundaries are blurred between the internal and the external, as well as among economic, security, and human rights dimensions – especially in the context of the dominance of global internet giants and the growing importance of data for value creation and social innovation.

Technology policy will determine the future of globalization

Facebook, Google, and Apple are among the most innovative and successful companies worldwide. At the same time, their market power raises anti-trust concerns. One thing all three companies have in common is their access to sensitive, security-relevant user data. This data, in turn, raises questions related to national security and is sought-after by security authorities and criminals alike. Enabling the expression and sharing of views and knowledge, these platforms are highly relevant when it comes to the protection of human rights and the process of forming public opinion. Rather than considering how these various dimensions connect and interact, Germany views the technology sector mainly through the lens of highly siloed competences within different regulatory agencies and ministries.

Public Sector Weaknesses

Besides its dependence on major tech platforms, Germany also has glaring weaknesses when it comes to the development and use of digital technologies in the public sector – whether in the education system, public administration, or health sector. The government (at the federal and state levels) and the public administration (mainly at the state and municipal levels) lack expertise in this area, specifically the ability to draw the right conclusions from new trends and then, crucially, to act quickly on these conclusions. Given how far Germany has fallen behind in the tech industry, the German public sector is needed as a driver and funder of technological innovation. Yet public institutions are currently chasing after developments rather than shaping them. This is due to fundamental structural problems in the government and public administration, which require modernization efforts across the board. This includes creating clear competences and streamlined coordination processes.

Untapped Opportunities of the EU Single Market

The single market gives the EU enormous regulatory power. The combination of the size (number of consumers) and purchasing power (average income in the EU) of the single market makes the EU one of the most attractive markets in the world. Regulating this market gives the EU a powerful lever that can be used to set global standards. The best example in the technology sector is the EU’s General Data Protection Regulation, which has become a global standard because tech giants do not want to give up the lucrative European market. The EU is now taking a similar approach with its AI Regulation. To date, however, regulation has not led to a stronger European technology sector, as many policy makers had hoped. On the contrary, the market power of Google, Facebook, Amazon, Microsoft, and Apple has continued to rise in recent years. On top of this, European regulatory requirements have so far not created the envisaged digital single market. There are many opportunities for countries to go it alone, and the implementation and enforcement of European rules continues to differ sharply from one member state to another. As a result, the huge potential offered by the single market, which could give domestic start-ups and industrial companies better opportunities to compete with firms from the United States and China, remains untapped.

Transatlantic Tensions

Under Secretary of State Hillary Clinton, the United States launched the Internet Freedom Agenda and took on a global leadership role in defending the free and open internet. The Internet Freedom Agenda brought the interests of Silicon Valley’s global tech giants together with the foreign policy objectives of promoting democracy and human rights and of supporting the US technology sector. Edward Snowden’s revelations led to an international backlash against the US government’s claim to leadership, as he exposed that government’s security interests in having access to global data flows. While the outrage in Europe has since subsided, it has not been forgotten, and it still overshadows the discussions on transatlantic data flows.

Technology policy needs greater political visibility, and it must be embedded in structural reforms and guided by an overarching strategy

The United States is now also taking a far more critical view of tech giants, with calls for greater regulation also being made in Washington. Joint regulatory interests could strengthen transatlantic cooperation. However, major conflicts of interest remain as virtually all major tech platforms affected by competition regulation come from the United States. Today, it is already apparent that they are attempting to head off intervention by persuading the US government that they are national champions that are essential for competition with China. As a result, the biggest opportunity offered by the new Trade and Technology Council is not the chance to develop joint transatlantic positions, but first and foremost the fact that it requires the EU to react to US interests and proposals. This could advance and institutionalize greater cooperation and coordination within the EU on key technology policy issues.

Technology Policy Will Determine the Future of Globalization

The internet, the infrastructure that underpins so many digital technologies, is global in nature. It facilitates cross-border connectivity and knowledge sharing. The IT sector itself is organized in complex global value chains. Software-based services and innovations can be rolled out rapidly around the world via the internet. This enabled TikTok, a Chinese app, to build a global community of users in just a few years. That said, there are currently also strong pushbacks against products and services based on global connectivity and the associated data flows. The technological competition between China and the United States is at the heart of this. Major US platforms such as Facebook and Google are blocked for internet users in China, as are many Western media outlets that report independently and critically on China. Partly because of US export restrictions, China has stepped up its efforts to become less dependent on American technologies, for example in relation to operating systems or chip design. There is also a global trend toward stricter national regulation of internet services and data use. Even the future of transatlantic data sharing is uncertain, given the different views that exist on data protection and legal frameworks for government access to data for security purposes.

