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#Status Quo Scenario: The EU’s Autocratic Model of Democracy
#Worst-Case Scenario: A Question of Trust
#Best-Case Scenario: The EU Ramps Up Investment and Rallies Europeans Around Flagship Projects
The EU cannot spread its cooperative and democratic form of order without innovating because its standards will mean nothing if its digital technologies are not taken up abroad. Simply leveraging the EU’s market size and the access of foreign-owned technology firms to EU consumers is an ever-diminishing form of power. Our scenarios demonstrate that the EU’s strategy of being first mover when it comes to regulation – on data protection, social media platforms, and artificial intelligence (AI) – too easily impedes its ability to innovate. If the EU continues to focus on a defensive regulatory policy, it will not only suppress innovation but also create negative knock-on effects for its whole foreign policy.
When it comes to the first factor – the way the EU uses its regulatory power to assert its standards internationally – the status quo scenario sees the EU quickly expanding its regulatory depth and reach through new tech rules, consciously joining a global geopolitical battle to assert a liberal democratic tech space. However, its model of “democratic power” is top-down, and it chooses which businesses to support based on reasons of grand strategy. In the worst-case scenario, the EU wisely focuses on building up trust among polarized EU citizens in order to maintain its capacity to regulate. But it takes a geopolitical approach, and its heavy focus on combating disinformation and hybrid threats only ends up distorting the European public sphere, deepening mistrust of technology and the state. Finally, in the best-case scenario, the EU concentrates primarily on ramping up investment and citizens’ adoption of tech, rallying Europeans around flagship innovation initiatives such as the crypto euro of the European Central Bank (ECB), the Mars mission of the European Space Agency (ESA), and the Gaia-X infrastructure project led by Germany and France.
Regarding the global geopolitics of tech, the status quo scenario sees the United States toggling between internationalism and populism. Early cooperation with the EU around establishing democratic rules for the game soon gives way to tech protectionism and tit-for-tat retaliation. When the United States again moves back toward internationalism, it then cooperates on the rules of the internet and digital technology with an innovative China rather than a defensive and unresponsive EU. In the worst case-scenario, China emerges as the world’s tech innovation hub and, for commercial reasons, is supportive of EU attempts to create a stable and cohesive regulatory space. As the European Digital Single Market fragments under polarizing political tendencies, however, China creates a “Beijing Effect,” harnessing its latest innovations to spread Chinese standards in Europe. The best-case scenario envisions cooperative solutions between great powers in the wake of infrastructure attacks in the United States and China. As Washington and Beijing recognize that their “Tech Cold War” is mutually debilitating, multilateral digital governance initiatives are revived. Both the EU’s innovative technologies and its nimble rules are adopted or mirrored abroad.
What to Watch Out For – Takeaways for Policymaking Today
Is the EU properly braced for the worst case? This second scenario imagines, not implausibly, the dissolution of the EU’s ability to regulate at home as it is pried apart by aggressive outside powers – all but ending its shaping power. China would not be able to achieve this kind of divide and rule were it not for the underlying tensions in Europe, evidenced by a significant rise of populist nationalism. China exploits the divide, not only by supplying tech to private consumers but also by pulling groups of EU countries into its tech governance sphere. But, importantly, China starts to act in this aggressive way only when it perceives that Brussels has forfeited the trust of European consumers. Therefore, this scenario shows that diminishing the (digital) divides across Europe is the way to supply the necessary resilience to withstand crises. The EU’s post-COVID-19 industrial policy decisions will inevitably prop up old champions, but they must also create a landscape supportive of innovation in small and medium-sized enterprises (SMEs) across the EU.
How might the EU work toward the best case? In this scenario, the EU adopts a balanced approach to regulation and sparks innovation by means of a limited number of successful flagship projects. These innovation initiatives produce globally competitive technology and digital services – as opposed to heavy-handed regulation or efforts to crown industrial champions. These competitive technologies, in turn, spur the development of innovative European tech norms, which allow the EU to take advantage of the change in global mood: a new win-win attitude toward cooperation in tech in the wake of severe crises. However, one key factor contributing to public support for the EU’s tech initiatives should not be forgotten – namely, that the digital divide among EU countries is bridged. This scenario strongly suggests that societal trust in and understanding of technology are at the core of the equation: The public and private sector jointly build rules, invest in education, and use tech to drive areas such as health and sustainability.
Status Quo Scenario: The EU’s Autocratic Model of Democracy
While the EU expands the ambit of its tech regulations and builds a nuanced framework of tech rules in this scenario, this does little to get domestic innovation to take off. That matters because its efforts are made against the backdrop of a global tech boom. The EU’s attempts to create homegrown alternatives to US and Chinese technologies fail primarily due to a lack of adoption in Europe – something its rule-making was meant to address. By 2030, the EU’s relative market size shrinks and, with that, its regulatory reach. Its top-down, ideological model of democracy promotion in the technological sphere suppresses innovation in Europe.
The EU’s Innovation Cannot Keep Up With Its Regulatory Ambition
As 2020 marks the start of a new decade, the EU recognizes that digital technology will be the frontline in a global competition between liberal democracies and autocracies. Keen to protect European citizens, the EU makes full use of its market power to set its own ethical liberal norms for AI, cloud computing, industrial data, platforms, and competition. Landmark regulatory frameworks follow. In 2022, the European Digital Markets and Digital Services Acts come into force in record time. In 2023, two major revisions to the 2016 General Data Protection Regulation – an updated “GDPR 2.0” and specific new regulations on personal data and ethical algorithms for AI – are implemented. Large, non-European tech firms welcome these efforts because they are seeking precisely this mix of high standards and political predictability – and, so, start applying EU norms to their global operations. True, large US firms push back at the European Commission’s widely trailed intention to break up GAFAM (Google, Apple, Facebook, Amazon, and Microsoft) in Europe. But Chinese platforms, which have a smaller share of the EU market, readily take on European market standards.
Buoyed by this successful “scaling up” of EU democratic standards in what everyone in Brussels agrees is an unprecedentedly hostile geopolitical situation, EU regulators make ever more robust tech norms on behalf of European society. But this overconfidence and sense of mission cloud their judgment, and their early successes do not last. EU lawmakers label more and more fields of technology as strategically important for Europe. They attempt to protect European data flows and information and communications technology (ICT) infrastructure. But the effect is to cut the EU off – even from neighboring world regions. The Franco-German-led attempt to create a federated European data infrastructure, the Gaia-X project, fails because it becomes too detached from its business, consumer, research, and international stakeholders and simply does not align with the public interest. Most problematic of all, bureaucratic rules impede start-ups, with knock-on effects for the stream of new technologies to Europe’s industrial giants. The EU’s share of the world’s gross domestic product (GDP) dips below 15 percent, a decrease of more than 5 percent in just 10 years.
The EU as a Shrinking Global Partner
In 2021, the EU wholeheartedly supports the “Summit for Democracy” convened by a Democratic US administration and bolsters the summit’s ambition to create multilateral initiatives to build democratic technical standards. However, given the huge geo-strategic stakes, Brussels and Washington each believes the other should subordinate its tech model to it. Their joint norms remain confined to small parts of the enmeshed transatlantic tech space – and the only thing that the United States and EU do enthusiastically cooperate on is naming and shaming autocracies. Therefore, the summit’s after-effects are neither sufficiently weighty nor inclusive enough to sway China. And this debacle for an internationalist US president’s diplomatic ambitions helps put an isolationist in the White House in 2024. This new US administration stirs xenophobic sentiment in America and, when barring foreign firms from its market, does not differentiate between Chinese or European tech products. Indeed, the EU is said to be the enemy of US Big Tech, intent on breaking up its sheer size, which is said to be the very source of America’s tech superpower in its grudge match with China.
