Why the United States Needs Europe in Order to Win the Technology Race

Center for Strategic and International Studies | Federico Steinberg, Riccardo Bosticco

The United States and European Union face a deepening technological rift as aggressive American policies push European decision-makers to pursue digital sovereignty and hedge towards Chinese supply chains. Washington's "AI Action Plan" aims for global technology dominance through exported AI stacks, yet extraterritorial laws like the CLOUD Act trigger intense European security concerns.

Supranational authority in Brussels has responded by coordinating legislative countermeasures including the Tech Sovereignty Package, Chips Act 2.0, and Cloud and AI Development Act. Autonomy carries immense costs. Experts estimate building an independent European technology stack requires €3.6 trillion, while U.S. cloud providers presently hold over 80 percent of Europe's market. Nonetheless, European leaders are diversifying partnerships and curbing reliance on American platforms such as Microsoft Teams and Zoom. Major U.S. technology stacks remain co-dependent on European coordination and critical hardware components supplied by ASML, TRUMPF, and ZEISS. Unilateral U.S. authority risks fracturing this transatlantic alliance, undermining mutual security and market leadership across global technology supply chains.

Comment

Extraterritorial command authority over critical digital architecture alters the risk calculus for allied defence procurement and industrial planning. When Washington enforces unilateral jurisdictional access through the CLOUD Act, target states face operational friction in maintaining control over sovereign data networks. This centralisation of administrative authority creates single-point governance vulnerabilities across coalition networks.

The operational mechanism functions through statutory assertions that override host-nation supervisory frameworks. In advanced semiconductor fabrication, where Dutch manufacturer ASML integrates extreme ultraviolet lithography with American software, overlapping command structures stall supply-chain permissions. Consequently, conflicting regulatory mandates between Washington and Brussels directly degrade decision-making speed across joint ASML component pipelines.

Strategic Question for Discussion

How do overlapping regulatory authorities like the CLOUD Act alter decision-making speed and governance within transatlantic tech consortia reliant on ASML lithography?

The available evidence points toward a growing institutional friction where statutory oversight mechanisms created in Washington clash directly with European data sovereignty directives. My assessment is that dual-jurisdiction requirements will force major hardware developers to split command structures into isolated regional subsidiaries. This fragmentation inevitably slows technology deployment cycles and weakens unified transatlantic coordination against external competitors.

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