Digital sovereignty in an 'open manner'? EU tensions between autonomy and competitiveness

Edoardo Celeste, Victor Henriquez Diaz and Elio Machado Neto No. 6/2025 Working Paper Series Digital sovereignty in an ‘open manner’? EU tensions between autonomy and competitiveness Contribution for the edited volume ‘The governance of digital trade: crossroads of divergent approaches’ (Laval University Press 2024) Digital sovereignty in an ‘open manner’? EU tensions between autonomy and competitiveness Edoardo Celeste, Victor Henriquez Diaz and Elio Machado Neto1 Abstract At the end of 2022, the EU solemnly adopted the Declaration on Digital Rights and Principles, a non-legally binding document systematising the Union’s shared political intentions and commitments towards the digital transformation. The Declaration stresses the importance of achieving a sufficient level of strategic autonomy in the digital field vis-a-vis foreign countries. This idea is expressed using the concept of ‘digital sovereignty in an open manner’, intended as a strategy to improve independence from non-EU players while fostering ‘the availability of services’ and ‘a dynamic, resource efficient, and fair economy’ (Recital 6). This chapter identifies a tension between these policy objectives. Is it possible for the EU to become digitally independent while maintaining its founding vision of an open and competitive economy? The chapter aims to assess this EU policy ambition by contextualising it in the existing regulatory framework and by carrying out a comparative analysis of similar policies emerging in the US and China. The chapter concludes proposing the adoption of a necessity and proportionality test to avoid protectionist distortions and to assess the alignment of EU digital sovereignty strategies with the protection of fundamental rights. Keywords: digital sovereignty; open strategic autonomy; competitiveness; protectionism. 1 Edoardo Celeste is an Associate Professor of Law, Technology and Innovation at the School of Law and Government of Dublin City University, Ireland, where is the Coordinator of the DCU Law and Tech Research Cluster and the Programme Chair of the Erasmus Mundus Master in Law, Data and AI (EMILDAI). Victor Henriquez Diaz is a PhD researcher at the DCU Law and Tech Research Cluster, former intern at UNCITRAL, and was a recipient of the Erasmus Mundus Scholarship of the EMILDAI programme. Elio Machado Neto is a legal researcher at the DCU Law and Tech Research Cluster and was a recipient of the Erasmus Mundus Scholarship of the EMILDAI programme. 1 I. Introduction In recent years, the term ‘digital sovereignty’ permeated the European Union’s political discussions and actions concerning the quest for building an ‘Europe fit for the digital age’. The digital sovereignty discourse also promotes the importance of achieving the EU strategic autonomy in the digital field vis-a-vis foreign countries combined with a reaffirmed commitment to fundamental rights protection and the green transition. The EU Declaration on Digital Rights and Principles, adopted at the end of 2022, systematised the Union’s shared political intentions and commitments towards the digital transformation. In this document, digital sovereignty is explicitly presented as one of the pillars of what is defined as the ‘EU way for the digital transformation’ (Recital 6). The Digital Decade Policy Programme 2030 (Decision (EU) 2022/2481) stressed the importance of a secure, resilient, performant, and sustainable digital infrastructure. The EU planned to achieve at least 20% of world production in value of cutting-edge semiconductors (Article 4 of the Decision), doubling its current share of the global market. The European Chips Act entered into force in September 2023, setting a legal framework for the EU’s ambition to reduce its external dependencies in that specific sector. The Declaration on Digital Rights and Principles promotes the idea of supporting digital sovereignty in an ‘open manner’ as a strategy to improve, among other aspects, ‘the availability of services’ and ‘contribute to a dynamic, resource efficient, and fair economy and society in the EU’ (Recital 6). This chapter identifies a tension between EU digital sovereignty strategies and these two policy objectives. Is it really possible for the EU to become digitally independent while maintaining its founding vision of an open and competitive economy? The chapter aims to assess this EU policy ambition by contextualising it in the existing regulatory framework and by carrying out a comparative analysis of similar policies emerging in the US and China. Firstly, the chapter will reconstruct the policy strategy adopted by the EU in the digital field, showing how digital sovereignty objectives have surfaced only in the last few years in response to geopolitical developments. The third section will analyse the text of the recently adopted EU Declaration on Digital Rights and Principles. We will highlight the tension between the stated objective of pursuing digital sovereignty ‘in an open manner’ and that of guaranteeing a ‘resource efficient and fair’ economy. The fourth section of the chapter will contextualise these ambitions in the existing or planned EU regulatory framework in the digital field. It will provide an overview of the status of digital dependence that currently characterises the EU and will illustrate the recent shift from a regulatory strategy centred on extending the EU regulatory influence on third countries to one aiming to reattract resources and the production of digital goods on EU soil. The fifth section will perform a comparative analysis of analogous strategies in the US and China, showing the emergence of common trends. The final section will conclude that EU strategies share similar justifications and may lead to distortive protectionist effects. We argue that the EU should carefully assess the medium to long term objectives of its digital sovereignty strategies. The protection of fundamental rights should serve as a guiding principle to assess whether EU regulatory measures go beyond their primary objective and risk to create distortive economic effects. A necessity and proportionality test is recommended to identify suitable solutions in line with EU aims and values. 1 II. The EU policy strategy: from smart growth to digital strategic autonomy A. First decade (2010-2020): Smart growth We can divide the history of EU digital policy strategies into two periods: a first decade going from 2010 to 2020, and the current decade, from 2020 to 2030, which has been dubbed the ‘digital decade’. The first decade saw the adoption by the EU Commission of the first EU Digital Agenda, which encompasses a series of initiatives.2 The Digital Agenda recognised for the first time the important role that Information Communication Technologies (ICTs) play towards achieving EU goals. According to the Commission, the ICTs sector represented 5% of the European GDP and possessed a positive overall impact on productivity growth.3 The Agenda highlighted key action areas for the EU: it aimed to foster sustainable socioeconomic development for a vibrant and secure a digital single market built on fast Internet access and interoperability. The Agenda was one of the flagship initiatives of the Europe 2020 Strategy launched in March 2010 by the European Commission. The 2020 Strategy established three intertwined priorities: smart, sustainable and inclusive growth.4 The Agenda possessed both an inward and an outward looking dimension: on the one hand, it aimed to foster digitalisation of public and private institutions within the EU, and, on the other hand, it sought to transform the EU economy in order to be able to compete on the global market.5 In 2015, the EU adopted the Digital Single Market Strategy, which capitalised on the objectives established by the 2010 Digital Agenda recognising the then already ubiquitous presence of ICTs in all economic sectors.6 The Strategy was built on three pillars: better access for consumers and businesses to online goods and services across Europe by breaking down barriers to cross-border online activities; creating the right conditions for digital networks and services to develop high-speed and secure infrastructures; and maximising the EU growth potential by investing in research and innovation.7 During the first decade, the EU focused its action on eliminating internal barriers and finally achieve a true digital EU single market. The Digital Agenda for Europe and the Digital Single Market Strategy do not mention digital sovereignty or autonomy, reliance or dependence. Despite the EU’s stated objective of maintaining its leading position in the digital sector, this theme will progressively emerge only in subsequent years.8 B) Second decade (2020-2030): Digital strategic autonomy By the end of the 2010’s, making Europe fit for the digital age had become one of the priorities of the Commission. EU policy documents consecrate the years 2020-2030 as the 8 European Commission, ‘A Digital Single Market Strategy for Europe’, 3. 