On Economic Security

Matake Kamiya


Lately, in Japan, there has been increasing interest in economic security. In April 2020, an "economic division" was established in the National Security Secretariat, and in December of the same year, the Strategic Headquarters on the Creation of a New International Order, the Policy Research Council of the Liberal Democratic Party (LDP), released "Recommendations Toward Developing Japan's ‘Economic Security Strategy'" (from here cited as the "LDP proposal"). 1 Prime Minister Fumio Kishida, who assumed the premiership in October 2021, created the new post of Minister in charge of Economic Security in his cabinet and started preparations for submitting to the Diet an economic security promotion bill, which was approved by the Cabinet on February 25, 2022. The Prime Minister has also expressed his intention to "firmly embed the concept of economic security" in the new versions of the National Security Strategy, the National Defense Program Guidelines, the Midterm Defense Buildup Program, and other documents, all of which are scheduled to be formulated by the end of 2022. 2

Before proceeding further, we must pause briefly to ask what economic security signifies. It is indisputable that economic security is a concept related to the "area" where security and the economy overlap. 3 Yet, agreement has not been reached to date on the most fundamental question: What is economic security? To implement economic security, who does what against what for what purpose? We must frankly admit that various related literature has "defined the meaning and image of economic security [respectively], but there is no identical image to share." 4

If this situation is left as it is, it will not only be problematic from an academic perspective but will also cause confusion in the formulation of Japan's economic security policy that will gain rapid momentum. This paper aims to mark a first step toward improving the current situation.

1. Definition of Economic Security

First, let us start considering what economic security is by reexamining the definition of security. In a very abstract sense, security can be defined as "an actor's efforts to protect some values irreplaceable to it from some threat by using some means." The specifics of the efforts --- "an actor" (Who protects?), "some irreplaceable values" (Protect what?), "some threat" (Protect from what?), and "some means" (Protect by what?) --- may vary depending on how one perceives each of these elements. Traditionally, security has in many cases been thought of as being centered on "a state's efforts to protect its territory, independence, and the lives and property of its citizens from military aggression by a foreign enemy through the exertion of military force." 5

What kind of security is economic security then? It stands to reason to think of it as a particular security case where economic factors get associated with any of the elements of the concept of security: "Who protects?" "Protect what?" "Protect from what?" "Protect by what?"

Recent arguments in Japan on "Who protects?" broadly agree that economic security is state efforts. Also, there is nearly unanimous recognition on what to protect by economic security --- "the territory and independence of a country and the lives and property of its citizens." For example, the LDP proposal states that economic security means "ensuring the … national interests from an economic perspective" and defines it as "ensuring Japan's independence, survival, and prosperity from an economic perspective." 6 "National independence, survival, and prosperity" can be construed to be the same as "the territory and independence of a country and the lives and property of its citizens." Kazuto Suzuki, one of Japan's eminent experts on economic security, defines economic security as "guaranteeing, through economic means, the security of life and property of the people and the preservation of national values." 7 Here, the "preservation of national values" can be understood to be synonymous with protecting national independence and survival because the independence of a nation sought by security efforts is not merely a formal one but unquestionably includes maintaining the core values and institutions of the nation, while dismissing interference from other countries. This is exactly what Masataka Kosaka meant when he once stated that the "goal of security" is to protect "the institutes, customs, and the system of common sense that make the Japanese people Japanese and Japan as it is." 8 It is apparent from the above what economic security protects, Suzuki and the LDP proposal alike envisage the independence, survival, and prosperity of the nation.

Thus, in the recent arguments on economic security, there is a unanimity of views on the two elements of "Who protects?" and "Protect What?" --- "a state protects its territory, independence, and the lives and property of its citizens." This perception is similar to the traditional concept of security described above. There is no room for economic factors to influence these two elements.

Then, if either of the other two elements of security concept --- "Protect from what?" and "Protect by what?" --- come under the influence of economic factors, does this immediately mean economic security? If so, which of the following is economic security --- "protecting a state's territory, independence, and the lives and property of its citizens from economic threats" or "protecting all of them by economic means"?

