The writer is managing partner of Flint Global and former permanent secretary at the UK Department for Business and the Foreign and Commonwealth Office
In the great power confrontation between the US and China, military tension is rising but the weapons of choice are economic. Digital technologies, trade interdependence and cyber warfare blur the boundaries of economic and security policy in ways that affect us all. The race for leadership in green technology and developing AI is also about geopolitical dominance.
Government intervention in markets is escalating through sanctions, trade protection, export controls, supply chain management and investment screening — such as the US’s Chips and Science Act, its new controls on investment into China and the EU’s draft economic security strategy. These interventions put businesses, investors and scientists on the frontline of adversarial international politics, seeking reassurance. Given the fast-moving threats, there will never be total certainty. But they can reasonably expect governments to set coherent policies that balance open economic relationships with national security constraints. And they are entitled to opportunities for consultation.
Since the G7 summit in Hiroshima in May, the idea of reducing economic dependence on high-risk countries is supplanting wilder notions of full decoupling, which would have catastrophic economic and political consequences. Continuing economic interdependence preserves prosperity and deters conflict. But businesses need to know what this approach means in practice. When US national security adviser Jake Sullivan talks of keeping sensitive technologies within a “small yard and high fence”, they ask what is to be kept in the yard, and how the fence is constructed.
The UK should focus on improving the way decisions are made and executed. For example, advice to the cross-departmental National Security Council, which brokers sensitive decisions at the heart of Whitehall, has been dominated by “securocrats,” many of whom have limited knowledge of economics and business. There should be a stronger economic counterweight. The Treasury is rightly boosting its own economic security expertise.
Transparent and effective dialogue with the private sector is vital. Occasional feel-good meetings between handpicked CEOs and top ministers are not enough. Consultation should be early, systematic and operational — it is often the nitty-gritty of implementation that matters most to business, such as the precise specification of products captured by a control list.
Whitehall’s poor record of timely decision-making in applying export controls on sensitive technologies is justly criticised. Businesses are caught between different departments with little sense of where the final decision lies or when it will emerge. Processes for constructive challenge are unclear. There is a strong case for a single “shop front” for business liaison.
Similarly, while the National Security and Investment Act sets out objective criteria relating to sensitive sectors and stake size, the recent shift of responsibility from the Department for Business and Trade to the Cabinet Office is tacit recognition that the most difficult cases are highly politically sensitive. They can end up being handled in what seems like a black box.
Sharing sensitive information is a perennial problem. Despite the welcome publication of the high-level national risk register, the government is understandably reluctant to disclose detailed threat assessments on issues like foreign intelligence activity. Constraints on sharing can also inhibit private consultation, though many people in business have government security clearances. Despite the challenges, better access to information should be a goal.
The UK National Cyber Security Centre, the public arm of GCHQ, has pioneered proactive engagement with business to explain and avert digital threats. Expanding such an approach to wider issues concerning critical national infrastructure and newly emerging technologies like AI would be welcome.
International co-operation is also vital. When the EU, US or Japan introduce rules that are not aligned they create competing and sometimes contradictory obligations for business. The US is pursuing overtly “America First” policies and will penalise countries and companies that do not comply. Promoting co-operation with the US, the EU and others in the G7, OECD, World Trade Organization and international standard-setting bodies is a priority.
Geopolitical confrontation and government intervention are here to stay. Both will hamper economic efficiency and growth. The greater the economic damage, the more difficult the political choices. The government has a strong interest in bringing businesses deeper inside the tent.
Source: Economy - ft.com
