International competition is changing. The destructive effect of military conflict, in combination with an international order that offers alternative peaceful means of dispute resolution, has largely delegitimatized force as an arbiter of conflict between nations. Hard power can be dispositive in certain circumstances, but the number of such cases is dwindling. Today, economic success is the foundation of global success, and prevailing in that competition is a vital national objective. Governments must protect their firms’ access to markets and ensure that the global playing field is level.
That logic animates the recent decision of the government to expand the National Security Council to include economic experts and advisers to ensure that this country has the right perspective, insights and tools to compete in this new era. It is the right move, although the practice of national economic statecraft requires a deft touch. Japan has long employed industrial policy to advance its national interests, but it must sharpen its tools and prepare for a different competition in the postindustrial economy of the 21st century.
Prime Minister Shinzo Abe had hoped to establish the NSC during his first term, but his early departure from office thwarted that ambition. He succeeded after he returned to power in 2012. The NSC includes four officials — the prime minister, the chief Cabinet secretary and the foreign and defense ministers — and is supported by the National Security Secretariat.
The NSS has been staffed primarily by personnel from the Foreign Ministry and Defense Ministry, reflecting a focus on “hard security” concerns. The reorganization will add a fourth senior official to the NSS and a clutch of lower-level experts in economic-oriented fields, such as cybersecurity, energy and high-technologies.
The range of economic challenges is wide and expanding. There are traditional concerns: having an accurate assessment of economic conditions to protect Japanese businesses when they venture overseas; ensuring raw material and resource supplies; integrating negotiating strategies across the spectrum of economic diplomacy initiatives to ensure consistency; and the protection of Japanese national interests, to name but three.
There are new focus areas too. One of the most pressing is protection of intellectual property rights and technologies. The potential application of new technologies to military uses demands new safeguards to ensure that they do not leak to countries that might use them against Japan or its partners. This requires scrutiny of investments, access to laboratories in the public and private sectors, including universities, and even real estate deals.
The government must work closely with private sector entities to make sure that they are alert to risks, to set standards and to acquire information needed for situational awareness. This is ever more critical as access to cutting-edge technologies may well determine the success of firms and countries. Firms that don’t protect information they have, and are not worried about theft or leaks, will not be able to join these frontier efforts.
At the strategic level, officials at the NSS must be alert to the weaponization of economic interdependence. Governments are increasingly inclined to use their size, possession of key resources or place in the supply chain to coerce trading partners. This is not new. In the 1970s, OPEC used its control of oil supplies to force oil-importing governments to follow its position on issues concerning Israel. Today, more countries have leverage and are ready to use it. Japan must be prepared for such actions and have a strategy and countermeasures in hand.
Equally important is an accurate assessment of ways in which governments use capital flows, public and private, to increase influence beyond their borders. A chief concern is China’s use of its Belt and Road initiative to advance its national interests. Japan can’t compete with the BRI alone, but it can cooperate with other donor governments to maximize resources. It can also work with recipient countries to ensure that they get the best deal possible and do not make unsustainable agreements.
A key purpose behind the reorganization is to centralize information and decision-making to ensure whole-of-government coordination and an enhanced ability to work with allies, particularly the United States, to achieve agreed outcomes. The scale of the challenge demands a united front among like-minded nations.
Japan must be careful that efforts to protect its economy do not undermine its firms or its long-term prospects. For example, recent attempts to heighten scrutiny of foreign investment are to be applauded but the proposed measure goes too far, threatening to deter needed foreign investment. A centralized authority that looks at the strategic picture should be able to avoid such mistakes. The new NSC better positions Japan to take on and respond to new challenges.