7 Ibid; see also Charles A. Weiss, ‘Available to All, Produced By Few: The Economic and Cultural Impact of Europe’s Digital Single Market Strategy Within The Audiovisual Industry’, Columbia Business Law Review 2016, no. 3 (2016): 878–923, https://doi.org/10.7916/cblr.v2016i3.1749. 6 European Commission, Communication ‘A Digital Single Market Strategy for Europe’, COM/2015/0192 final. 5 See Małgorzata Stec and Mariola Grzebyk, ‘The Implementation of the Strategy Europe 2020 Objectives in European Union Countries: The Concept Analysis and Statistical Evaluation’, Quality & Quantity 52, no. 1 (1 January 2018): 119–33, https://doi.org/10.1007/s11135-016-0454-7. 4 European Commission, Communication ‘Europe 2020 A Strategy For Smart, Sustainable And Inclusive Growth’ COM(2010)2020. 3 Ibid, 3. 2 European Commission, Communication “A Digital Agenda for Europe”, COM(2010)245. 2 European ‘Digital Decade’.9 Achieving a ‘smart growth’, however, is now more linked to environmental concerns, mainly focused on the EU plans to achieve climate neutrality by 2050.10 For the first time, the EU also sets out more explicitly its willingness to play a stronger role from a geopolitical perspective.11 Only in this context, the Commission started focusing on strengthening EU digital sovereignty. We cannot find a univocal definition of digital sovereignty neither in academic articles nor in policy instruments.12 One of the reasons that can explain the nebulosity of this concept lies in the very fact that the concept of ‘sovereignty’ has hardly been neatly defined.13 Digital sovereignty is the latest concept emerged from the application of the traditional notion of sovereignty to the digital ecosystem. The expression ‘technological sovereignty’ already emerged in the 1960’s.14 ‘Data sovereignty’ was the most common concept at academic and commercial level, although it is now perceived to be a specific subset of the notion of digital sovereignty.15 Such an evolution should not surprise as it reflects the perception of technological changes in the contemporary society.16 Digital sovereignty claims at EU level emerge from the need to ‘control the digital’, indented by the ecosystem encompassing data, infrastructures, software, hardware and services which represent the pillars of the digital society.17 Such ‘control’ of the digital ecosystem consists in the possibility to apply EU values and rules to digital assets. However, that regulatory power, to be effective, presupposes a status of relative strategic autonomy of the EU in the digital field. For example, the EU can well decide to unilaterally apply its law beyond EU borders, but the fact that data might be processed by non-EU companies or physically stored in third countries may reduce the effective capacity of the EU to fully control such data, for the mere fact that it might be simultaneously subject to a concurrent sovereign power of another jurisdiction.18 18 On this topic see Fabbrini Federico et al., Data Protection beyond Borders: Transatlantic Perspectives on Extraterritoriality and Sovereignty, Paperback edition. (Oxford: Hart, 2022). 17 See Luciano Floridi, ‘The Fight for Digital Sovereignty: What It Is, and Why It Matters, Especially for the EU’, Philosophy & Technology 33, no. 3 (1 September 2020): 369–78, https://doi.org/10.1007/s13347-020-00423-6; Patrik Hummel et al., ‘Data Sovereignty: A Review’, Big Data & Society 8, no. 1 (1 January 2021): 2053951720982012, https://doi.org/10.1177/2053951720982012. 16 See, e.g., in relation to the concept of digital constitutionalism, Edoardo Celeste, ‘The Scope of Application of Digital Constitutionalism. Output from an Empirical Research’ (Nexa Research Papers 2017) Nexa Research Papers, https://nexa.polito.it/nexacenterfiles/E.%20Celeste%20-%20Research%20Paper.pdf. . 15 Ibid; Federal Ministry for Economic Affairs and Energy (BMWi), ‘Project GAIA-X – A Federated Data Infrastructure as the Cradle of a Vibrant European Ecosystem’, October 2019, https://www.bmwk.de/Redaktion/EN/Publikationen/Digitale-Welt/project-gaia-x.pdf?__blob=publicationFile&v =4. 14 Stephane Couture and Sophie Toupin, ‘What Does the Notion of “Sovereignty” Mean When Referring to the Digital?’, New Media & Society 21, no. 10 (1 October 2019): 2305–22, https://doi.org/10.1177/1461444819865984. 13 See Hent Kalmo and Quentin Skinner, eds., Sovereignty in Fragments: The Past, Present and Future of a Contested Concept (Cambridge: Cambridge University Press, 2010). 12 Edoardo Celeste, ‘Digital Sovereignty in the EU: Challenges and Future Perspectives’, in Data Protection Beyond Borders: Transatlantic Perspectives on Extraterritoriality and Sovereignty, ed. Federico Fabbrini, Edoardo Celeste, and John Quinn (Oxford: Hart Publishing (Bloomsbury), 2021), 211–28. 11 European Commission, ‘Priorities 2019-2024’, accessed 21 September 2023, https://commission.europa.eu/strategy-and-policy/priorities-2019-2024_en. 10 European Commission, Communication ‘The European Green Deal’ COM/2019/640 final. 9 See European Commission, Communication ‘2030 Digital Compass: The European Way For The Digital Decade, COM(2021) 118 Final’. 3 Such a circumstance led the EU to implement two simultaneous types of digital sovereignty strategies.19 On the one hand, the EU has tried to reinforce its digital sovereignty in a centripetal way. In other words, by exercising a regulatory force that reattracts digital assets within EU borders. For example, when the Court of Justice of the EU required metadata stored by telecommunication operators to be conserved within the EU.20 On the other hand, the EU has implemented regulatory strategies to secure its digital sovereignty in a centrifugal way, meaning by extending its regulatory reach beyond its boundaries. Here, an apparent example being the notorious extraterritorial scope of application of the General Data Protection Regulation.21 In 2020, the EU Commission adopted the communication Shaping Europe’s Digital Future. Beside stressing that green and digital transformation should go hand in hand, this document also presents ‘technological sovereignty’ as ‘Europe’s ability to define its own rules and values in the digital age’ based on its autonomous development and deployment of its own digital capacities (data infrastructure, networks and communications), thus reducing dependence on other global players.22 In this document it is therefore apparent how the dimension of strategic autonomy started to emerge as a necessary requirement to achieve a full control on digital assets. The document highlights that this approach does not aim to penalise any international actor, but prioritizes Europeans’ needs and values.23 To this end, the Commission identifies a series of key objectives to build ‘a European society powered by digital solutions that are strongly rooted in [European] common values’: technology that works for people; a fair and competitive economy; an open democratic and sustainable society; and Europe as a global player.24 Similarly, a 2020 European Parliament brief highlighted that the concept of ‘digital sovereignty’ recently surfaced as ‘a means of promoting the notion of European leadership and strategic autonomy in the digital field’.25 In 2021, the Commission released the 2030 Digital Compass.26 This communication established the European cardinal points for the digital decade: a digitally skilled population and highly skilled digital professionals; secure and performant sustainable digital infrastructures; digital transformation of businesses and digitalisation of public services. This document was complemented in December 2022 by the Digital Decade Policy Programme 2030.27 Article 1 establishes that such a programme aims to create the right environment 27 ‘Decision (EU) 2022/2481 of the European Parliament and of the Council of 14 December 2022 Establishing the Digital Decade Policy Programme 2030’, 323 OJ L § (2022), http://data.europa.eu/eli/dec/2022/2481/oj/eng. 26 European Commission, ‘Priorities 2019-2024’. 25 Madiega Tambiama, ‘Digital Sovereignty for Europe’ (European Parliamentary Research Service, July 2020), https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/651992/EPRS_BRI(2020)651992_EN.pdf, 1. 24 Ibid. 23 Ibid. 22 European Commission, Communication ‘Shaping Europe’s Digital Future’ COM(2020) 67 final 2. 