The global regulatory environment splits into two big blocs and a third, smaller one – around the United States, China, and the European Union, respectively. In response to the near-complete US market foreclosure, China bars all outside usage of personal and industrial data from the United States. But to justify these protectionist ends, Beijing adopts the language it learned from the EU in the early part of the decade – it cites, for instance, insufficient US data protection. As they close themselves off, each of the three markets sees technology as a domain of national security. They all accelerate investments into autonomous domestic AI, high-performance computing, and quantum technologies. The paradoxical effect of market closure is thus to fuel a global tech boom. In 2030, the global stock market also booms and the winners are tech companies from China and the United States – especially the Chinese internet-based companies Tencent and Baidu followed closely by the US leader in AI, Nvidia. When the United States finally veers out of isolationism and toward a further attempt to create a new international rules-based order, it works with a highly innovative China this time rather than the sclerotic EU.
The EU Turns Into What It Fears
The attempts early in the decade by legislators in France, Germany, and Brussels to pick “flagship democratic technologies” on behalf of European voters is sadly removed from real public demand. The EU is shaping its industrial policy along lofty ideological grounds, but, given the choice, European voters in fact pick up and adopt technologies that are made in the United States and China. Competition between the US and China – the two “tech workshops of the world” – is heating up thanks to their consumer-friendly approaches. The Chinese share of the global market is increasing thanks to the comparatively cheap systems it offers, which are snapped up by EU consumers, particularly those in regions hit hardest by a slowing EU economy. The EU’s top-down model of democracy leaves it prey to US corporate muscle and Chinese state capitalism. While Europe’s public sector-led tech initiatives fail to take off and appear inefficient, its private-sector tech is viewed increasingly critically – for its role in mining data and its insufficient containment of digital surveillance in markets outside Europe.
Despite a tech boom that has reached virtually every corner of the globe, Europe finds itself increasingly caught in between the two big players, both of them growing as they bite into the EU market. Because the United States and China view control of the EU market as the “global kingmaker” to achieving tech supremacy, the EU finds itself staving off an increased number of foreign takeover bids on European companies. Its weak position makes its few small contenders and then even its old champions ripe for the picking. Starved of a local innovation stream, Europe’s former prowess in engineering-driven manufacturing fades, and EU industrial champions struggle to adapt to the demand for user-driven smart devices. Europe’s Daimler is taken over by China’s Baidu in 2028; and Volkswagen – soon to be grimly rebranded as the Chinese People’s Car – is next on the menu. The EU is not invited to the table when China and the United States declare a stalemate and agree to draw up the new rules of the game between them. The EU’s top-down model of democracy even leaves its citizens receptive to autocratic norms from abroad.
Stocktaking: Lessons Learned from 2030
In an increasingly securitized tech environment, the EU’s industrial policy efforts during the 2020s were too ideological and heavy-handed; its few homegrown tech applications were not even picked up by consumers and businesses in Europe. It focused on shielding its legacy industries from outside competitors, trusting too much in the incumbents to envision the disruptive innovations of the future. But this stifled start-up businesses, and the EU ended up making those legacy industries vulnerable to hostile takeovers. Its response to the growing geopolitical stakes was over-regulation, which further dampened Europe’s potential for domestic innovation. In the long run, the shrinking EU market lost its position as a global actor and regulatory entrepreneur, and a lack of cohesion and diminishing level of trust in public-sector tech inhibited its natural advantages. There are lessons for how the EU might avoid this negative, status quo trajectory. One is to rethink the EU’s efforts to integrate its “new” policy priorities – such as the green agenda, as well as ethical and human rights aspects – into its regulatory expansionism.
