For a National Economic Security Council
It’s time for America to stop improvising and start delivering
“Economic security is national security” has become one of those Washington platitudes that everyone agrees to repeat to each other, even as most have no firm idea what it means and would disagree if they did.
The ongoing eclipse of America’s predisposition towards economic openness and integration by the imperatives of national security is arguably more consequential than America’s turn towards economic protectionism generally. That is because the latter instinct mostly obstructs further integration, while the former threatens, if poorly executed, to create a world that is both less prosperous and secure. Without a comprehensive economic security strategy and reliant on a patchwork institutional infrastructure and anachronistic grab bag of authorities, the United States is at risk of such an outcome.
The defensive component of America’s emergent economic security strategy has focused on reducing dependencies on China in key sectors while also denying China enablers – semiconductors, investment, and intellectual property – to further its military, technological, and economic progress.
America seeks to take a “small yard, high fence” approach to its various controls. Jake Sullivan, the national security advisor, in a speech earlier this week, further articulated four questions that seek to set an outer limit on controls: whether a technology is “foundational” to national security, the subject of adversary focus, has substitutes, and can build and sustain an international coalition.
But what constitutes a “foundational” technology remains so ill-defined that, when coupled with China’s maximalist ambitions to lead in every technological domain, it renders the fence vulnerable to still considerable expansion. A further test is needed: regulation in other domains typically rests upon a cost-benefit analysis often framed in terms of the value of a statistical life. US economic security policy must similarly and systematically ask whether the benefit (or harm aversion) of its actions outweigh the costs – or at least imposes disproportionately higher costs on adversaries compared to those borne by the US and its allies.
The offensive components are even more fraught. The success of America’s enormous industrial policy commitments in semiconductors is far from assured. Nascent proposals for a strategic wealth fund would introduce yet another tool when strengthening those that already exist may be most impactful. The Partnership for Global Infrastructure Investment, an attempted response to China’s Belt and Road Initiative, is largely vaporware. And without meaningful market access, the Indo-Pacific Economic Framework offers everything but the basis for the shared prosperity and integration on which true resilience rests.
As a recent conference report by the Potomac Institute for Policy Studies notes, the current system “looks to the National Security Council to coordinate across departments and agencies. However, the NSC tends to inherently focus attention and resources on immediate global challenges and crises, limiting its capacity to fill this interagency lead role. At the same time, departments and agencies inherently view the world through their authorities and legacy, institutional lenses.”
What is needed to effectively command American economic statecraft is a National Economic Security Council.[1] With a dedicated advisor and staff on par with the National Security and Economic councils, the NESC would convene key officials from Treasury, Commerce, and State who oversee investment security, sanctions, and export controls. It would also include stakeholders from the US Trade Representative, USAID, Exim, and the Development Finance Corporation who represent America’s affirmative tools of economic statecraft. And finally, it would include officials from the Departments of Energy, which controls the strategic petroleum reserve; the Department of Defense, whose immense budgetary authorities can disproportionately shape innovation and supply chain ecosystems; and the National Science Foundation, which funds much of the research that keeps America at the technological frontier.
Once established, the NESC should take on six core missions. First, it should articulate and regularly review a national economic security strategy. The strategy would detail key vulnerabilities to the US economy, deficiencies in American competitiveness versus its adversaries, and what core technologies merit investment and protection given their potential for weaponization. It would establish processes for determining all these elements, when and how to deploy the economic security tools at its disposal, and how to assess both the costs and effectiveness of their use. The European Union, despite its own complexities, has already delivered a compelling example in its own economic security strategy.
Second, the NESC should take the lead on engaging with the commercial sector, facilitating new mechanisms such as a strategic reserve for critical commodities. Recognizing the collective action problem of moving complex supply ecosystems, the NESC should stand up working groups of major buyers of sensitive or overly concentrated goods and task them with developing common diversification plans that can be augmented by the economic statecraft tools at the NESC’s disposal.
Third, the NESC should lead engagement with Congress on a targeted trade promotion authority that, with clearly defined value and sectoral parameters, would fast track trade agreements that advance supply chain resilience or other strategic objectives, such as long-term military cooperation.
Fourth, the NESC should inventory the existing pools of funds dispersed across agencies – all well-intentioned, but often overlapping; individually subscale, but with enormous collective potential; and wildly divergent in their design and flexibility – and identify a strategy to promote their coordination and, with support from Congress, consolidation. Beyond these funds, it should play an ongoing role in identifying opportunities throughout the federal budget to direct funds in ways that advance economic security objectives.
Fifth, the NESC should drive reforms to authorities and their supporting agencies – alongside supplemental resourcing, where warranted – to make them fit for modern purpose. The Commerce Department’s Bureau of Industry and Security, which administers export controls, for example, has operated on the same inflation-adjusted budget for more than a decade despite a doubling in its licensing workload.
Finally, the NESC should coordinate with likeminded countries to promote common assessments of risks and responses to them. Among its first priorities should be: deepening collaboration in defense procurement, achieving a joint anti-coercion mechanism, and facilitating technical assistance as partners build out their authorities.
A dedicated National Economic Security Council will strengthen the United States in its competition with China and allow the overburdened National Security Council to return to its core competencies. Resources, authorities, strategy, and organization all matter in statecraft. It’s time for America to stop improvising and start delivering.
[1] Potential participants could include: Deputy NSA; Deputy Director, NEC; Treasury, OFAC; Treasury, Investment Security; Treasury, Office of International Trade and Development; Treasury, Office of International Finance; Treasury, Economic Policy; Commerce, Bureau of Industry and Security; Commerce, International Trade Administration; State, Counter Threat Finance and Sanctions; State, International Finance and Development; State, Commercial and Business Affairs; Energy, Under Secretary for Infrastructure; Defense, Industrial Base Policy; Defense, Acquisitions and Sustainment; Defense, Office of Strategic Capital; USAID, Office of Policy; Exim, President; DFC, CEO; USTR, Trade Policy Coordination; DHS, Assistant Secretary for Trade and Economic Security; CIA, Economic Security Center; and Director, National Science Foundation.