21 See Federico Fabbrini and Edoardo Celeste, ‘The Right to Be Forgotten in the Digital Age: The Challenges of Data Protection Beyond Borders’, German Law Journal 21, no. S1 (March 2020): 55–65, https://doi.org/10.1017/glj.2020.14. 20 Digital Rights Ireland Ltd v Minister for Communications, Marine and Natural Resources and Others and Kärntner Landesregierung and Others, No. Joined Cases C‑293/12 and C‑594/12 (ECJ 8 April 2014); Edoardo Celeste, ‘The Court of Justice and the Ban on Bulk Data Retention: Expansive Potential and Future Scenarios’, European Constitutional Law Review 15, no. 1 (March 2019): 134–57, https://doi.org/10.1017/S1574019619000038;; cf. national data localisation laws in . Edoardo Celeste and Federico Fabbrini, ‘Competing Jurisdictions: Data Privacy across the Borders’, in Data Privacy and Trust in Cloud Computing, ed. Theo Lynn et al. (London: Palgrave Macmillan, 2020), 43–58. 19 See Celeste, ‘Digital Sovereignty in the EU: Challenges and Future Perspectives’; Edoardo Celeste, ‘Brexit and the Risks of Digital Sovereignism’ in Edoardo Celeste and others (eds), Data protection and digital sovereignty post-Brexit (Hart 2023). Edoardo Celeste, ‘Brexit and the Risks of Digital Sovereignism’, in Data Protection and Digital Sovereignty Post-Brexit, ed. Edoardo Celeste et al. (Oxford: Hart, 2023), 181–98. 4 through cooperation between EU institutions and Member States to foster innovation and investment for the delivery of the digital targets at Union level by 2030.28 Additionally, Recital 1 stresses that such an environment should empower citizens and businesses through digital transformation, which encompasses ‘digital sovereignty in an open manner, respect for fundamental rights, the rule of law and democracy, inclusion, accessibility, equality, sustainability, resilience, security, improving quality of life, the availability of services and respect for citizens’ rights and aspirations’.29 Words that, as we will see, will be reiterated verbatim in the Preamble of the EU Declaration of Digital Rights and Principles. In the Digital Decade Policy Programme 2030 the objective of reaching digital strategic autonomy is apparent. Besides a digitally skilled population and the digitalisation of public services and businesses, the document sets as a target the implementation of ‘secure, resilient, performant and sustainable digital infrastructures’.30 Such a target would aim to exercise a centripetal force vis-à-vis key digital assets. In particular, it aims to foster the capillary introduction of fixed and mobile high-speed networks, reaching at least 20% of the global production of semiconductors, fully in compliance with the EU sustainability targets; achieve an even distribution of a significant number of climate neutral edge nodes around the Union, and successfully launch a performing quantum computer by 2025.31 Digital sovereignty positioned itself at the centre of a broader strategic autonomy strategy for the EU.32 In the 2021 Strategic Foresight Report, the EU Commission identified challenging areas that the EU would have to address to ensure the bloc’s ‘freedom to act’.33 It recognized the necessity to support human-centred technology to be digitally sovereign.34 But, more interestingly, three of the critical areas identified in the path to open strategic autonomy involve a close integration with digital sovereignty. The Report acknowledged that in order to be digitally sovereign, it is essential to strengthen the EU capacity to store, extract and process data in observance of fundamental rights.35 In this area, as previously mentioned, the main challenge is the vast amount of data stored and processed in cloud services offered by non-EU cloud storage providers, resulting in a strategic dependency for the EU.36 Likewise, the EU Commission acknowledged the urgent need to invest in the development and production of next generation technologies and semiconductors chips, as limited production could disrupt the supply chain and affect business continuity of key industries. The EU Commission stressed the importance of critical raw materials for the green transition and the defence industry. Raw materials coming from non-EU countries are essential for wind and solar power, electric vehicles batteries, aircraft production and small drones. Hence the need to build an intersectoral international partnership of industrial, research and trade policies to secure stable and diverse supply. In the subsequent 2022 Strategic Foresight Report, aware of the shifting geopolitical scenario, the EU Commission deepened its vision on the Twin Transition. It continued to highlight the relevance of developing domestic capacities and diversifying the sources of supply of critical commodities as a mechanism to reduce the existing strategic dependencies 36 Ibid, 11. 35 Ibid, 10. 34 Ibid, 3. 33 See European Commission, 2021 Strategic Foresight Report ‘The EU’s capacity and freedom to act’ COM(2021)750 final, 1. 32 Cristiano Cagnin et al., ‘Shaping and Securing the EU’s Open Strategic Autonomy by 2040 and Beyond’ (Luxemburg: European Commission - Joint Research Centre, 2021), https://doi.org/10.2760/414963, 23. 31 Ibid. 30 Ibid, art 4(2). 29 Ibid. 28 Ibid. 5 from foreign providers.37 Additionally, the 2022 Report made a call for additional investment in research and innovation across critical technologies as this would strengthen the EU’s resilience towards the twin transitions.38 Similarly, the 2023 Strategic Foresight Report reiterated the areas of action to secure the EU open strategic autonomy, mindful of the rising competition for influence among nations.39 Overcoming current dependencies across sectors - including technology - by leveraging the Single Market is a key element for the EU Commission in order to achieve strategic autonomy.40 Thus the encouragement to use trade defence instruments, regulation on foreign subsidies and procurement.41 Likewise, it reiterated the need for support for the manufacturing of raw materials that are important for energy transition.42 III. The European Declaration on Digital Rights and Principles A. Internal objectives and international ambitions The European Declaration on Digital Rights and Principles for the Digital Decade was adopted in December 2022 after an agreement was reached among the EU Commission, European Parliament, and the Council.43 The Declaration is not legally binding and does not affect existing legal rules and their application.44 It is organised into six chapters that cover respectively: a human-centric approach; solidarity and inclusion; freedom of choice; digital participation; safety, security and empowerment; and sustainability.45 The dispositions of the Declaration can be classified into three groups: a) rights, identified by the expression ‘everyone has the right to’; b) principles using a performative present tense; and c) principles using a conditional tense ‘should’, including more ambitious statements.46 According to its Preamble, the Declaration should build on existing EU law. The rights mentioned in the Declaration are already protected by the existing legal framework.47 Cocito and de Hert speak of a ‘normative equivalency paradigm’, which is the approach adopted by the United Nations (UN) over human rights on the Internet.48 Recital 3 of the Preamble would support this view by expressing that European values and fundamental rights 48 Cocito and De Hert, ‘The Transformative Nature of the EU Declaration on Digital Rights’. 47 Maksymilian Kuźmicz, ‘European or Universal? The European Declaration of Digital Rights in a Global Context’, International Conference on Computer Ethics 1, no. 1 (10 May 2023), https://soremo.library.iit.edu/index.php/CEPE2023/article/view/250. 46 Edoardo Celeste, ‘Digital Constitutionalism, EU Digital Sovereignty Ambitions and the Role of the European Declaration on Digital Rights’, in New Directions in Digitalisation. European Union and Its Neighbours in a Globalized World, ed. Annegret Engel, Xavier Groussot, and Gunnar Thor Petursson, vol. 13 (Switzerland: Springer Nature, 2024), 255–71; Cristina Cocito and Paul De Hert, ‘The Transformative Nature of the EU Declaration on Digital Rights and Principles: Replacing the Old Paradigm (Normative Equivalency of Rights)’, Computer Law & Security Review 50 (1 September 2023): 105846, https://doi.org/10.1016/j.clsr.2023.105846 who speak of a ‘mixed’ or ‘hybrid’ normative nature of the Declaration. 45 See Alba Perez Victorio, Edoardo Celeste, and Alberto Quintavalla, ‘Greening AI? The New Principle of Sustainable Digital Products and Services in the EU’, Common Market Law Review 61, no. 4 (1 August 2024). 44 Recital 10. 43 ‘European Declaration on Digital Rights and Principles for the Digital Decade’, OJ C 23/01 § (2023). 42 Ibid, 15. 41 Ibid. 40 Ibid, 14. 