Needed: A National Economic Security Lens
January 12, 2012
Last October, a U.S. intelligence report to Congress revealed that foreign economic espionage worth billions of dollars is being driven by China and Russia and represents a “significant and growing” threat to the nation’s prosperity and security.
The Internet has accelerated and amplified economic vulnerabilities given the ease of digital access to mass amounts of data, low barriers of entry to cyber intrusion, and the useful cloak of online anonymity. But this threat to our national economic security isn’t confined to cyberspace.
In the interconnected global environment, economic power, access to resources, and cutting-edge technologies are defining both power and vulnerabilities. China and Russia have already demonstrated their willingness to engage in a new geo-economic game. It’s one the United States needs to learn to play quickly.
During a diplomatic spat last year with Japan, China suspended its export of rare-earth minerals—necessary for key high-tech manufactured items like hybrid engines and solar panels. China has also used its undervalued currency, subsidies, and the weight of its market—both current and future—to demand local content and partnership concessions from foreign companies.
The resulting transfer of technology and marginalization of multinational companies has allowed Chinese companies to take larger chunks of the global solar, wind turbine, and high-speed rail markets. At the same time, Chinese infrastructure and extraction projects in Africa, Central Asia, and Latin America are facilitating Chinese access to both raw materials and political influence.
Russia hasn’t hesitated to play the game either, using its oil and natural gas resources to exert political pressure while padding the Kremlin’s coffers. In 2006 and again in 2009, Russia shut off natural gas supplies to Europe through Ukrainian pipelines to extract concessions from Ukraine and put political pressure on a rival. Russia—through Gazprom—has also followed an acquisition pattern of “plugging the holes” of alternate channels of energy supply to Europe in the Balkans, Poland, and perhaps now in Greece.
The United States is unprepared to play this new geo-economic game. Our current approach to economic security abroad reflects a reticence to meld political and economic interests, something Secretary of State Hillary Clinton has begun to highlight. This underscores a long-standing structural divide between national security policies and the role of the U.S. private sector in the international commercial and financial system.
The most egregious examples are in Iraq and Afghanistan. American blood and treasure have been spent to establish security and functioning economies, but American companies and interests are often left on the sidelines as Chinese, Russian, and other countries’ companies profit from oil, mineral, and other sectors.
U.S. economic reach and influence has been taken for granted as a function of the free trade paradigm that the United States helped establish and the competitive advantages of U.S. companies against foreign competitors. This is now in jeopardy, with not only economic advantage but international influence at risk.
As the Venn diagram of economic and national security overlaps ever more exactly, the United States should craft a deliberate strategy that aligns economic strength with national security interests.
A National Economic Security Lens
The intelligence community should prioritize collection and analysis to focus on the global landscape through this national economic security lens. Our homeland security enterprise should be focused less on defending against specific actors and more principally on protecting and building redundancies in the key infrastructure and digital systems essential for national survival. Law enforcement and regulators should have access to beneficial ownership information for investments and companies formed in the United States.
International alliances should be recast to ensure key resource and supply redundancy, while trade deals should be crafted to create new opportunities for influence and economic advantage. The proposed Trans-Pacific Partnership trade accord endorsed by President Obama is a major step in the right direction. We should reconsider doctrines of deterrence to account for the challenges of attribution in cyberspace, as well as the opportunities of entanglement in a globalized environment that would make it patently unwise for countries to try to weaken the United States.
We should view the relationship between government agencies—like the Overseas Private Investment Corporation and USAID—and the private sector as core to the promotion of U.S. interests, creating alliances based not just on trade and development but on shared economic vulnerabilities and opportunities.
In doing this, we must reaffirm our core principles. We are neither China nor Russia, nor should we create structures that move us toward a state authoritarian model. On the contrary, we should remain the vanguard of the global free trade, capitalist system, while preserving the independence of the private sector and promoting ethical American business practices. We should not retreat from the globalized environment we helped shape but instead take full advantage of the innovation and international appeal and reach of American business and technology.
In the 21st century, economic security underpins the nation’s ability to project its power and influence. The United States must remain true to its values but start playing a new, deliberate game of geo-economics to ensure its security and take advantage of rapidly emerging vulnerabilities and opportunities. (Originally posted on CBSNews.com. Reprinted with permission.)
Juan C. Zarate is a senior adviser at the Center for Strategic and International Studies in Washington, D.C. He was the first assistant secretary of the treasury for terrorist financing and financial crimes and served as the deputy national security adviser for combating terrorism (2005–2009).
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2012 by the Center for Strategic and International Studies. All rights reserved.