New Policy Paper: Reciprocal Technology Transfer as a Bridge between Competition and Cooperation

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7 hours ago
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Executive Summary

The growing asymmetry in technological competitiveness between the EU and China has highlighted critical vulnerabilities in Europe’s strategic industries – especially in electric vehicles (EVs), solar panels, semiconductors, and renewable energy supply chains. Chinese dominance in manufacturing, supply integration, and strategic raw materials, backed by massive state subsidies and industrial coordination, has created structural dependencies that threaten Europe’s industrial base and technological sovereignty. Traditional tools like tariffs and subsidies have proven limited in their effectiveness. While they offer short-term protection, they risk retaliatory trade measures, higher consumer costs, and fail to ensure genuine technology transfer or long-term competitiveness. The failure of initiatives such as the European Battery Alliance to rival Chinese firms like CATL and BYD underscores the need for more robust, coordinated intervention.

This paper proposes that performance requirements (PRs)—such as mandatory R&D investment, reciprocal licensing, local content, and employment quotas—should be considered as a strategic industrial policy instrument to enable international technology transfer (ITT) and secure domestic upgrading. Drawing from developmental state experiences in Taiwan, China, South Korea, and Japan, the paper demonstrates how performance requirements, when tailored to national absorptive capacity and bargaining power, can lead to transformative technological catch-up and sustained economic growth.

However, the importance of an economy’s socioeconomic context cannot be understated. We find that absorptive capacity and national bargaining power play an important role in determining the success of state-driven ITT policies. Countries with high absorptive capacity and strong market leverage (e.g. EU, US, Japan) are well-positioned to implement PRs effectively. In contrast, countries lacking these foundations often experience limited or outdated technology transfer, as shown in cases like South Africa and Argentina.

For the EU, with its developed institutional framework and large consumer market, implementing reciprocal technology transfer agreements—particularly in high-tech sectors like EVs, batteries, and green technologies—presents a viable path to rebuilding strategic autonomy and resilience. The EU's recent move to condition Chinese EV market access on technology sharing signals a shift toward a pragmatic, policy-driven development model reminiscent of the East Asian developmental states.

The paper concludes with a proposed framework to guide policymakers in applying performance requirements tailored to their country’s structural characteristics, reinforcing the importance of balancing strategic assertiveness with institutional readiness. As global competition intensifies, the EU must evolve from passive liberalism to a proactive industrial strategy — one that secures not just access to markets, but control over the technologies that will define future economic leadership.

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