Recommendations

Recommendations for Action on Three Levels: Visibility, Structres, and Strategy

Technology policy needs greater political visibility, and it must be embedded in structural reforms and guided by an overarching strategy. These three levels are interconnected and must go hand in hand if Germany is to successfully overcome the challenges outlined above. While these issues are now receiving a great deal of attention from policy-makers, the only way to ensure they receive lasting and sustainable political visibility is through structural reforms and an overarching strategy.

Technology policy has become a higher political priority, and this is reflected in the calls for a federal ministry for digital affairs. However, the creation of a new ministry will not be enough to establish technology policy as a cross-cutting issue. Structural reforms are also needed to improve inter-ministerial cooperation, to lay the foundations for faster analysis and decision-making, and to implement the resulting strategies and measures effectively. The third level, alongside visibility and structural reform, is strategic positioning, which concerns addressing the challenges and trade-offs set out above.

1.       Visibility of Technology Policy

The establishment of a ministry for digital affairs is currently the most prominent reform being called for with the aim of boosting the visibility of technology policy. However, creating a ministry does not, on its own, guarantee a high level of visibility and influence at the cabinet table. For this to be the case, the ministry needs to have suitable competences, and a minister with sufficient influence in the government must be appointed. In addition to the roll out of broadband and digitalization of the public administration, a digital ministry should also have competences in the areas of research funding for key technologies, regulation of the digital economy, and funding for social and economic innovation. The foreign policy dimension should be anchored at the institutional level so that the ministry brings the internal and external aspects of technology policy together under one roof and considers both in its decisions.

One possible alternative to a digital ministry is upgrading the Federal Chancellery’s competences and resources, for example in the form of a technology taskforce with its own budget. This approach has the advantage of better reflecting the cross-cutting nature of the issue, as it will be impossible for a digital ministry to bring together all the relevant competences. The danger, however, is that a technology taskforce might implement its projects independently of the ministries rather than in cooperation with them. To ensure visibility, a technology taskforce would also need a very close connection with the federal chancellor; ideally, it should have a seat at the cabinet table. If the approach of closer coordination in the Federal Chancellery is taken, the Federal Foreign Office would have to concentrate on the international dimension of technology policy and develop the necessary resources and structures. However, the establishment of a digital ministry would also require the Federal Foreign Office to take action, and this is discussed in greater detail in the following section.

2.     Structural Reform

Technology policy is a cross-cutting issue. Neither a strong digital ministry nor a well-equipped taskforce will be enough to produce an effective technology policy unless structural issues relating to inter-ministerial cooperation and coordination are addressed (see also the Action Plan for German Foreign Policy Structures). The field of technology policy should play a prominent role in the strategy development process, but it must also be integrated into the proposed Federal Security Council and the upgraded crisis response center. The proposed inter-ministerial foresight process should also look at issues of technological change and its geopolitical implications.

For the foreign policy dimension of technology policy to become target-oriented, it needs competencies and resources to be built up and better coordinated

Structural reforms are also needed at the ministry level. The issues of higher prioritization, better coordination, and the development of expertise and resources are relevant not only in terms of intra-governmental cooperation, but also in the context of the work of the individual ministries. The focus in this chapter is on the Federal Foreign Office, which – no matter whether a digital ministry is created or not – is the key player in German foreign and security policy.

Making International Technology Policy More Visible and a Higher Political Priority

Not only is the foreign policy dimension of technology policy not a political priority for the leadership of the Federal Foreign Office; but the necessary resources (both human and financial) are also lacking. There is a risk of the foreign policy agenda being dominated by the short-term problems of day-to-day politics rather than by the need to strategically develop capacity to act on this key issue for the future. This issue can only be made a priority if the process is driven by the political leadership and if the necessary resources are made available. To ensure internal coordination and external visibility, a member of the highest leadership level should be given responsibility for the foreign policy dimension of technology policy. In addition, the relevant competences, which are currently scattered across various directorates-general, need to be brought together.

Developing and Systematically Implementing a Digital Agenda for the Federal Foreign Office

The previous electoral term saw the Federal Foreign Office engage with a digital strategy of its own for the first time. New technologies offer a great deal of potential to improve internal cooperation and collaboration with Germany’s missions abroad, and to tap into new analytical sources and capabilities in the work of the Federal Foreign Office. This requires a fundamental evolution of internal processes and structures to improve internal information flows, break down silo mentalities, and streamline decision-making processes. The Federal Foreign Office should set up an innovation unit that can develop and try out new ideas and encourage a shift in internal culture toward more agility and collaboration.