Our experts were not convinced that the Commission’s pitch for European tech – its unique selling proposition being its ability to shape “ethical” and “trustworthy” tech – is enough to generate a sufficient rate of tech adoption for European products and services to matter globally. Certainly, the EU should continue pushing for such standards, but high demand for accessible US and Chinese products is likely to persist. With a different industrial policy slant, the EU could raise trust in technology not only through regulation but also by harnessing new technologies to ensure everyday benefits for citizens – for example, by investing in smart healthcare solutions to navigate the post-pandemic world or supporting its multilateral environmental efforts by investing in green technology. In this scenario, the EU’s efforts to rein in large tech “gatekeepers” did backfire somewhat, but largely because it occurred on ideological and geopolitical grounds. Today, the EU can reduce the oligopolistic power of these companies, thereby reducing barriers to entry for smaller SMEs – and creating space for European firms to innovate in the process.
Worst-Case Scenario: A Question of Trust
In this scenario, the European Union again focuses on boosting its capacity to regulate, this time channeling investment and research efforts toward technologies that promise to protect the European public sphere and build trust with voters. But the EU’s investment choices end up weakening its ability to handle crises, undermining societal trust, and stunting bottom-up innovation. Early on, politicians single out China as a source of disinformation and hybrid threats, fretting about China’s weaponization of the World Wide Web. But China only unleashes a concerted influence campaign when it, too, has lost faith in EU regulators and wants to define their regulatory regime.
EU Elites Buy a White Elephant
In the early 2020s, a slow vaccine roll-out and a third and fourth wave of COVID-19 mutations roil Europe. In Central and southern Europe, governments blame the EU. In the northwest, a rump of centrist pro-European heads of state attempt to reestablish faith in the EU by way of a joint innovation initiative. They blame the surge of populist, anti-EU sentiment on disinformation from China and argue that the lack of an “autonomous European sphere” leaves Brussels vulnerable and diminishes their ability to make and spread rules (the Brussels Effect). In 2024, a Danish “Commission Vice-President for a Sovereign and Prosperous European Industry,” along with a faction of Baltic and northern European states, pours euros and political capital into a flagship project – an autonomous European “Satellite Internet Infrastructure.” Their intention is good: to reduce the vulnerability of EU internet-based services from external disruption while presenting a disruptive innovation for everyday use by EU citizens and companies. They promise disruption without disturbance. But this – somewhat forced – investment does little that Europe’s old fiber optic cables could not and, ultimately, proves to be more vulnerable. Outside powers can now disable the whole EU without knock-on effects for other world regions.
Europe Succumbs to a Self-Fulfilling Prophecy
European governments, lulled into a false sense of security by their satellite system, lag behind on message encryption, allowing US firms to intercept huge amounts of data. US-EU relations take a hit, and large US companies are increasingly hobbled by new European rules that specifically target their strengths. China sees that it can seize the crown of being the dominant global force in technology – providing the majority of critical infrastructure worldwide, supplying the most-used digital platforms, and setting technical standards. It pushes assertively westward, unleashing for the first time a concerted and heavy attack whose target is to undermine trust in European and US tech. Until this point, China has hugely profited from the EU’s stability and unity, but these traits are gone. Chinese disinformation efforts, thus, find receptive ears: the EU’s policies have failed in what ought to have been their core aim – to encourage Europeans to adopt new technologies. Instead, the constant stream of warnings from Brussels has created mistrust in European and US technology, which stunts domestic innovation. These developments pave the way for the “C Plus” approach now familiar from Africa and Latin America – China plugs itself into the European Union’s institutions and downloads Chinese rules. Young Europeans now snap up Chinese apps like TikTok and WeChat.
Brussels Falls Into the Digital Divide
After the COVID-19 pandemic, EU innovation initiatives such as the satellite program only add to the uneven effects of its economic recovery package. Large companies from western and northern Europe continue to dominate the European tech market, while SMEs, start-ups, and research centers in lower wage areas of the EU struggle to access resources, investment, and human capital. European efforts in the regulatory sphere prove to be simultaneously stifling for further innovation and toothless for truly reducing the market power of dominant companies. The EU’s digital single market begins to fragment because rule-makers focus on securing their regulatory power and neglect technological innovation. All this widens the digital divide in the electorate and eventually undermines any future rule-making. Because populist-governed member states like Poland take a hawkish line on China while populist governments such as Italy’s argue for rapprochement with Beijing to access its cheap tech, the EU finds itself unable to act. Paralyzed, elites from the EU’s northwest are unable to deliver on their priorities, reinforcing citizens’ skepticism. By 2030, right-wing parties gain significant margins in German and French elections.
