CEE Needs To Modernise Industry To Strategically Lead the EU
21 March 2023
23 November 2020
Modern semi-conductors, COVID-19 vaccines and the rise of artificial intelligence show the technological challenges ahead for Central Europe and the rest of the world in the absence of deepened cooperation. To keep authoritarian powers at bay, democracies should consider creating a new, proprietary technological alliance that goes beyond NATO and where the leadership of the United States as a technological power is indispensable.
It was clear even before the US presidential election. Whether Joe Biden becomes the American president or Donald Trump remains in office, the ongoing power conflict between the United States and China will not disappear.
The conflict determines and will influence the dynamics of global politics and the world economy for the next decade or so.
Some commentators already compare this relationship to the Cold War, but today’s conflict is revealing itself chiefly as a battle for the best brains and the latest technologies. Although this is not a fully comparable analogy, it does have a similarity with the confrontation between superpowers in the decades after the Second World War: every politician in the world who has the ambition to become a head of state or government has to take a position in this conflict.
For instance, we do not have to go far, we can just look at the role of the current head of state and head of government in Czechia, Miloš Zeman, and his attitude towards China and the United States.
However, the balance of power is and will play out completely differently than during the United States’ rivalry with the Soviet Union, when it mattered who had how many nuclear warheads, aircraft carriers, submarines or tanks.
China, for example, has twice as many soldiers as the United States, has more tanks and cannons and twice as many military vessels. Compared to the Chinese, the Americans have three times as many military planes and probably many times as many nuclear warheads but we do not know the exact number of Chinese warheads.
Another criterion may be that China spends, according to various estimates between a third and a half of what the United States spends on its military. The important trend underscoring these numbers is that the Chinese are catching up with America in terms of money spent.
Yet, the real question is, who buys what for this money.
In other words, whether Beijing or Washington are spending money on soldiers’ salaries and clothing and training, buying old military equipment or investing funds in developing new technologies for the future – which will completely change the way in which we fight.
Today, brute military alone does not mean much if it is not supported by modern technologies. In addition, nuclear deterrence and fear of direct military conflict still work in determining the relationship between powers.
Yet, with the arrival of President Donald Trump in the United States in 2016 and President Xi Jinping in 2012 as the head of the Chinese Communist Party, it seems as if rationality in the decisions of the largest powers has receded into the background.
In addition, modern weapons are dependent on modern technology. So the number of tanks, planes or warships may not say a lot about the true strength and capabilities of a state, because the cyber and space domains, as soldiers reckon, relativise the power of armour or ammunition, but also the potential of the economy.
The dividing lines of global power, already to a large extent today, are based on technology. In the future, these dividing lines will certainly not be based on the number of tanks but the speed and scope to which countries adapt to technological change.
To a large extent, this is a consequence of globalisation, i.e. international cooperation, trade and real-time interconnection.
Although globalisation is currently experiencing a crisis, on the other hand, it has just enabled the development of many technologies, which are now being controlled and used to benefit the interests of individual countries.
They have so far developed mainly thanks to extensive international cooperation. Now is the time to nationalise them. Let us look at a few examples.
At the heart of every modern device is a chip. It is one of the products of the semiconductor industry. The production of semiconductors is a complex process, which is not limited to one place but is the result of the entanglement of various suppliers – from those who invent to people who programme the devices that produce these semiconductors.
However, these devices can be invented and manufactured by a completely different set of companies. Other companies know how to make the basic material for those who put it all together and make semiconductors. Simply put, manufacturing consists of three distinct parts: design, fabrication and assembly.
An excellent analysis of German think tank Stiftung Neue Verantwortung clearly shows how in each of those phases a different region of the world dominates. In terms of design, it is the United States and in semiconductor fabrication and assembly, it is Southeast Asia, mainly one company in Taiwan but also South Korea.
Nevertheless, the local factories need devices whose development and production are dominated by the US and Europe, but the production of the basic material is controlled by two Japanese companies. Chemicals for production come mainly from Europe and Japan. No region in the world has all the technology needed to make semiconductors.
In its dispute with China, the United States has imposed relatively targeted sanctions on this semiconductor manufacturing chain, which spans two US-dominated locations: the production of software needed to design semiconductors and the production of chip assembly devices.
China, which plays a secondary role in this chain and which is otherwise able to put a lot of energy and money into rapid copying and subsequent development of new technology, is trying to catch up and gradually building up its own capacity.
According to some estimates, China is about fifteen years behind the United States in this field. Huawei has begun preparing its own chip factory in Shanghai, where it wants to produce them without American technology.
The Chinese are masters at stealing industrial innovations. That is why the Americans place so much emphasis on the protection of intellectual property and go quite strongly after multiple Chinese attempts to access patents or protected manufacturing processes of American and other companies.