Developing and Deepening Expertise 

Like the rest of the federal administration, the Federal Foreign Office must compete more for the best talents. It will only be able to recruit digital experts and thought leaders if it offers them long-term prospects. Career structures and pathways should be adjusted to allow greater subject specialization.

Making Strategic Use of the Missions Abroad for Technology Policy

Other ministries are responsible for regulating and promoting digital technologies. The Federal Foreign Office’s greatest assets are its global network of missions abroad and its expertise in developing and cultivating international alliances and institutions. However, it is not yet making the most of these assets when it comes to the foreign policy dimension of technology policy. For example, Germany cannot achieve digital sovereignty alone but only at the EU level. This will, however, require a great deal more knowledge and information about competences and strengths in the technology sectors of other EU member states, and more work on developing a common strategic position. China and the United States already receive a great deal of attention. However, the federal government also needs a better understanding of global developments and interests in the technology sector. Only in this way can the Federal Foreign Office develop a coherent strategy for Germany’s foreign policy position on key issues of international technology policy.

3.    Strategy - Core Elements of a Technology Policy Approach 

Grasping the Geopolitical Dimension of Technology and Acting Accordingly

Although many in Germany do not want to believe it, new technologies are at the center of geopolitical conflicts. Germany must deal with this reality productively. This does not mean copying American or Chinese approaches. Instead, Germany must grapple much more seriously with its dependencies and vulnerabilities (see also the Action Plan for the Economy and Foreign Policy and the Action Plan for China and Foreign Policy). This includes determining the fields of technology where it is essential for Germany to have its own expertise. Particularly in the technology sector, China has long since ceased to be just a market for German products and is increasingly becoming a competitor. German policy-makers need a better understanding of the long-term interests and developments in China and need to develop strategies to avoid dependencies in the context of key technologies (see also the Action Plan for China and Foreign Policy). Shared values provide an argument for closer transatlantic cooperation. But there are conflicts of interest to be navigated in relations with the United States as well, resulting from the asymmetry of economic strength in relation to key digital technologies.

German technology policy lacks an overarching sociopolitical vision to give it the guiding framework it needs to set priorities

Establishing Priorities for Technology Policy on the Basis of Overarching Objectives

The development and mastery of technologies is only ever a means to an end, not an end in its own right. German technology policy lacks an overarching vision to give it the guiding framework it needs to set priorities. The following starting points should be at the heart of this kind of sociopolitical vision:

  • Climate action and the Sustainable Development Goals: Technologies that can contribute to climate action and the achievement of the SDGs should be prioritized. The German government needs a mission-oriented approach in which it works together with stakeholders from the scientific community, business, and civil society to define the overarching challenges that it then seeks to address by mobilizing funding and taking further measures – for example in the areas of regulation or public procurement. Such an approach can help drive technology promotion forward in the socio-political context. However, this requires capacities in the government and public administration.
     
  • Openness and capacity to act: Technologies that do not leave Germany dependent on individual companies or countries should be prioritized. Open standards, interoperability, and open source are important approaches for achieving this goal.
     
  • Defense of European values: Human rights and democracy still must be defended in the context of new technologies. The use of new technologies for the purpose of blanket surveillance, discrimination against marginalized groups, and the manipulation of democratic processes must be systematically countered.
     
  • Access to technology: Germany should ensure that developing countries have access to technology and the opportunities for development that it brings.
     
  • Mobilization of capital: Germany needs to invest more in developing key technologies and translating them into commercially successful products. First steps, such as the establishment of the Federal Agency for Disruptive Innovation or the plans for a technology investment fund, should be systematically refined and strengthened.
     
  • Europe as the anchor for German technology policy: Germany is too small to be visible and successful in international competition – particularly with China and the United States. The federal government should stop going it alone and concentrate fully on the further development and harmonization of the digital single market.
     
  • Security should not be overlooked: Digital technologies also play an important role for security authorities and the military. Germany must not close its eyes to this reality. It must develop the expertise to allow it to understand the security policy aspects of digital technologies and to use these technologies in line with European values to protect German society and democracy.
Bibliographic data

This Action Plan is an edited and slightly updated translation of the German text that was originally published on September 20, 2021, as part of DGAP Report No. 17 Smarte Souveränität (“Smart Sovereignty”). It was written in the framework of the project “Ideenwerkstatt Deutsche Außenpolitik” about which you can find more information here.

An English PDF of this text, including the infographics, can be found as a chapter in the DGAP Report “Smart Sovereignty.” Download the full report here.

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