Stocktaking: Lessons Learned from 2030
In this scenario, Brussels engaged in exaggerated “policy solutionism” – going into policymaking overdrive as if the solution were merely showing that it can set norms. The EU relied too heavily on regulation as the basis of its capacity to act instead of trusting in innovation and enhancing competitiveness to strengthen its shaping power. This led the EU to make investment choices that support elite voices, only worsening centrifugal political forces. Its former proficiency in crisis management has been equally lost. Its one-off risky attempt to invest in satellite infrastructure has backfired, further eroding citizens’ trust in the EU’s ability to steer them through the next technological decade. China was able to push into the existing technological and socioeconomic divide, perpetuating a vicious cycle out of which the EU was unable to break, in which its faint efforts to encourage innovation were toothless, its regulatory power no longer applied, and, as a result, its population was less and less convinced of the EU’s benefits.
However, this scenario also illustrates some blind spots that may yield opportunities. If the transatlantic relationship declines, for example, the EU has options. It can invest in new alliances, including with countries of the Global South. It can also position itself, once more, as a normative power striving for an ethically and equitably regulated tech world – by not only working with civil societies abroad where authoritarian regimes have rigorously diffused Chinese surveillance and law enforcement tech but also positioning its homegrown tech on global markets with their unique selling propositions. First, this approach could result in human-centered AI applications and health solutions with secure and safe data usage, the dimensions of which could be more boldly advertised by the EU to the outside world. Second, it can harness discontent with China’s “strings-attached” cooperation in countries of the Belt and Road Initiative (BRI). This discontent could emerge in countries that accumulate debt or grow wary of deals in which a majority of rare earth supplies, which are relevant for high-tech production, is sent to China.
Best-Case Scenario: The EU Ramps Up Investment and Rallies Europeans Around Flagship Projects
In this scenario, the EU is able to maintain its regulatory power and use its innovation potential to back cooperative projects. As digitization and tech adoption take off in the aftermath of the COVID-19 pandemic, the EU picks up reforms that free investment. Importantly, these reforms enhance societal trust by both improving tech infrastructure coverage and implementing ethical regulation. Internal cohesion grows, populism decreases, and the EU gains new capacities for nimble norm-setting. Key innovative undertakings, such as Gaia-X, the ECB’s digital euro, and the ESA’s Mars program, build both trust in technology at home and European prestige abroad. Two severe cyber crises spur momentum for international cooperation, and the EU is well placed to capitalize on a new win-win attitude among big powers in multilateral fora.
Balanced Regulation and Innovation Breakthroughs
By 2030, the EU is a fully-fledged technological peer of the United States and China, matching them in the number of essential patents and unicorns [a unicorn refers to a privately held start-up company valued at over $1 billion], rates of venture capital, and attractiveness for ICT talent. Driven by the societal embrace of digitization in the aftermath of the COVID-19 lockdowns, both technological adoption and investment in homegrown tech increase. A Europe-wide pension fund reform in 2022 allows more investment in start-ups. The Digital Single Market is completed by 2024, flanked by worker mobility measures attracting highly skilled labor to the EU. The EU has gone beyond regulatory-style reform with a number of flagship initiatives. These include the “digital euro” launched by the ECB in 2022, the Mars exploration program launched by the ESA in 2023, and breakthroughs in quantum technologies. The Franco-German-led Gaia-X project becomes a triumph of clever political-technological design, providing the basis for an interoperable, secure cloud infrastructure – a federated system that has enabled a wide range of new services and providers through healthy competition. The system is adopted in third countries. As a result, other EU standards such as the “GDPR 2.0” are copied, giving EU tech companies a competitive edge.
