(Oct 23): The UK has voiced concerns that the European Union’s (EU) push for technological autonomy will damage British digital companies, arguing that it should be eligible to compete for contracts under forthcoming “Made in Europe” tech rules.

The EU is debating whether to limit contracts under its Cloud and AI Development Act to European companies, its latest push for European preference rules as it seeks to reduce its dependence on non-European providers, like the US, according to people familiar with the matter. 

The proposal is the centrepiece of a sweeping “tech sovereignty” package being drafted by Brussels, which will create a tiered system for cloud computing services and software providers — dictating that European governments rely exclusively on EU vendors to handle their most sensitive data.

The two sides are intensifying discussions on this and other matters ahead of an EU-UK summit in Brussels on Nov 20.

UK Prime Minister Andy Burnham has raised the prospect of Britain rejoining the EU in the future, sparking expectations of a reset in EU-UK relations 10 years after the Brexit vote. In a speech last month to Labour Party members, Burnham said that Brexit had left the country weaker and failed to allow Britain to “take back control” of its borders and rules, as promised by the Leave campaign.

However, the EU’s push for European preference across a range of legislative files, from cars to public procurement, has irked the UK.

The European Commission, the EU’s executive arm, did not immediately respond to comments. A UK government spokesperson said it’s closely engaging with the EU as the Cloud and AI Development Act develops, and will continue to make the case for close cooperation as a trusted partner. The spokesperson noted that the UK is already deeply integrated into Europe’s digital and technology ecosystem. 

The new tensions over European preference rules center around two main objections from the UK side, according to people familiar with the discussions — the demand that digital services providers be physically based in the EU, and restrictions on ownership and control.

Britain is home to big telecommunications company and cloud providers, including BT and Nscale, which could be negatively impacted by the new rules. 

Among the arguments made by the UK is that any move to exclude it breaches the terms of the post-Brexit trade deal that governs EU-UK relations, an argument refuted by the commission, according to people familiar with the matter.

The British government is under political pressure to align to Brussels on imposing tariffs on subsidised car imports from China in exchange for access to the EU-wide procurement model. France and Germany agreed a car deal last week which opens the door for the UK to qualify for European subsidies under “Made in Europe” rules set out by its forthcoming Industrial Accelerator Act. To benefit, however, the country will have to mirror EU’s rules on foreign direct investment and trade defence, a thinly veiled reference to measures the bloc has taken against China.

UK Business Secretary Jonathan Reynolds signalled earlier this week he’s open to hitting Chinese electric vehicles with tariffs to win enhanced access to European markets, but would make the call based on UK needs not demands from the EU.

Among the other issues to be discussed at next month’s Brussels summit are greater alignment on rules governing transport of agriculture and food products, linking their cap-and-trade emissions programmes and greater access for young people to live and work in both jurisdictions, one of the most contentious aspects of the talks.

Uploaded by Tham Yek Lee