39 European Commission, 2023 Strategic Foresight Report ‘Sustainability and people’s wellbeing at the heart of Europe’s Open Strategic Autonomy’ COM(2023)376 final, 2. 38 Ibid, 14. 37 See European Commission, 2022 Strategic Foresight Report ‘Twinning the green and digital transitions in the new geopolitical context’ (2022) COM(2022)289 final, 13 6 applicable offline should be applied in the digital environment. Yet, despite its explicit intentions, the nature of the Declaration is not completely declaratory and ancillary to existing EU law. This document often carries out a process of ‘normative retrofitting’: it makes explicit principles that guide or underpin existing or planned regulatory instruments of the EU in the digital field.49 Thus, appearing to be in line with the phenomenon of ‘digital constitutionalism’, which has witnessed the emergence of a significant number of digital charters and declarations articulating rights and principles for the digital society.50 From an internal point of view, the Declaration emerged from the perceived necessity for the European Union to adapt its values and fundamental rights to the digital environment.51 It systematises the Union’s shared ‘political intentions and commitments’ towards the digital transformation.52 The Declaration can be perceived as a synthesis of guiding principles of the EU digital agenda encompassing elements of the Digital Single Market communication and the Digital Decade Policy Programme 2030. According to the Preamble, the Declaration should be taken as a reference point for policymakers as well as for companies operating in the digital field.53 Beside this first category of aims of the Declaration, which are more related to the internal dimension of the EU, it is also possible to identify a second mission of this document, which is more outward-looking, focusing on the role of EU digital rights and principles on the international plane. In this regard, one can consider the Declaration as the EU’s contribution to the Global Digital Compact, the initiative launched by the United Nations which aims to establish a set of shared principles for an ‘open, free and secure digital future for all’ by 2024.54 This convergence between EU strategies and this UN project can be seen as a further way to legitimise EU’s actions in the international arena, by contextualising EU principles a in the broader internal policy framework. Indeed, the Declaration also possesses an explicit ‘soft power’ role.55 Recital 11 of the Preamble stresses that the EU should use the Declaration as a tool to promote its conception of digital rights and principles also in the context of its international relations. The ambition of the EU is to spread a human centric and fundamental rights-based model for the development of the digital society. The EU adopted the Declaration with the intent to use it as a brief and succinct policy document with a quasi-constitutional language, which would ‘guide’ international partners and businesses and influence their approach to the digital transformation.56 56 Recital 11. 55 Cf. Anu Bradford, The Brussels Effect: How the European Union Rules the World (London: Oxford University Press, 2020). 54 European Union Foreign Affairs Council, ‘European Contribution to the Global Digital Compact’, March 2023, https://www.eeas.europa.eu/delegations/un-new-york/global-digital-compact-bold-step-towards-digital-transfor mation_en?s=63.; United Nations General Assembly, Resolution No. A/RES/76/307, Modalities for the Summit of the Future (2022), https://documents.un.org/doc/undoc/gen/n22/587/47/pdf/n2258747.pdf. 53 Respectively, Recital 7 and 8. 52 Recital 7. 51 See Recitals 3 and 7. 50 Celeste, ‘Digital Constitutionalism, EU Digital Sovereignty Ambitions and the Role of the European Declaration on Digital Rights’; more generally on this phenomenon, see Edoardo Celeste, Digital Constitutionalism: The Role of Internet Bills of Rights (London: Routledge, 2022), https://doi.org/10.4324/9781003256908.; Edoardo Celeste, ‘Internet Bills of Rights: Generalisation and Re-Specification Towards a Digital Constitution’, Indiana Journal of Global Legal Studies 30, no. 2 (September 2023): 25–54, https://muse.jhu.edu/article/916450.. 49 See Perez Victorio, Celeste, and Quintavalla, ‘Greening AI?’ and Celeste ‘Digital Constitutionalism’. 7 geographies, and its vulnerability to third country export restrictions and other disruptions in the present geopolitical context’.91 Recital 15 of the Digital Decade Policy Programme 2030 also stresses the importance of semiconductors to the green transition.92 The explanatory memorandum attached in the proposal of the Act states that European stakeholders invest mainly in Research and Development (R&D) but that this is not translating into industrial benefits.93 It recognises that the EU is well positioned in the fields of design of semiconductors components for power electronics, radio frequency and analogues devices, sensors and microcontrollers that are used in the automotive and manufacturing industries, but lags behind in the design of digital logic (processors and memory), which are essential for data, AI and connectivity development. In this context, Codagnone et al. highlight the EU twofold dependency on the US for chip design and on Asian countries for the production of semiconductors, while globally member states have a position of leadership in specific fields, such as sensors and automotive semiconductors.94 The entry costs to the chip production market for EU businesses appear to be prohibitive; hence, chip fabs are in the hands of a monopoly of firms, including the Taiwanese TMSC and South Korean Samsung.95 EU businesses rather seem to specialise in specific phases of the production process.96 More concretely speaking, the EU Chips Act envisages to tackle this situation by operating in three areas. Firstly, it introduces norms to regulate the so-called ‘Chips for Europe Initiative’, which consists in facilitating the knowledge exchange from EU laboratories to chip fabs, by promoting the creation of pilot production lines, a cloud-based design platform, competence centres and the establishment of a Chips Fund for industrial investors.97 Secondly, it introduces a normative framework to foster public and private investments in integrated production facilities and so-called ‘Open EU Foundries’. Special rules are introduced to allow EU countries to grant state aids to these productive infrastructures.98 Thirdly, the Act establishes a coordination and monitoring mechanism, the European Semiconductor Board, connecting the Commission to Member States. Such a system will oversee the demand and production of semiconductors and will activate a crisis stage through an alert system in case of critical shortages.99 It will be complemented by the Chips Joint Undertaking, an entity which replaces the Key Digital Technologies Joint Undertaking and that will manage funds under the Horizon Europe or DEP programmes to foster the Chips for Europe Initiative.100 Deeply rooted in the need to overcome dependency and the risk of disruption in supply chains, the EU Commission also proposed the Critical Raw Material Act in September 2023. The Act follows the declaration adopted at the margin of the 2022 informal meeting of 100 ‘Council Regulation (EU) 2023/1782 of 25 July 2023 Amending Regulation (EU) 2021/2085 Establishing the Joint Undertakings under Horizon Europe, as Regards the Chips Joint Undertaking’, OJ L 229 §. 99 Articles 28 to 32 respectively. 98 Articles 1(1)(b), 14, 15, 16 and 18, respectively. 97 Articles 1(1)(a), 3 to 12, respectively. 96 Ibid. 95 Ibid. 94 Codagnone et al. ‘Europe’s Digital Decade and Autonomy’, 22. 93 European Commission, Proposal for a Chips Act, 1. 92 Decision 2022/2481, Digital Decade Policy Programme 2030. 91 European Commission, Proposal For A ‘Regulation Of The European Parliament And Of The Council Establishing A Framework Of Measures For Strengthening Europe's Semiconductor Ecosystem (Chips Act) (' COM(2022) 46 final 2022/0032(COD) <https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52022PC0046> accessed 24 December 2023, 1. 