Crises Spur Multilateral Tech Cooperation
In the run-up to 2030, the United States, China, and the EU recognize the risks of a potential “Tech Cold War.” In its place, a cautious mood of cooperation emerges among them. This switch toward cooperation is produced by a series of major crises. A sequence of severe cyberattacks disrupts all of their communications infrastructures. After a hiatus in which all three feel they have improved their resilience, a severe cyberattack hits a US nuclear plant. Experts from the EU and China offer to step in to help prevent a nuclear meltdown; their offer is rebuffed in Washington with obviously negative ramifications. As a result of the lessons learned from these crises, the EU, United States, and China engage in mutual reassurance as well as joint standards that facilitate communication and data flows between continents. Thanks to a new era of digital diplomacy, the International Telecommunication Union is revitalized and expanded to become a UN Digital Agency whose standard-setting prowess means it begins to supplement the United Nations’ slow-moving and expensive “analogue agencies.” In the wake of a global digital trade agreement, private companies from the EU, US, and China feel able to collaborate. An alliance among Huawei, Nokia, and Broadcom enables the deployment of high-speed 6G mobile internet, going some way to overcoming the global digital divide.
The Digital Divide is Bridged and Trust Reestablished
Thanks to this innovation drive and the Digital Single Market initiative, the digital divide across Europe is finally bridged. Fiber connectivity is available for all companies and private households and high bandwidth and low latency are standard. By 2029, broadband penetration has reached 99.9 percent, and 5G is operational in both rural and urban areas throughout Europe, further driving innovation and new business models and helping Europe play to its strengths in the Internet of Things, robotics, health, mobility, and gaming. As a result, overall political cohesion increases, and the EU is able to set rules quickly. Although technological breakthroughs are vast, society is not overwhelmed by disruption or data overload. Thanks to digital uptake, education has kept up with the needs of a new tech economy, labor laws have been adequately adapted, and new technologies such as AI are subject to appropriate and ethical regulation, supporting everyday life. Governments and private companies have worked together to raise levels of trust. New opportunities emerge through investment in innovative technologies, including those related to global greening and the vanishing divide between the EU’s north and south.
Stocktaking: Lessons Learned from 2030
Viewed from 2030, it is clear how the right degree of regulation – together with a drive for innovation – can create virtuous cycles. Investing in a number of flagship projects early in the decade fueled the appetite in Europe for EU-grown tech. While it took a number of worldwide crises to dampen global tech confrontation, these crises resulted in swift benefits and offered both political and economic opportunities. Ultimately, the EU’s regulatory power – though not asserted by Brussels on as great of a scale as in the status quo scenario – in fact expanded because its initiatives, such as the digital euro and space program, were adopted or admired elsewhere, offering EU tech companies significant advantages. This scenario is also characterized by trustworthy and affordable tech, with infrastructure providing beneficial access for everyone and enhancing EU cohesion. This, in turn, provided new opportunities for European business and freed capital to be invested into much-needed new carbon-neutral projects to feed the EU’s green agenda at home and abroad.
Although the sequence of events described in this scenario was mostly highly positive, it might easily have had severe downsides. The scenario required high-risk behavior to achieve its positive outcome. This scenario relied on the rallying effect of successful flagship initiatives. These achieved buy-in for the EU and its tech companies by impressing consumers and governments. But success hinged on these initiatives actually taking off; a significant failure over the course of this decade might have had a reverse effect. Similarly, this scenario saw a high degree of societal acceptance of new tech, in which the benefits of an eased digital divide and balanced regulation created trust. But unprecedented degrees of technological disruption might just as easily have yielded a backlash against new types of tech-driven business models. Furthermore, the upsurge in innovation in the tech sector might easily have had an adverse impact on certain industries that were left behind, creating a challenge to EU cohesion. Finally, the cooperation in this scenario was catalyzed by major crises, leading initially to chaos, disruption, and mutual distrust. Only because the EU, China, and the United States were sufficiently resilient were they subsequently able to work together.
