Trump Makes America Inc’s Grip on the World Even Tighter

The recent moves by European governments to reduce their reliance on American tech giants have sent shockwaves across the globe. Germany’s digitisation minister, Dirk Schrödter, has led the charge, switching 30,000 civil servants from Microsoft Teams to open-source alternatives. France is also planning to ditch Teams and move to Linux.

At first glance, this might seem like a straightforward tale of Europe pushing back against American dominance. However, scratch beneath the surface, and you’ll find a complex web of interests at play. For decades, America has used its commercial prowess as a tool of statecraft, imposing sanctions on adversaries and threatening to cut off access to critical technologies during trade negotiations.

The recent examples of Karim Khan’s lost Microsoft email account and Anthropic’s temporary shutdown in foreign countries have sent a clear message: America’s grip on global tech is tightening. This has left even allies worried that they might be next. European governments, for instance, are emerging as key battlegrounds in this struggle for technological sovereignty.

The European Commission’s plan to boost the continent’s “technological sovereignty” aims to shift processing of sensitive government data to European cloud providers like Nextcloud and Hetzner. However, American firms have entrenched themselves in critical areas of government, from information technology to defence. In fact, estimates suggest that American companies account for around 2% of foreign governments’ spending on tech and defence.

But this modest share belies the outsize role these firms play in critical areas. Two-fifths of business generated by American companies from foreign governments comes from IT and defence – a stark reminder of their stranglehold on these sectors. The dominance of Alphabet, Amazon, and Microsoft in the global cloud-computing market is also telling, with these three companies controlling two-thirds of the market.

The alternatives to these tech giants are limited. Forrester estimates that American providers account for between seven and nine out of ten largest vendors in most segments of enterprise software. Those substitutes that do exist often lack critical features or struggle to compete with their American counterparts. LibreOffice, for example, lacks AI capabilities, while OVHcloud struggles to keep pace with Amazon Web Services.

So why is this shift happening now? One reason is the growing recognition among governments abroad that their ability to operate depends on American suppliers. The pandemic has accelerated a trend towards digitalisation, leaving many countries vulnerable to supply chain disruptions and price hikes. European governments are waking up to the fact that they’ve been sleepwalking into a dependence on American tech giants.

The rise of nationalism in Europe is also driving this shift. As trade tensions between America and its allies escalate, European governments are seeking to reduce their reliance on American suppliers as part of a broader push for technological sovereignty. This isn’t just about economics – it’s also about politics. By reducing dependence on American tech giants, these governments can reclaim control over critical infrastructure and assert their own interests.

As more countries follow Europe’s lead in pushing back against America’s grip on global tech, expect significant changes to the global economy. Australia and Britain are already among those with significant exposure – their reliance on American firms is set to increase in coming years. However, there are also risks: switching costs can be hefty, and inferior alternatives may not provide the same level of security or innovation.

The shift towards technological sovereignty in Europe will have far-reaching implications for the global economy – and it’s time for all stakeholders to take notice.