The study shows that strong growth in digital trade appears to provide a solid foundation for achieving the goals set by the European Commission for its “Digital Decade.” Upon closer analysis, however, hidden weaknesses emerge that could jeopardize future progress: Ireland’s disproportionate influence on the continent’s digital trade balance. On closer inspection, Europe’s digital trade surplus is in reality a digital trade deficit.
Due to the disproportionately large presence of U.S. technology companies in Ireland and their low-cost access to European markets, this “Ireland effect” distorts European trade statistics and limits digital autonomy. Without U.S. companies in Ireland, the European Union would have a massive digital deficit. “The cost of this deficit to Europe will total over $350 billion between 2022 and 2024, which is approximately 40% of planned defense spending through 2030,” says Assistant Professor Dr. Maximilian Mayer, who coordinates the project at CASSIS and is a member of the Transdisciplinary Research Area “Individuals & Societies” at the University of Bonn.
Furthermore, the study highlights Europe’s excessive dependence on China in the trade of digital goods. Given this significant imbalance and the “Ireland effect,” it becomes clear that Europe is caught between the digital giants China and the U.S. This reality calls Europe’s economic gains into question, increases its geopolitical vulnerability, and limits its digital autonomy, according to the analysis.
The team of authors therefore recommends that the European Commission further strengthen the European manufacturing industry and competitiveness, further reduce dependencies on China in the trade of digital goods, and adopt a policy language that defines autonomy and sovereignty as shared goals and promotes new, multifaceted technology partnerships with partners from the public and private sectors.
“The analysis shows that Europe’s digital dependencies are greater than the statistics suggest,” says Michael Jungwirth, Director of Public Policy & External Affairs at Vodafone Germany and Public Policy Director at Vodafone Group. “We now need a coherent industrial and trade policy that truly strengthens digital resilience—for an economically and geopolitically sovereign Europe.”