14 EU governments held in Versailles that highlighted the role of critical raw material for the ultimate goal of strategic autonomy and sovereignty of the EU.101 In the notes accompanying the proposal, the Commission stressed the importance of this legislation to address concerns regarding reliance on third country suppliers. The proposal contains a set of measures to guarantee access to the supply of critical raw materials which are critical for several strategic sectors, including technology.102 As part of this strategy, in 2022 the EU also concluded a Digital Partnership with Singapore. The project aims to jointly shape the digital field though rules and standards harnessing their power to boost their digital economy allowing businesses to operate across borders.103 The EU-Singapore Digital Partnership targets the semiconductor supply chain, promoting primate investment in order to safeguard security and resilience amidst the global technological race.104 Finally, in October 2023, the EU Commission adopted a recommendation on critical technology areas for the EU’s economic security, as part of the European Economic Security Strategy.105 It encourages Member States to carry out a collective impact assessment with the Commission on four technology areas that, on the one hand, possess a significant technological potential, but, on the other hand, might have a military use, thus threatening global peace, or might be used to violate fundamental rights. Namely: advanced semi-conductor technologies, AI technologies, quantum technologies and biotechnologies. The Commission is expected to launch ancillary initiatives in this domain by spring 2024.106 Yet, it is possible to observe a further consolidation of the coupling between EU strategic autonomy and security concerns in the digital field. V. Comparative perspectives: US and Chinese regulatory strategies A. United States: from clean energy to digital autonomy The EU is not alone in the race towards digital sovereignty. This trend is shared with other states around the world. Japan, Taiwan, South Korea, the United States and China are the main competitors.107 It goes without saying that, despite they all have different levels of development and areas of focus in the digital industry, their digital economies are deeply intertwined as the result of international trade and industrial cooperation.108 However, it seems that what once was a fruitful network of alliances for development, it is today the root of global geopolitical tensions in the field of technology. The COVID-19 pandemic, recent 108 Jakob Edler et al., ‘Technology Sovereignty as an Emerging Frame for Innovation Policy. Defining Rationales, Ends and Means’, Research Policy 52, no. 6 (1 July 2023): 104765, https://doi.org/10.1016/j.respol.2023.104765.. 107 Gary Clyde Hufbauer Hogan Megan, ‘Major Semiconductor Producing Countries Rely on Each Other for Different Types of Chips’, Peterson Institute for International Economic, 31 October 2022, https://www.piie.com/research/piie-charts/major-semiconductor-producing-countries-rely-each-other-different-t ypes-chips. 106 Ibid. 105 European Commission, ‘Commission Recommendation of 03 October 2023 on Critical Technology Areas for the EU’s Economic Security for Further Risk Assessment with Member States’ C(2023) 6689 final; see also European Commission, ‘Joint Communication “European Economic Security Strategy”’, JOIN(2023) 20 final. 104 Ibid, 5 103 European Commission, ‘EU-Singapore Digital Partnership’, 1 February 2023, https://digital-strategy.ec.europa.eu/en/library/eu-singapore-digital-partnership,1. 102 European Commission, ‘European Critical Raw Materials Act’, Text, European Commission, 16 March 2023, https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1661. 101 European Council, ‘The Versailles Declaration, 10 and 11 March 2022’, Consilium, 11 March 2022, https://www.consilium.europa.eu/en/press/press-releases/2022/03/11/the-versailles-declaration-10-11032022/.7. 15 wars and economic tensions acted as a warning to all these nations.109 They all realised how dependent they have become on each other.110 Consequently, most of these countries have introduced regulations and policies modifying their technological industry. Harnessing power to secure strategic autonomy as an expression of digital sovereignty is the current global motto. The United States vs China’s rivalry is the epitome of these geopolitical tensions in the digital field.111 It is claimed that both countries have adopted a tecno-nationalist vision that is driving the implementation of industrial policies aiming at digital self-sufficiency, leaving behind the supply chain vulnerabilities, while driving out foreign competitors.112 This competition has even acquired ‘cold war’ nuances, deeply affecting bilateral trade.113 The United States has unfolded its own strategy which targets its competitors while strengthening its internal industrial forces. In recent policies and regulations, the US seems to have relinquished the multilateral free-market rules, for a more stringent position relying on subsidies as well as domestic benefits.114 The Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Procure Semiconductors and Science Act (CHIPS Act) are two recent pieces of legislation intended to increase private investments, address supply chain and national security concerns as well as reducing carbon emissions.115 Concretely, both laws put in place a package of incentives for investments in clean energy productions and semiconductor manufacturing.116 It is clear then that this kind of ‘America First’ approach, which started with President Trump, continues now under the Biden administration and it is part of a major turn in the US digital sovereignty competition against foreign influence, with particular attention to China.117 The rationale behind such rules is to address the national security risks that either Chinese technological companies operating in the United States or Chinese-developed technology implemented nationally represent for the country.118 By combining both regulations, the US 118 Agathe Demarais, ‘How the U.S.-Chinese Technology War Is Changing the World’, Foreign Policy (blog), 26 March 2025, 117 Christian Scheinert, ‘EU’s Response to the US Inflation Reduction Act (IRA)’ (European Parliament - Policy Department for Economic, Scientific and Quality of Life Policies, June 2023) https://www.europarl.europa.eu/thinktank/en/document/IPOL_IDA(2023)740087. ; see also Luo and Van Assche, ‘The Rise of Techno-Geopolitical Uncertainty, 1426. 116 Ibid. 115 Luis A. Abad, Donald C. Hok, and Brianna C. Sullivan, ‘What the Inflation Reduction and CHIPS Acts Could Mean for US Importers’, The Tax Adviser, 1 June 2023, https://www.thetaxadviser.com/issues/2023/jun/what-the-inflation-reduction-and-chips-acts-could-mean-for-us-i mporters/.. 114 Luo and Van Assche, ‘The Rise of Techno-Geopolitical Uncertainty, 1424. 113 Alex Capri, ‘US-China Decoupling in Tech’, Hinrich Foundation, 4 June 2020, https://www.hinrichfoundation.com/research/wp/tech/us-china-decoupling-tech/. 112 Paul Evans, ‘Techno-Nationalism in China–US Relations: Implications for Universities’, East Asian Policy 12, no. 02 (April 2020): 80–92, https://doi.org/10.1142/S1793930520000161; see also Vivek Mishra, ‘The Great U.S.-China Tech Decoupling: Perils of Techno-Nationalism’, orfonline.org, accessed 25 March 2025, https://www.orfonline.org/expert-speak/the-great-u-s-china-tech-decoupling 111 Yadong Luo and Ari Van Assche, ‘The Rise of Techno-Geopolitical Uncertainty: Implications of the United States CHIPS and Science Act’, Journal of International Business Studies 54, no. 8 (1 October 2023): 1423–40, https://doi.org/10.1057/s41267-023-00620-3. 110 ‘Vermessung Der Digitalen Dependenz’, Digital Dependence Index, accessed 25 March 2025, https://digitaldependence.eu/en/. 109 Ibid. 16 aim at not only creating but increasing a demand for locally manufactured semiconductors, considering that the clean energy sector (electric vehicles, wind turbines and solar panels) relies on this technology.119 Yet, despite securing digital sovereignty is a legitimate venture, the US regulatory strategy has raised concerns due to its protectionist underpinnings and potential discriminatory effects, which has sparked a chain reaction around the globe.120 The Inflation Reaction Act was signed by President Biden on August 16, 2022. The law includes more than 20 modified tax incentives as well as billions of dollars in financial aid programs to increase investment in clean energy technology, and deployment of a clean energy economy. Most importantly, the goal is building a low carbon energy system with American-made technology.121 Subsidies for electronic vehicle purchase and investment subventions for manufacturers clean-tech products are among the measures offered.122 However, the IRA conditioned the benefits offered to the satisfaction of local content requirement, being this one of its most distinctive aspects. Local content requirements are policy measures implemented by countries in international commerce to favour domestic industry over foreign competition with the objective of spurring competitiveness of local industries.123 Consequently, local content requirements are commonly introduced as a condition to use domestically produced goods or services, including a percentage of domestic labour or parts that a good must contain to be sold in a country.124 Therefore, in order to fulfil the local content requirement of the IRA, all the steel or iron used in a structural function must be mined, produced or manufactured in United States’ soil.125 Likewise, measures such as the consumer tax credit on electric vehicles could reduce the cost of eligible cars, but 125 Brent Sabot, Debbie Gordon, and Heather Rosas, ‘New Treasury Guidance on IRA Domestic Content Rules’, RSM (blog), 19 May 2023, https://rsmus.com/insights/tax-alerts/2023/new-treasury-guidance-on-ira-domestic-content-rules.html. 124 Michael Lind, ‘The Case for Domestic Sourcing’, American Compass (blog), 9 June 2020, https://americancompass.org/on-domestic-sourcing/. 