In Japan, many adopt the latter view. For example, the LDP proposal defines economic security as "ensuring Japan's independence, survival, and prosperity from an economic perspective"; Suzuki also argues that economic security is to guarantee the same "through economic means." Masanori Hasegawa also defines economic security as "economic means for achieving security." 9

However, there are two problems with this view because it seems to be too broad in scope in one sense and too narrow in another.

First, the view that economic security is an economic means for achieving security objectives is in a sense too broad in scope, if not loose, because it is hard to imagine for a state to exclude economic means in defending its independence, survival, and prosperity from some threat. Consequently, if we adopt this view, it will logically follow that every form of security includes some elements and aspects of economic security --- only to dilute the effectiveness of the concept of economic security.

Since it is questionable to regard economic security as economic means for achieving security objectives, we have no alternative but to consider it as "protecting national security from economic threats." Nonetheless, it is difficult to confine the means necessary to that end to economic means. It is apparent that to protect a country from economic threats, non-economic means are also indispensable in most cases. For example, to protect national security from economic threats, it is important to regularly build and maintain a relationship of trust with allies and partners, as will be elaborate later. This will claim diplomatic efforts that will go beyond the economic sphere. In addition, the protection of sea lanes is essential for the stable supply of energy, resources, food, etc. Undoubtedly, non-economic means are also necessary for this purpose. This is why I argue that the view of confining economic security to economic means for security's sake is unduly narrow.

In summary, economic security should be recognized as "a state's efforts to protect its territory, independence, and the lives and property of its people from economic threats by all necessary means that are predominantly but not limited to economic means." In other words, economic security is a state's effort to protect its national security from economic threats; the means required for this purpose are not economic ones alone.

2. Three Types of Economic Threats

What are economic threats against national security? First, it is imperative to note the diversity of economic threats. There are several types of economic threats and each type requires different measures to ensure security from it.

In the following, I would like to briefly discuss three major types of economic threats against national security.

The first type is the case where an accidental disturbance in the international economic system, not caused by deliberate actions of someone, has a negative impact on a national economy. From here, this will be referred to as a Type 1 economic threat. Among possible examples are: global crop failure due to extreme weather that seriously affects food supply; an economic disruption such as the Lehman Shock that negatively affects a national economy. Such incidents, not caused by a specific country, may appear as a grave threat to national security. Supply chain disruptions caused by the COVID-19 pandemic are an economic threat of this type.

The second type is the case where the benefits that a country derives from economic relations with another country have a negative impact on the latter's economy and broader security. From here, this will be referred to as a Type 2 economic threat. For example, a certain country's economic relations with another country lead to the outflow of technology from the former to the latter, which may harm the former's economic competitiveness; or technologies leaked from one country to another are converted by the latter to military use, which may as a result hurt the former's security.

The third type is the case where a country uses its economic power to fulfill its design to undermine another country's economy and broader security. Specifically, the country uses its economic power to unleash malicious economic statecraft toward the target country. 10 Such will from here on be mentioned as a Type 3 economic threat. The most important source that empowers a country to take such action is the vulnerability arising from economic interdependence between the target country and the one taking action. What is particularly problematic about Type 3 economic threat is the risk that the target country's vulnerability stemming from economic interdependence with a hostile country may be manipulated by the latter, with negative consequences for the former's economy and broader security. To cite a recent typical example, since the outbreak of the COVID-19 pandemic, there has been an increasing awareness among the Japanese people of the possibility that Japan's vulnerability due to its economic interdependence with China will be manipulated by the latter. 11

Here we must note that all state-to-state interdependence does not uniformly produce Type 3 economic threats. The vulnerability of a particular country due to interdependence with a hostile one could be manipulated by the latter as a tool of economic statecraft, while interdependence with an ally or partner country is generally less dangerous in that respect. Rather, interdependence with a credible ally or partner may mitigate that particular country's economic vulnerability and also help the latter in countering the economic statecraft of its adversary.

