Business must brace for the new national security economy

Workers transport goods on a truck near a cargo ship at a port in Lianyungang, Jiangsu province, China 13 September, 2019 (Photo: Reuters/Stringer).

Author: Brad Glosserman, Tama University

Relations between the United States and China will continue to deteriorate despite the phase one trade deal signed in January 2020. The mood, at least among US elites, has shifted. A former White House official recently identified two schools of China policy: hardline and ultra-hardline. Significantly, the dividing lines are not between political parties but within them.

Businesses must rethink standard operating procedures and policies in the wake of intensifying competition between the world’s two leading economies. Executives must prepare for the new national security economy. Regulatory reforms have already begun and managers and decision-makers must be sensitive to this new reality.

The US National Security Strategy published December 2017 identifies a world marked by great power competition. While there will be a military dimension, it will be seen primarily in the economic arena and develop most fiercely in the arena of emerging technologies as the United States competes with China to create the world’s largest innovative economy. During the Cold War, attention was paid to technology leakage with military applications. That concern persists but today governments recognise that the country which dominates the frontiers of new technologies will prevail in the race for global leadership.

Since the United States and China are both deeply embedded in global supply chains, their policies have a profound impact on the behaviour of businesses worldwide. US Vice President Mike Pence’s remarks in October 2018 at the Hudson Institute make it clear that Washington is looking hard at private sector behaviour as it engages China. While US action gets most of the attention, China is also implementing measures to promote indigenous development and insulate its supply chains from political disruption.

The 2019 US National Defense Authorization Act (NDAA) calls for the identification …continue reading