123 Jan-Christoph Kuntze and Tom Moerenhout, ‘Local Content Requirements and the Renewable Energy Industry - A Good Match?’, SSRN Scholarly Paper (Rochester, NY: Social Science Research Network, 12 September 2012), https://doi.org/10.2139/ssrn.2188607, 5. 122 David Kleinman et al., ‘How Europe Should Answer the US Inflation Reduction Act’ (Bruegel, 9 February 2023), https://www.bruegel.org/policy-brief/how-europe-should-answer-us-inflation-reduction-act. 121 The White House, ‘Clean Energy Economy: A Guidebook to the Inflation Reduction Act’s Investments in Clean Energy and Climate Action’, 2023, https://www.whitehouse.gov/wp-content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf, 9. 120 Nicholas Crawford, ‘The Energy Transition, Protectionism and Transatlantic Relations’, Survival 65, no. 2 (4 March 2023): 75–102, https://doi.org/10.1080/00396338.2023.2193101.; see also Abad, Hok and Sullivan, ‘What the Inflation Reduction and CHIPS Acts Could Mean for US Importers’. Not only the European Union has reacted to the US recent strategy, now even countries such as Japan are openly considering strengthening their own industries via tax incentives. See: Kantaro Komiya, ‘Japan Eyes Tax Break for Domestic EV Battery, Chip Production - Nikkei’, Reuters, 11 August 2023, sec. Technology, https://www.reuters.com/technology/japan-eyes-tax-break-domestic-ev-battery-chip-production-nikkei-2023-0811/. 119 Poorva Karkare, ‘Unpacking Digital Sovereignty through Industrial Policy’, in Global Approaches to Digital Sovereignty: Competing Definitions and Contrasting Policy, ed. Melody Musoni, Poorva Karkare, and Ennatu Domingo, Discussion Paper No. 344 (The Centre for Africa-Europe Relations, 2023), https://ecdpm.org/application/files/7816/8485/0476/Global-approaches-digital-sovereignty-competing-definition s-contrasting-policy-ECDPM-Discussion-Paper-344-2023.pdf. https://foreignpolicy.com/2022/11/19/demarais-backfire-sanctions-us-china-technology-war-semiconductors-exp ort-controls-biden/. 17 would result in a large disadvantage and loss of export to those companies manufacturing vehicles not included in the benefited list.126 What is more relevant about the law is the inconsistency of the local content requirements with the existing international trade rules of the WTO, even disregarding basic principles such as non-discrimination, in violation of the most-favoured-nation (MFN) principle.127 In the context of the international trading system, according to the MFN principle there cannot be any discrimination between the trading partners of the different countries, meaning that there is no place for special benefits or conditions towards a specific country over others.128 Likewise, the MFN principle provides an equalitarian treatment in terms of tariffs, internal taxes and internal regulation to all trading partners.129 Consequently, with the introduction of the local content requirements and tariffs, the US are disregarding settled principles in international trade potentially discriminating foreign producers. It remains to be seen the course of action of foreign countries to this measure that may affect trade as it has been known until now. In August 2022, the CHIPS Act was enacted with the aim of fostering manufacturing, strengthening supply chain and enhancing domestic research as well as development of local capabilities.130 Just as the IRA, the CHIPS Act introduces a series of new grants, tax credits and other incentives focused on the manufacturing and supply chain located in the US. Overall, the CHIPS Acts provides for: (i) the Advanced Manufacturing Investment Tax Credit (AMITC) equivalent to 25% of the qualified investment in the construction of manufacturing facilities; (ii) the CHIPS for America fund, which is a competitive based grant mechanism to fund investments in facilities and equipment in the different stages of manufacturing of semiconductors as well as research; and, (iii) the CHIPS for America Workforce and Education Fund, which provides funds for workforce development activities ranging from training to apprenticeships.131 It all boils down to the desire of boosting investment in the American semiconductor sector and making the US self-sufficient, reducing the likelihood of a chip supply interruption due to a global crisis or foreign sabotage.132 The semiconductors need to be made in America. Additionally, the CHIPS Act not only intends to invest in the local semiconductors industry, it 132 Vishnu Kannan and Jacob Feldgoise, ‘After the CHIPS Act: The Limits of Reshoring and Next Steps for U.S. Semiconductor Policy’ (Carnegie Endowment for International Piece, 22 November 2022), https://carnegieendowment.org/research/2022/11/after-the-chips-act-the-limits-of-reshoring-and-next-steps-for-u s-semiconductor-policy?lang=en.; Abad, Hok and Sullivan, ‘What the Inflation Reduction and CHIPS Acts Could Mean for US Importers’. 131 Bruce J. Kessler, ‘State Tax Credits and Incentives Under the IRA or CHIPS Act’, Deloitte United States, 2022, https://www2.deloitte.com/us/en/pages/tax/articles/chips-act-state-tax-incentives.html. 130 Matt Furlow, ‘What’s the Status of the CHIPS and Science Act Implementation?’, U.S. Chamber of Commerce (blog), 28 August 2023, https://www.uschamber.com/technology/chips-and-science-act-anniversary-progress-made-but-work-remains. 129 William J. Davey, ‘Non-Discrimination in the World Trade Organization’ (Brill, 2012), https://brill.com/display/title/21953, 67; see also Tobias Naef, Data Protection without Data Protectionism : The Right to Protection of Personal Data and Data Transfers in EU Law and International Trade Law (Springer Nature, 2023), https://directory.doabooks.org/handle/20.500.12854/96229, 245 246. 128 World Trade Organisation, ‘Principles of the Trading System’, accessed 25 March 2025, https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm. 127 Kleinman et al., ‘How Europe Should Answer the US Inflation Reduction Act’, 9; Scheinert (n 101); Kleimann et al, ‘EU’s Response to the US Inflation Reduction Act (IRA), 9. 126 Kleinman et al., ‘How Europe Should Answer the US Inflation Reduction Act’, 2, 6, 8; see also Scheinert, ‘EU’s Response to the US Inflation Reduction Act (IRA)’, 8. 18 also limits ongoing investments and the growth of the semiconductor manufacturing sector in China. It addresses so by prohibiting companies in receipt of any CHIPS Act incentives to engage for a 10-year period in substantial transactions that could support the material expansion of China’s capacity in the semiconductors’ field as well as any other country of interest.133 In sum, both instruments set aside internationally agreed trade rules to achieve industrial autonomy in the race for digital sovereignty. B. China’s ambitions towards ‘de-americanisation’ For several years, China has been working towards achieving self-sufficiency to finance and control the growth of its technology industry.134 Its regulatory efforts are mainly materialized in “Made in China 2025”, a national plan drafted by the Ministry of Industry and Information (MIIT) in 2015.135 Inspired by Germany’s “Industry 4.0” plan,136 China introduced this programme to accelerate its manufacturing capacities, promoting the development of advanced and traditional industries as well as modern services.137 Since 2014, this policy has been accompanied by financial aids through state funding, such as the “National Integrated Circuit Industry Investment Fund” as well as additional State Council policy documents that furthered down the objectives to strengthen the technological industry such as Document No. 8.138 Likewise, the 14th five-year economic plan (2021-2025) of the government declared the semiconductor industry a national priority in 2020, with the firm objective of achieving self-sufficiency.139 Self-sufficiency being understood as a semiconductor supply chain controlled by China and serving the needs of the domestic market.140 Overall, the Chinese strategy to achieve self-sufficiency relies on the idea of reducing vulnerabilities due to the interdependence with the US, which is also perceived as a “de-americanisation” of supply chains.141 The Made in China 2025 (MIC) plan is the most renowned Chinese policy program to regain technological power. The goal of MIC is reducing reliance on foreign technology imports while investing in the creation of domestic companies which can compete in global 141 Evans, ‘Techno-nationalism’, 82. 