The Coronavirus Puts a Spotlight on a National Security Supply Crisis

July 26, 2020 Topic: Security Region: Americas Tags: HuaweiTechnologyEconomyChinaXi Jinping

The Coronavirus Puts a Spotlight on a National Security Supply Crisis

This study identifies seven economy-related risks that could threaten the critical infrastructures, sectors, and processes that are vital for the sustainable functioning of society.

In times of national emergency, it can be crucial that governments can maintain an uninterrupted supply of essential goods and services, be it technology, food or raw materials. As countries across the world now face an unprecedented demand on supplies and services to tackle the outbreak of the coronavirus, it may be important for governments to take stock of the potential risks to national security that could accompany their choice of vendor.

In a study for the Dutch government, RAND Europe researchers looked at the relationship between the economy and national security. The study identifies seven economy-related risks that could threaten the critical infrastructures, sectors and processes that are vital for the sustainable functioning of society.

Foremost of these is ownership, or foreign direct investment, in critical sectors. While foreign investment brings great opportunities for economic growth, jobs, information exchange and international collaboration, it may also allow access and control of critical sectors and processes by foreign actors.

Earlier in the year, the UK made the decision to give the Chinese technology giant, Huawei, access to certain sections of its 5G telecommunications network. Since then, China’s response to the coronavirus has once again brought into question whether the UK should be reliant on new technology from the country. As a result, the UK’s mobile providers are now being banned from buying new Huawei 5G equipment after December 31, 2020, and they must also remove all the Chinese firm’s 5G kit from their networks by 2027.

Leaving politics aside, the concern over Huawei highlights the close interconnection of economy-related risks. Foreign direct investment and ownership of critical infrastructure and sectors can increase the risk that foreign entities gain influence and control over their operations. It can also lead to critical infrastructure becoming vulnerable to the risk of dependence on specific suppliers further downstream in the supply chain, such as those responsible for the maintenance of critical infrastructure and processes.

The security of supply for critical products and services is particularly important in situations where an unreliability of suppliers can jeopardize the effectiveness of a country’s critical processes and thus threaten the functioning of society. Such threats are already being considered by other countries wary of the impacts of the coronavirus. The Dutch government approved a law in April 2020 to ban potentially dangerous acquisitions of telecom companies, highlighting the importance of such a decision in light of current geopolitical relations.

The dangers of supplier dependence are also becoming apparent in other areas too. As countries across Europe struggle to contain the virus, there has also been a significant demand for the import of protective equipment, with many turning to China to provide this. A number of European governments have also reportedly rejected Chinese-made equipment designed to combat the outbreak.

Inevitably, policymakers will have to make trade-offs between economic needs and measures focused on minimizing security risks. To complicate matters, any such discussions around these trade-offs are often linked with wider debates in society, such as those concerning national sovereignty, foreign policy and migration.

There is also the danger that discussions of trade-offs assume that any loss of control and independence is always negative. This neglects the fact that, even in critical sectors, different forms of fruitful collaboration can take place that could help sustain critical capabilities, while minimizing national security risks. An international alliance between the governments of Italy, Germany, France and the Netherlands, for instance, reached an agreement with pharmaceutical company AstraZeneca on supplying a coronavirus vaccine, should it be successful.

To analyze trade-offs in relation to specific economic activities—such as foreign investment, trade or skills imports—questions need to be asked to better understand the nature of the security risk presented by economic activity. This will help to identify the vulnerabilities of the relevant sector and the costs to the country if the vulnerability is exploited; the nature of the threat posed; and the likely security consequences if the threat were to materialize.

Applying these questions to a country’s critical infrastructure may allow for a more complete understanding, and the subsequent management of, the nature of the risks posed by economic activities to national security. As the world faces this ongoing challenge, the thinking about how governments approach national security is having to evolve quickly. Balancing economic needs and possible threats is an integral part of it.

Stijn Hoorens is the director of RAND Europe’s Brussels office.

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