The COVID-19 pandemic has shown a different field in which different countries compete with each other – in an effort to obtain a safe and functional vaccine for a new disease as soon as possible.
Although countries such as Russia and China quickly developed a vaccine, they began to use it en masse without appropriate tests and to offer it to potential allies around the world as a way to secure political influence.
Democratic states, in which regulatory mechanisms and the protection of the rights of the individual operate, already have a number of vaccines at their disposal, but precisely because of the responsibility they bear as elected governments, companies and scientists are working to ensure the safety of vaccines.
A state-of-the-art biotechnological industry was confronted with a mature regulatory mechanism derived from a political system. This industry is given responsibility towards the health and lives of citizens – voters.
By having hundreds of thousands of people vaccinated with a hitherto untested vaccine, they risk quite a lot of popular trust in their own political system to retain the upper hand.
But the Chinese and Russian rulers clearly see an advantage in terms of having the power to influence their clients. We could see that in Central Europe in the case of Hungary which is the only country within the EU signalling to take Russian Sputnik V vaccine.
It is true that whoever is able to offer the vaccine to his allies first will be ahead not only in the current crisis but also in the future. SARS-CoV-2 is certainly not the last virus to attack humanity and the ability to develop and manufacture an effective drug or vaccine will be valued in the future.
Let me only mention the argument of Czech politicians that when we have a factory in our territory that participates in the development and production of one of the potential vaccines – American Novavax – it makes it easier to negotiate the availability of that vaccine.
The head of Novavax, Stanley Erck, also confirmed in the interview for Czech daily Hospodářské noviny in summer that Czechia could gain early access to their vaccine when it will be approved for use.
The third example is about the universal weapon of the future but also the largest money-making opportunity: universal artificial intelligence that will be able to handle practically everything.
Although the road to this AI-scenario is still quite long today, there are already concerns about its misuse, both by private companies as a generator of virtually endless profits and to obtain a monopoly control of the economy, as well as some states.
There is also a close connection with the US-China rivalry here, because many Americans, including Google CEO Eric Schmidt, fear that China will soon overtake the United States in this area.
Here, we can also find a link to Czechia. In this field, Czech scientists are both connected to American research, i.e. to the world leader, and participate in global debates on the introduction of generally accepted standards, which should set and regulate the rules for the use of artificial intelligence in the future.
However, the previously mentioned modern technologies show the current weakness of all-pervasive globalisation. It brought prosperity, but it opened up opportunities for authoritarian rulers of various kinds to acquire these technologies and use them purely for the purpose of control.
Much has been written and said about China’s ‘big-brother’ state, given that Beijing offers and exports a system of surveillance of the population elsewhere.
The three briefly outlined examples indicate what is at stake and where the path to the future leads for liberal democracies: not to the nationalisation of economics and politics but, on the contrary, to deepened cooperation.
Democracies should therefore consider creating a new, proprietary technological alliance that goes beyond NATO and where the leadership of the United States as a technological power is indispensable.
What is more, it is in the Americans’ own interest, as scientists Jared Cohen and Richard Fontaine framed it when describing the idea of a world technology alliance in Foreign Affairs magazine recently. They named their project “T-12” based on the number of countries that should be included in it, following the example of the G8 group comprising the largest and developed economies.
But where would the place be for such a small country as Czechia, if there was a new division of the world along other lines? Cohen and Fontaine also included two European countries in T-12: Sweden and Finland. The reason is simple. They are democracies often being presented as model examples for others.
Sweden and Finland are home to Ericsson and Nokia, two European manufacturers of technologies for 5G mobile networks and actively working on the next generation of mobile technology. The power and influence of this new world will not necessarily depend on the number of tanks, as we have said.
Czechia is undoubtedly a democracy, although not exactly a model one. This Central European country also has enough brains and capabilities to offer to the new technological alliance.
For example, remember when the National Cyber and Information Security Bureau’s (NUKiB) warning to Chinese suppliers of December 2018 did to the global world of cybersecurity.
We can follow the careers and successes of scientists and businessmen like Michal Pěchouček or Marek Rosa in artificial intelligence. We can see the success of small Czech companies focused on the narrow, specialized production of smart products for the aerospace or defence industry, such as Ray Service or Mejzlík Propellers.
Similar examples can be certainly found in other Central European countries.
What is needed is to start thinking differently about the relationship between power, politics and the economy, by following the latest trends and the situation in the world.
What is needed is to behave according to those values which we would like to follow and cooperate with countries in a group where we want to belong.
A Czech version of this article is available at Hospodářské noviny. Data visualisation prepared by Maria Ciupka. The article is part of the New Europe 100 project supported by the International Visegrad Fund.
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