Can digital sovereignty survive an open trading system?

In the mid-19th century, the expansion of the European railway was hobbled by a paranoid approach to sovereignty: the battle of the gauges. Nations built incompatible track widths to ensure that a neighbor's rolling stock, and its armies, could not cross their borders. This 'sovereignty' provided a brief sense of security, but it ultimately crippled the continent's economic integration, creating friction-heavy bottlenecks that took decades and massive capital to harmonize. Today, as Brussels seeks to define its digital sovereignty strategy, it risks repeating this mistake. If Europe ends up building a sovereign stack that cannot seamlessly interface with the global system, the walls erected for protection may become the very barriers that undermine its industrial competitiveness, writes Konstantinos Komaitis, PhD.

Europe’s digital sovereignty agenda is born of a legitimate strategic concern: the continent has become dangerously dependent on foreign technologies at precisely the moment tech has become inseparable from geopolitical power. In Brussels, reducing reliance on non-European cloud providers and semiconductor supply chains is no longer framed as industrial policy but as a matter of economic security.

That instinct is neither irrational nor uniquely European. Across the world, governments are reassessing vulnerabilities exposed by supply-chain disruptions and the use of technology as an instrument of statecraft. The age of frictionless globalization is over.

Brussels is often critiqued for being a 'regulatory superpower' that lacks the industrial muscle to back up its mandates. There is a valid urgency to move beyond rule-making and toward building a competitive European 'sovereign stack', from cloud architectures to semiconductor foundries. The European Commission’s recently proposed Tech Sovereignty Package, reflects this shift in thinking. Rather than focusing solely on regulation, Brussels is now trying to build industrial capacity, secure strategic technologies and create the conditions for European alternatives to emerge in areas such as cloud computing, artificial intelligence and semiconductors. The challenge will be ensuring that sovereignty does not become synonymous with economic separation.

The emerging European approach reflects a broader attempt to strike this balance. The Commission's sovereignty agenda repeatedly stresses that autonomy should not mean autarky and that Europe must remain open to trade and international cooperation. Yet this distinction becomes harder to maintain once sovereignty objectives are translated into procurement preferences, infrastructure requirements and industrial subsidies. The risk is not the rhetoric of sovereignty itself, but how it is implemented.

The strategic error would be to view this infrastructure as a tool of isolation. True autonomy is not achieved by shutting out the world, but by building domestic capabilities that are so interoperable, open and high-performing that they become preferred nodes within the global
system. If Europe builds local infrastructure merely to create a walled garden, it sacrifices the scale and efficiencies of the open trading system for the comfort of a high-cost digital bunker.
The danger is not merely economic; it is also legal. For decades, the international trade order rested on a stable premise: openness creates efficiency, and common rules generate predictability.

The World Trade Organization (WTO) was designed to prevent discrimination and ensure regulation was not a disguised form of protectionism. Yet, the current discourse on digital sovereignty often treats these WTO obligations as an inconvenient legacy rather than a binding constraint. For instance, by pivoting toward "cloud immunity" or localized data mandates, Europe risks a legal collision with the General Agreement on Trade in Services (GATS). This threatens the "rule of law" in the digital sphere, the very foundation that allows European SMEs to compete globally without the backing of a domestic tech giant.

This shit also risks a "competitiveness gap." The digital economy expanded because companies did not have to replicate entire technological stacks market by market. This architecture dramatically reduced transaction costs and accelerated innovation. As governments now seek greater territorial control, they risk reintroducing the frictions that decades of integration eliminated. Requirements for localized infrastructure may appear manageable in isolation, but collectively they fragment markets and weaken the efficiencies that make networked economies productive. This is the central challenge facing Europe’s sovereignty agenda. Industrial policy can strengthen resilience, but it can also unintentionally increase costs and reduce competitiveness if protection becomes an objective in itself.
Europe’s economic survival depends on multilateral leverage, not the retreat into digital isolation.

While the US and China exploit unified domestic markets to reach technological escape velocity, European prosperity remains a function of the global trade "network effect." Openness is therefore a strategic necessity, allowing European industry to aggregate demand beyond its fragmented borders. However, as the push for domestic infrastructure continues in Brussels, Europe must avoid the trap of subsidizing technological laggards. A sovereign stack that prioritizes origin over performance acts as a de facto digital tax on every European startup and manufacturer, eroding the very competitiveness it seeks to protect. Ultimately, an underperforming architecture is a fragile one; by insulating domestic providers from global competition, Europe risks locking its critical data into second-tier systems that lack the R&D scale to match the security innovations of the global frontier, a risk that is now critically underscored by the rapid acceleration of AI.

For Europe to succeed, the construction of its infrastructure must be governed by an unwavering commitment to openness. "Stack curation" must remain non-discriminatory and consistent with WTO obligations. By adhering to the principles of the General Agreement on Trade in Services (GATS), Europe protects itself from retaliatory trade barriers and preserves the legal certainty that global investors require.

This legal stability must be matched by an architecture designed for integration rather than isolation. Sovereign systems should be built as open nodes within a global ecosystem, recognising that resilience comes not from separation but from the ability to connect, adapt and
compete. Interoperability is not merely a technical preference; it is the strongest defence against the inefficiencies of a high-cost digital bunker.

This will be the ultimate test of the EU's new sovereignty agenda. If the Tech Sovereignty Package succeeds in strengthening European capabilities while preserving openness and interoperability, it could become a model for balancing resilience and global integration. If it drifts toward preference schemes and technological compartmentalisation, it risks recreating the very frictions it was designed to overcome.

Ultimately, digital sovereignty should not be defined by the height of a country's walls, but by its capacity to engage with the world from a position of industrial strength. The test of European leadership will be its ability to protect strategic interests without severing the digital arteries that sustain global trade. Europe's challenge is not to build a different gauge. It is to build stronger trains that can run on the global network.

Share this article: