A geopolitical turnabout? Comparing the EU and the US approaches to competition and risk mitigation in high-tech relations with China

Since the last decade, we have been witnessing a transformation in the global economic and political order. The rising power of China, the relative decline of US influence in the international system and the international political economy, the rise of other Asian powers such as India, and the revisionist turn of Russia – all undermine the rules-based 'Liberal International Order'. These trends give rise to a geopolitical world order based on power competition and in which major powers increasingly use geo-economic strategies to pursue geopolitical objectives. Against the background of renewed strategic competition, systemic rivalry and rising levels of geopolitical tensions and conflict, cutting-edge and enabling technologies have emerged as a defining source of power. The ability to control and innovate advanced technologies has become a crucial determinant of economic strength, military capabilities, and overall geopolitical influence. Furthermore, governments increasingly tend to assess trade and investment in critical technologies through the lens of perceived security risks they might entail. This holds true for FDI in critical infrastructure, the access to enabling technologies (e.g. AI or quantum computing), or trade in dual-use technologies. Economic security and resilience gain in importance as policy goals. Against the background of a “geopoliticization” of technological competition, trade and investment, governments can basically adopt three different strategies to deal with these challenges: shielding, stifling, and spurring (Roberts et al. 2019). 1. They can shield themselves against potential risks emanating from allowing competitors access to their own technologies by way of FDI, research cooperation, or student enrolment in high-tech-related disciplines; and they can limit the use of foreign technological products in domestic critical infrastructures. Foreign investment screening is a key tool when pursuing shielding strategies. 2. They can stifle the technological and economic advancement of competitors. Export controls in selected high-tech areas and regarding dual-use goods are of key importance for this purpose. 3. They can spur the technological advancement of their own companies and economy by doubling down on their research and development and industrial policy activities in selected high-tech areas. The promotion of cutting-edge chip technology would be a key example of a spurring approach. This paper intends to compare the specific choices of EU and US policymakers when defining their response to China as the main technological competitor and the relative importance they attach to shielding, stifling and spurring strategies. Our research question reads as follows: which explanatory factors and interests account for the particular mix of these three potential strategies of the EU and the US in countering challenges and risks stemming from high-tech competition and cooperation with China? To answer this question, we will provide comparative case studies on FDI screening and export controls. Reference Roberts, A., Choer Moraes, H., and Ferguson, V., 2019. Toward a Geoeconomic Order in International Trade and Investment. Journal of International Economic Law, 22 (4), 655–676.