3. Threat Types and Response Methods

The categorization of threats is vital because different response methods are needed to deal with different types of threats. For example, even the concepts of "strategic indispensability" and "strategic autonomy," 12 which are core concepts in recent economic security debates in Japan, vary in effectiveness depending on the type of threat to address. Nevertheless, there seems to be a tendency that this point is not well acknowledged in the ongoing economic security debates.

First of all, to protect a country from Type 1 threats, it is necessary to create an economic system that is less vulnerable to any negative economic impact in the event of an accidental disruption of the global economic system. To this end, Japan must increase its "strategic autonomy" in what the LDP proposal calls "strategic core industries." Concurrently, however, it should also be kept in mind that the competitive pursuit of "strategic autonomy" by individual nations would lead to the loss of the positive aspects of interdependence that the international community has enjoyed to date, such as the increased global economic welfare beyond national borders. Curbing the excessive pursuit of "strategic autonomy," Japan must simultaneously develop and deepen interdependence with its allies and partners, especially, liberal democracies that share fundamental values and ideas. For this purpose, Japan must strengthen diplomatic relations with allies and partners from peacetime to ensure that they are mutually trustworthy and dependable countries for Japan in the event of a significant disruption of the international economic system.

Since Type 1 threats result from an accidental disruption of the global economic system, not caused by deliberate actions of someone "strategic indispensability" is not directly effective to deal with such threats. The maintenance of "strategic indispensability" is however significant in ensuring that allies and partners are credible in times of emergency. As is evidenced by the fact that in the immediate aftermath of the COVID-19 outbreak, many EU countries prioritized their national interests over the unity of the EU, in the anarchic international society that lacks a central government, there is no guarantee that a peacetime partnership will be fully functional in case of emergency. "Strategic indispensability" can help to reduce this concern. A country possessing hard-to-replace technological capabilities in a critical area is unlikely to be "betrayed" by other countries even in an emergency.

A typical Type 2 threat is an unexpected outflow of technology from a country, which may ultimately hurt that country's economy and broader security. Neither "strategic autonomy" nor "strategic indispensability" are of no use in protecting a country from this type of threat. Technology leakage could occur no matter how autonomous the country's economy is; technologies that are critical and hard to replace in the eyes of other countries are the most likely targets of technology theft. What matters in combating this type of threat are measures to make undesirable technology outflow hard to occur. Specifically, measures such as export controls, patent controls, and restrictions on the acquisition of companies by foreign capital will serve to prevent an unnoticed transfer of technology and know-how and its conversion for military use.

To address a Type 3 threat or a case where an other country unleashes malicious economic statecraft using its economic power, it is of the utmost necessity for a target country to decrease its economic and technological dependence on the adversary as much as possible, thereby reducing its vulnerability. To this end, it makes sense to enhance "strategic autonomy" and "strategic indispensability," but it should be recognized that this alone does not suffice and has limitations.

It is needless to repeat that in order for a country to reduce its dependence on a hostile one, the former must make efforts to increase "strategic autonomy," especially in the areas that the LDP proposal calls "strategic core industries." Nonetheless, it is not only almost impossible for any country to attempt to provide for its economic needs through self-help, but it is also undesirable because the country will lose benefits from economic interdependence, as mentioned earlier.

What is important here for a country is to develop and deepen interdependence with its allies and partners, especially those that share fundamental values and ideas, in order to reduce dependence on hostile countries. For this purpose, the country must strengthen diplomatic relations with those countries in peacetime.

If, in addition to reducing its dependence on hostile countries, a country can acquire technologies that are indispensable to them and thus can enhance its "strategic indispensability," the hostile countries will be dependent on that particular country for those technologies, and, as a result, it will be able to make it harder for the hostile countries to use their economic power to unleash economic statecraft against it. Even if that country cannot acquire "strategic indispensability" on its own, it may hold it collectively with trusted allies and partners. 13

Therefore, in facing Type 3 economic threats, too, it is crucial to foster trust with allies and partner countries in peacetime. Yet, as mentioned earlier, in an anarchic international society, it is uncertain whether allies and partner countries will behave as anticipated in case of emergency. Consequently, efforts to promote cooperation with allies and partner countries must be combined with the necessary amount of self-help. For example, with regard to "strategic indispensability," efforts to maintain it collectively are insufficient. Endeavors to hold on its own some technology deemed indispensable by other countries is also needed to be made.

