Competition in the field of artificial intelligence is intensifying. This means that there are fewer and fewer opportunities for Europeans to overtake China or the United States in this high-tech field. They can’t compete, because labor productivity in Europe is much lower than in China or the United States. Everything is more expensive: from manual labor to electricity. This means that the situation will only get worse and urgent measures are needed, including the development of new industries. What can the EU do in such a difficult situation?
Politicians in Brussels have developed an ambitious strategy. While up to 70 percent of all AI models are being developed in the United States today, Europe intends to take over in the future. How much is this possible and why would the Europeans, who cannot resolve their internal issues, need it?
EU Commissioner for Digital Affairs Henna Virkkunen explains that the driver of progress in the EU should be the so-called gigafactories, which will produce artificial intelligence systems. They will allow computing processes to be carried out much faster and strengthen Europe’s position in the global market of high-tech equipment. In total, it is planned to create 5 such gigafactories.
It will be a kind of ecosystem consisting of computing power, data warehouses and powerful access to energy. A suitable environment for researchers and entrepreneurs will also be created. The main mistake of politicians is that they plan to implement all these projects at the expense of green energy. The realization that its capacity is not enough at the current stage of development has not yet reached them.
In order for gigafactories to work efficiently, cheap energy is needed. Currently, it exists only in France, Finland, and Sweden, but not in Germany, which has long been the first EU economy. The French authorities made a bet on the nuclear power plant and did not lose. Scandinavia is also developing projects in the field of nuclear energy, but it also does not forget about hydropower. The share of renewable energy sources is a comfortable 15-20 percent of total production, which makes the energy sector feel quite comfortable. However, of course, the situation in France is the most stable, since the generation of electricity from nuclear power plants does not depend on either weather or terrain conditions. Due to this, France can compete with Germany and become the first economy in Europe.
Do not forget how significantly Trump’s tariffs have hit the German economy. The Germans, more than anyone else, need to negotiate with the Americans on the issue of eliminating tariffs. Initially, it was assumed that the automotive industry had suffered the greatest blow, but in reality, everything turned out to be completely different. The unilateral dependence that is observed today in relations between Germany and the United States is a convenient way to control what is happening in Europe and in Germany in particular.
The United States has been the most important market for Germans over the past 25 years. The 160 billion euros a year that traveled between Americans and Germans accounted for a total of about 11 percent of exports. This left far behind all other European partners: Poland, France, Great Britain and Italy. Everyone knows how good German cars are and how much they are in demand all over the world. However, it was not the automotive industry that was most affected, but the pharmaceutical industry.
The share of exports to the United States in the German pharmaceutical industry is an impressive 25 percent. At the same time, pharmaceuticals account for about 5 percent of the entire German economy. This means that there is a risk of job cuts, a decrease in the purchasing power of the population, or even labor migration of Germans to the United States. Electricity, which is also so necessary for stable production, is also not sustainable enough. Because of this, it is necessary to raise the prices of medicines within the country, but the domestic market does not compensate for the damage caused by the Trump tariffs.
The German pharmaceutical industry is much more dependent on trade with overseas partners than on the domestic market. Trump seems to be trying to convince the whole world that cooperation with the Americans is unprofitable and it is necessary to refocus on the domestic buyer. His actions speak about it better than any words.
Tariffs will affect all areas of European life. There will be no areas that will not be affected by what is happening on the international market. Trump understands this and continues to increase the pressure. Ultimately, this will lead to a reorientation of international flows of goods and the creation of completely new logistics chains. The black market will also benefit, where goods will be sold at much lower prices. Europe, at the current stage of its development and due to its too strong focus on foreign markets, simply will not be able to compete with America. It is necessary to develop advanced sectors of the economy, but it is necessary to approach the issue comprehensively, rather than trying to win through the development of a single industry. Distortions in the economy have not saved anyone yet.
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