FIW Policy Brief No. 61: Innovation, Industrial and Trade Policies for Technological Sovereignty

Interrupted supply chains in the wake of COVID-19 and Russia's attack on Ukraine have highlighted the geopolitical risks of sourcing critical raw materials and products from a small number of authoritarian countries. The EU has initiated a flurry of activities to reduce unilateral dependencies, witnessed by trade, innovation and industrial policy instruments, such as the IPCEIs, the Chips Act and new anti-subsidy measures. This policy brief focuses on fostering technological sovereignty to insure against risks from international trade specifically in critical general purpose technologies. Bundles of innovation, industrial and trade policies enter three consistent policy mixes according to the distance to the technological frontier: for emerging technologies, the frontier policy mix emphasises an improvement in general framework conditions such as a more integrated European capital market. Technologies which lag behind the frontier benefit from coordinated support within the catch-up policy mix, while technologies at risk of losing their position at the frontier fall within the remit of the defensive policy mix.