In the formulation of Japan's economic security policies, which is expected to proceed rapidly, it should be kept in mind the need for a finely tuned response to each type of economic threat described above.

4. Necessity of Economic Security Policies Targeting Countries that Are Likely Sources of Threats

There is another thing to keep in mind when envisioning economic security policies. Apart from response to Type 1 threats, which are not intentionally brought about by particular countries, economic security policies should be formulated assuming that they are, as is the case with other security policies, directed toward countries that are likely to become the source of threats.

In the area of military security, the degree of threat posed to one country (A) by another (B) can be measured by B's "ability to attack" × B's "will to attack." Similar thinking needs to be applied to economic security when addressing Type 2 and Type 3 threats. When B emits those economic threats to A, the equivalent of the "ability to attack" is, in this case, B's ability to undermine A's economy and broader security; B's economic power chiefly constitutes that ability. On the other hand, the equivalent of the "will to attack" is B's intention or motive to use such an ability to compromise A's economy and broader security.

Any country should adopt economic security measures (policies) primarily against countries with the capability and the intent to adversely affect the former's economy and/ broader security. It is inefficient to formulate economic security policies in general terms without identifying such countries to be targeted at.

Fundamentally, any country directs its military security policy against another country that possesses both the capability and the intention to undermine the former's security. This is why Japan does not maintain military preparedness against US nuclear forces or ballistic missiles but takes measures against the nuclear weapons and missiles of China and North Korea. The same is true of economic security. It is useless for a country to direct its economic security policy toward countries unlikely to use their high economic power against it. Instead, the country should direct its economic security policy against those countries likely to use their economic power to unleash malicious economic statecraft against it.

In formulating its future economic security policies, Japan should be clearly aware of which country is a potential target of the policies, especially those designed to address Type 2 and Type 3 threats.

In Lieu of Conclusion: The Current State of Economic Security --- Japan Simultaneously Faces Two Different Waves

Japan is at present confronting two different waves of economic security threats at the same time. One of those waves is a Type 1 threat posed by the COVID-19 pandemic, which has a sweeping impact on the Japanese economy. The other wave is Type 2 and Type 3 threats emanating from China, which become increasingly alarming due to their being combined with the international economic turmoil brought about by the pandemic and with China's growing aggressive stance and behavior externally amid the pandemic.

As described earlier, when protecting national security from the three types of economic threats, responses will vary depending on the threat type. In Japan today, however, there is a tendency to discuss economic security without precisely distinguishing these three types of threats. Specifically, sufficient attention seems not to be paid to the fact that the effectiveness of "strategic indispensability" and "strategic autonomy" varies depending on the types of threats.

As mentioned above, it should be noted that Japan is currently facing a dual-impact from the two economic threats of different nature: (1) a pandemic that happens to have originated in China, not intentionally created by it, has suddenly brought about massive negative impacts on Japan's economy; and (2) amid the pandemic, the Japanese people have suddenly come to recognize the danger that China's deliberate economic activities may have significant negative consequences for Japan's economy and broader security. To be more specific --- supply chain disruptions caused by the pandemic fall into the Type 1 threat and are not caused by China. Amid such disturbances, however, Japan's overwhelming dependence on China for surgical masks, pharmaceuticals, and other products has come to light; the Japanese people have suddenly become aware that the country is in a state of "tight interdependence with a hostile country" for a wide variety of goods and technologies; the magnitude of potential risks associated with the interdependence has become apparent to the Japanese people. Presumably, this is why every type of economic threat is now discussed collectively as a China-related economic security problem.

Should the present analysis be cogent, this trend is not advantageous for Japan to formulate effective economic security policies. To "firmly embed the concept of economic security" in the new versions of the National Security Strategy, the National Defense Program Guidelines, the Midterm Defense Buildup Program, and other documents, Japan should begin with a clear recognition that as it is facing different types of economic threats to national security, it must work out a distinct set of policy measures to address each of the types.

(Professor, the National Defense Academy)

current topics