140 Christopher Thomas, ‘Lagging but Motivated: The State of China’s Semiconductor Industry’, Brookings, 7 January 2021, https://www.brookings.edu/articles/lagging-but-motivated-the-state-of-chinas-semiconductor-industry/. 139 Allen, ‘China’s New Strategy for Waging the Microchip Tech War’; see also Kirana Aisyah, ‘China Expanding Digital Economy for Tech Self-Sufficiency – OpenGov Asia’, OpenGov Asia, 12 November 2021, https://opengovasia.com/2021/11/12/china-expanding-digital-economy-for-tech-self-sufficiency/. 138 Nigel Inkster, Emily S. Weinsten, and John Lee, ‘Ask the Experts: Is China’s Semiconductor Strategy Working? - China Dialogues’, China Dialogues - A Platform for Discussion and Collaboration among Leading China-Watchers (blog), 1 September 2022, https://blogs.lse.ac.uk/cff/2022/09/01/is-chinas-semiconductor-strategy-working/. 137 Ibid. 136 Johannes Winter, Anna Frey, and Jan Biehler, ‘Towards the Next Decade of Industrie 4.0 – Current State in Research and Adoption and Promising Development Paths from a German Perspective’, Sci 4, no. 3 (September 2022): 31, https://doi.org/10.3390/sci4030031, 3. 135 Scott Kennedy, ‘Made in China 2025’, Center for Strategic and International Studies, 6 January 2015, https://www.csis.org/analysis/made-china-2025. 134 Gregory C. Allen, ‘China’s New Strategy for Waging the Microchip Tech War’ (Center for Strategic International Studies, 5 March 2023), https://www.csis.org/analysis/chinas-new-strategy-waging-microchip-tech-war. 133 Abad, Hok and Sullivan, ‘What the Inflation Reduction and CHIPS Acts Could Mean for US Importers’. 19 markets.142 The MIC conceives an innovation-driven manufacturing sector which would integrally upgrade the industry sector, improving the global position of China in the supply chain.143 Despite this policy programme is described as a comprehensive industrial plan – thus implying an integrated programme in the military and civil sector –144 the first prioritized area is “New generation IT industry” targeting core general purposes chips.145 Regarding semiconductors, the MIC introduced a shift from previous policies by proposing to acquire foreign technologies via mergers and acquisitions (M&A).146 Indeed, one of the tools to implement MIC is increasing Chinese M&A transactions abroad, acquiring foreign makers of advanced automated equipment to attract technologies to China and reduce the number of foreign competitors.147 For instance, following MIC, there was a surge of Chinese M&A transactions in Germany in key sectors, such as cars with alternative driving technology, biomedicine and robotics.148 Likewise, in 2016, the value of Chinese M&A operations in the US surpassed USD 45 billion.149 At the same time, MIC aimed at attracting foreign investments in manufacturing fields, such as new generation IT, high-end equipment, new materials among others.150 Additionally, MIC promoted the use of foreign investments not only in the introduction of technology but also in the development of joint ventures and development of the Chinese manufacturing industry.151 In fact, the efforts of the Chinese government to attract foreign investments into the country continue; for instance, the Ministry of Science and Technology proposed simplified approval procedures for foreign-invested research and development centres and simplified procedures for the cross-border transfers of IP and technologies among others.152 Among its specific guidelines, the MIC sets goals to secure the positioning of local companies in the semiconductors market.153 For instance, the MIC seeks an increase by 40% the participation of Chinese vendors in the core components market and up to 70% of 153 Renato Balderrama Santander and Amado Trejo Romero, ‘Made in China 2025 and Self-Sufficiency in New Technologies.’, Revista Comercio Exterior Bancomext, accessed 19 December 2023, https://revistacomercioexterior.com/span-langen-usmade-in-china-2025-and-self-sufficiency-in-new-technologie s. 152 Lewis Lu, ‘China Continues Efforts to Attract Foreign Investment’, International Tax Review, 28 March 2023, https://www.internationaltaxreview.com/article/2bgm3ajcqdaj2szn77z0g/local-insights/china-continues-efforts-t o-attract-foreign-investment. 151 Ibid, 31. 150 PCR State Council, ‘Notice of the State Council’, 25. 149 James McBride and Andrew Chatzky, ‘Is “Made in China 2025” a Threat to Global Trade?’, Council on Foreign Relations, accessed 19 December 2023, https://www.cfr.org/backgrounder/made-china-2025-threat-global-trade. 148 Cora Jungbluth, ‘Is China Systematically Buying Up German Key Technologies?’, Global & European Dynamics (blog), 22 May 2018, https://globaleurope.eu/globalization/is-china-systematically-buying-up-german-key-technologies/. 147 Marilia Bassetti Marcato, ‘The Made in China 2025 amid Hyperglobalization: Upgrading, Intangible Assets, and Internationalization Strategies’, Economia e Sociedade 31 (29 July 2022): 355–84, https://doi.org/10.1590/1982-3533.2022v31n2art05, 364. 146 Thomas, ‘Lagging but motivated’. 145 PCR State Council, ‘Notice of the State Council on the Publication of Made in China 2025’, trans. Ben Murphy (Center for Security and Emerging Technology, 8 May 2015), https://cset.georgetown.edu/wp-content/uploads/t0432_made_in_china_2025_EN.pdf.19. 144 Evans, ‘Techno-nationalism’, 82. 143 Kennedy, ‘Made in China 2025’. 142 Institute for Security & Development Policy, ‘Made in China 2025’, June 2018, https://www.isdp.eu/publication/made-china-2025/. 20 participation for important basic materials.154 Moreover, the MIC established a percentage of Chinese content materials in sectors such as smartphone processors, industrial robots and equipment’s necessary for renewable energy generation.155 The National Integrated Circuit Industry Investment Fund, dubbed as the “Big Fund”, was put in place in 2014 and it is one of the financial vehicles to subsidize the semiconductor Chinese domestic industry.156 The fund, which was renewed in 2019, provides state funding for domestic semiconductor industry, state-driven acquisitions overseas and procurement of foreign semiconductor equipment.157 The Big Fund had a capitalization of USD 28.9 billion back in 2019 and, just in October 2023, it invested USD 1.99 billion in Changxin Xinqiao, a memory chip company.158 The national financial arm of the Chinese self-sufficiency policy is a crucial part to achieve the strengthening of the semiconductor industry. Moreover, China’s State Council issued Document No. 8 to further down the developments made by previous policies in 2000 and 2011.159 Document No. 8 introduced policies on fiscal, tax, investment, research and development, import and export, talent intellectual property, market application and international cooperation policies.160 Regarding tax and fiscal policies, Document No. 8 provided most domestic semiconductor companies with financial assistance through a variety of measures such as exemption from import duties and corporate profit taxes as well as preferential value-added tax. Some of these exemptions are meant to be valid for up to ten years in certain specifically designated sectors.161 Additionally, China’s State Council supported mergers and acquisition across the nation to build a stronger industry.162 It also encouraged the use national and local investment funds, while also inviting local governments and commercial financial institutions to grant business loans.163 In relation to intellectual property, China’s State Council proposed companies to register for exclusive rights on integrated circuit designs and software copyrights.164 This move has been accompanied by additional measures which require certain specified patents and intellectual property to be owned by independent Chinese companies, which are China-based and without possibility to be owned or controlled outside of China. 165 165 ‘Answers to Questions about the “Notice on the Relevant Requirements for the Preparation of a List of Integrated Circuit Enterprises or Projects and Software Enterprises That Enjoy Tax Incentives”’, National Development and Reform Commission, 31 March 2021, https://www.ndrc.gov.cn/xxgk/jd/jd/202103/t20210331_1271319.html. 164 Ibid, 6. 163 Ibid. 162 PCR State Council, ‘Notice of the State Council’, 3. 161 Allen, ‘China’s New Strategy for Waging the Microchip Tech War’. 160 PCR State Council, ‘Notice of the State Council’, 2-8. 159 ‘China Stresses High-Quality Development in Integrated Circuits and Software’, The State Council of the People’s Republic of China, 4 August 2020, https://english.www.gov.cn/policies/latestreleases/202008/04/content_WS5f2956b4c6d029c1c26373f1.html. 158 Ibid. 157 Karen Suttler, ‘China’s New Semiconductor Policies: Issues for Congress’, legislation, 20 2021, https://www.congress.gov/crs-product/R46767, 4. 156 Allen, ‘China’s New Strategy for Waging the Microchip Tech War’.). 155 Ibid. 154 Ibid. 21 VI. Conclusion: Towards a test to limit digital protectionism The similarity in the regulatory and policy strategies deployed by the US and China is apparent. Both countries have implemented instruments to strengthen their techno-industrial sector and they do so through protectionist measures, by increasing the assistance of the state while leaving foreign competitors in an uneven playfield. Despite the process of the US and China is the result of years of tension, this overprotective trend affects countries around the world. Indeed, the EU has acknowledged that the strategies deployed by both countries have triggered a chain reaction of ‘geopolitical, economic, and technological global rivalry’.166Against this backdrop, can we speak of a form of digital protectionism emerging throughout the EU digital sovereignty strategy presented in the previous sections? And if yes, what can the EU do to prevent this risk? As it happens to other concepts of the digital sphere, there is no universal consensus on the definition of digital protectionism among policy makers.167 In particular, the US regards digital protectionism as an ‘erection of barriers or impediments to digital trade, including censorship, filtering, localization and regulations to protect privacy’.168 In line with this definition, back in 2017, the US Trade Representative labelled as protectionist actions of Russia, China, the EU, and Turkey.169 However, the American perspective clarifies that the EU’s digital sovereignty quest differs from those emerging in Russia, China and Turkey because of the techno-authoritarian aspect present in those countries, stressing that the European vision is based on protecting the interest of individuals.170 Yet, concretely speaking, it can be argued that the EU concerns justifying its digital autonomy strategies do not differ from the justifications given by other countries, such as China and the US. In fact, as was discussed in the previous section, the rationale behind both countries’ measures is the self-protection against external risks.171 In light of this, there are conflicting positions regarding the qualification of European policies and regulation as protectionist. Bradford claims that it is more plausible to say that EU strategies are ‘tough regulation’ rather than protectionist measures, considering the lack of hard evidence and the difficulty to detect the protectionist strain in these kinds of programmes.172 Conversely, other authors argue that EU regulations such as the GDPR, despite commendable, also imply protectionist aspects or just plainly assumes EU regulatory framework is protectionist.173 Looking at the various conceptualisations of digital protectionism, it is undeniable that the EU has decided to safeguard its own industry and citizens. The recent EU Chips Act, the Data Act and the recently approved AI Act are reflects a defensive position of the EU. There have been even cooperative initiatives of Member States enacting measures to strengthen technological sovereignty through export restrictions, as it recently happened in 173 Tobias Naef, ‘Data Protection without Data Protectionism’134; see also Muge Ucar and Altug and Yalcintas, ‘GDPR and Digital Protectionism in the EU: The Cases of Android and iOS’, Journal of Economic Issues 57, no. 4 (2 October 2023): 1079–94, https://doi.org/10.1080/00213624.2023.2273120. 172 Christakis, ‘European Digital Sovereignty’, 53; Bradford, ‘The Brussels Effect’. 171 See supra section III. 170 Frances Burwell and Kenneth Propp, ‘Digital Sovereignty in Practice: The EU’s Push to Shape the New Global Economy’, Atlantic Council (blog), 2 November 2022, https://www.atlanticcouncil.org/in-depth-research-reports/report/digital-sovereignty-in-practice-the-eus-push-toshape-the-new-global-economy/, 6. 169 Ibid. 168 Ibid. 167 Susan Ariel Aaronson, ‘What Are We Talking about When We Talk about Digital Protectionism?’, World Trade Review 18, no. 4 (October 2019): 541–77, https://doi.org/10.1017/S1474745618000198.. 166 European Commission, ‘2023 Strategic Foresight Report’, 2. 22 the Netherlands.174 The objective of these pieces of legislation or policies is to foster local industry development and upholding European standards. Nonetheless, the adoption of such an allegedly protectionist approach would come with a cost. There are fears that Europe would develop its own techno-nationalism,175 excluding overseas competitors in the internal market to benefit European companies.176 This has raised the question of whether the EU is following the so criticized Chinese path in implementing overprotective measures.177 Such protectionist policies and regulations could amount to a violation of international trade law, as it has happened with recent US actions.178 There is also the likelihood that, if not carefully applied, programs which grant excessive benefits to European businesses, either in services or manufacturing, could constitute unlawful discrimination, disregarding WTO principles. Protectionist measures would also impact on the possibility of revitalising the cooperation channels between the US and the EU.179 Some regulations could be self-defeating; for instance, the Data Act and other restrictions which aim to foster opportunities for European firms may hinder European companies’ opportunities to compete globally.180 It could be even contradictory to impose restrictions or additional burdens to European businesses to access foreign technology, as this not only translates in rising costs and performance alterations but also it could slow down the desired technological advancement for the region.181 Furthermore, protectionist policies can also take a toll on consumers because they cause higher prices to be paid and impact product safety.182 The main concerns that have driven the EU to deploy a policy and regulatory strategy with a protectionist tone are beyond discussion. Nonetheless, this chapter argues that the focus should be on the middle to long term effects that such measures could cause in the economic horizon of the Union. It would be relevant to introduce a necessity and proportionality test to identify less economically distorting solutions, while preserving the protection of fundamental rights, which should represents the other key guiding principle of EU digital sovereignty policies.183 Every current and future regulatory instrument in the context of the digital sphere should be preceded by a detailed assessment that balances out its objectives with its effects. The EU must safeguard European business and citizens without causing a major disruption to the dynamics of the single market and its original vision founded on an open economic model. 183 See ‘Digital Sovereignty in the EU: Challenges and Future Perspectives’; Celeste, ‘Digital Constitutionalism, EU Digital Sovereignty Ambitions and the Role of the European Declaration on Digital Rights’. 182 Limor Hatsor and Artyom and Jelnov, ‘Product Regulation or Protectionism?’, The Journal of International Trade & Economic Development 32, no. 2 (17 February 2023): 266–80, https://doi.org/10.1080/09638199.2022.2081712, 277. 181 Christakis, ‘European Digital Sovereignty’, 63. 180 Ibid, 11. 179 Stefan Fölster, ‘From Digital Protectionism to Digital Alliances’ (Frivärld, 19 April 2023), https://frivarld.se/rapporter/from-digital-protectionism-to-digital-alliances/. 178 Ibid, 60. 177 Christakis, ‘European Digital Sovereignty’. 176 Aaronson, ‘Digital Protectionism’, 29. 175 Christakis, ‘European Digital Sovereignty’, 57-58. 174 Sara Poli, ‘Reinforcing Europe’s Technological Sovereignty Through Trade Measures: The EU and Member States’ Shared Sovereignty’, European Papers - A Journal on Law and Integration 2023 8, no. 2 (27 July 2023): 429–45, https://doi.org/10.15166/2499-8249/665; for more instances of national restrictive measures on digital matters see also Janka Oertel, ‘China: Trust, 5G, and the Coronavirus Factor’, in Europe’s Digital Sovereignty: From Rulemaker to Superpower in the Age of US-China Rivalry, ed. Carla Hobbs (European Council of Foreign Relations, 2020), https://ecfr.eu/publication/europe_digital_sovereignty_rulemaker_superpower_age_us_china_rivalry/.. 23