The Japanese Economic Security Promotion Act: A Solution to National Security Threats Resulting from Economic Globalization
Posted on Mar 1, 2023Avery Bashe
Over the last few decades, the world economy has become increasingly more interconnected as international trade barriers have been removed and new technologies have made it easier to interact and communicate with other individuals despite vast geographic separation. While the increase in economic globalization has been a boon to the world economy, it has also resulted in many nations facing new vulnerabilities in the realm of economic security. Economic security refers to the way in which a nation is able to orient its economy in a way that maximizes its national security needs.[1] A nation with poor economic security, therefore, may be limited in how it can respond in war or other national crises. While economic security has always been a concern of nations, it has come into increasing focus over the last few years, with many nations making new efforts to combat modern economic security concerns.[2] On May 11, 2022, the Japanese Diet passed the Act on Promotion of Ensuring Security by Taking Economic Measures in an Integrated Manner ( “Economic Security Promotion Act” or “Act”), the nation’s own attempt to protect its economic security.[3] The Economic Security Promotion Act is an important step in solving these modern concerns, and thus may influence the way in which other nations approach these issues in the future.
Before discussing what makes the Economic Security Promotion Act important, it is necessary to first investigate the cause of the current focus on economic security. Largely, this increased concern is borne from a fear that China may be using its economic strength to take advantage of the current liberalized state of the world economy.[4] These attempts have taken various forms. First, China has consistently been accused of intellectual property theft by both the United States and the European Union.[5] Critics have accused the nation of sponsoring cyber espionage with the goal of stealing information from companies across the world to allow its companies to replicate technology to better compete on the international market.[6] Meanwhile, Chinese requirements that foreign countries partner with domestic ones when doing business in the nation has led to criticism by these companies, claiming they are effectively being forced to train a future competitor.[7] Second, nations have become increasingly wary of Chinese tech companies becoming intertwined with their domestic infrastructure.[8] One of the most public of these criticisms was leveled at the Chinese telecommunication company Hauwei, which became one of the largest providers of 5G networks in the world in 2020.[9] However, many nations soon after voiced concerns that the use of Hauwei products in their domestic 5G networks could possibly give the Chinese government access to critical data, creating a severe national security risk.[10] These concerns led many countries to outright ban the use of Hauwei products in their domestic 5G networks.[11] Third, and finally, were concerns over centralization and reliance on supply chains in China. In the last few decades, China has become a dominant exporter in a variety of goods that are central to the world economy.[12] This dominance has resulted in a “bottleneck” effect in which a failure in China’s production could have massive effects on the global economy.[13] During the Covid-19 pandemic, Chinese production crashed as factories were forced to close, leaving many nations without key components which were necessary for their national defense and economic wellbeing.[14] As a result, nations have become increasingly aware of the negative effects of supply chain centralization on their nation’s economic security.
The Japanese Economic Security Promotion Act effectively addresses the current issues presented by China in four main areas: supply chain diversification, infrastructure, technological development, and critical intellectual property.[15] The first section, focusing on supply chain diversification, authorizes the government to designate certain goods as “critical materials,” meaning that they are necessary for the nation’s national security, but supplies of which are dependent upon foreign sources.[16] The government is then authorized to create and carry out a plan to ensure a stable supply for each of these materials.[17] Additionally, the Act allows companies that wish to diversify their supply chains to certify with the government, which then authorizes them to receive subsidies and low-interest loans to reorganize their supply chains.[18] The second section, related to infrastructure, allows the government to screen the equipment used by companies operating critical infrastructure to ensure a resilience to cyber-attacks.[19] This policy is largely in response to the concern that the use of equipment from hostile nations, such as China, will harm national security.[20] The third section, focusing on technological development, authorizes the government to establish partnerships with private companies to help fund and oversee critical research and development in areas with key national security components.[21] This policy helps ensure that Japan remains technologically competitive in areas such as aerospace, quantum mechanics, and artificial intelligence, which are industries closely related to national security.[22] Finally, the fourth section establishes a secret patent system which allows certain patents to be registered in Japan without being made public.[23] This policy helps prevent theft of intellectual property in areas where such theft would be particularly harmful. Thus, it helps address the recent concerns surrounding intellectual property theft by the Chinese government.
Ultimately, while Japan is not the only nation which has addressed concerns about economic security, its solution likely remains the most comprehensive. The Act creates an underlying economic security framework which competently addresses recent threats which have resulted from China’s increasingly dominant economy. As such, it serves as a model for other nations wishing to improve their own economic security policy. Thus, if other nations follow similar paths towards strengthening their economic security, the Economic Security Promotion Act may end up having a strong effect on the future world economy.
[1] See Vincent Cable, What is International Economic Security? 71 Int’l Aff. 305 (1995).
[2] Bethany Allen-Ebrahimian, Democracies Embrace Economic Security to Counter China and Russia, Axios, (Jan. 31, 2023), https://www.axios.com/2023/01/31/democracies-embrace-economic-security-to-counter-china-and-russia.
[3] Keizai taisaku no ittai-teki jisshi ni yoru anzen kakuho no suishin ni kansuru hōritsu [Keizai sonomono suishin-hō] [Economic Security Promotion Act], Law no. 43 of 2022 (Japan).
[4] David E. Adler, Why ‘Economic Security’ Became Magic Words in Japan, Foreign Policy (Jan. 20, 2023), https://foreignpolicy.com/2023/01/20/japan-china-economic-security-strategic-threat/.
[5] Miriam Rosen, EU chides China and Others for IP Breaches — Again, Financial Times (June 18, 2020), https://www.ft.com/content/0d48a5dc-9362-11ea-899a-f62a20d54625; Johnathan Weisman, U.S. to Share Cautionary Tale of Trade Secret Theft With Chinese Official, New York Times (Feb. 14, 2012),
https://www.nytimes.com/2012/02/15/world/asia/chinese-official-to-hear-trade-theft-tale.html.
[6] Weisman, supra note 5.
[7] Carlos Tejada, Beg, Borrow or Steal: How Trump Says China Takes Technology, New York Times (March 22, 2018), https://www.nytimes.com/2018/03/22/business/china-trump-trade-intellectual-property.html.
[8] Adam Segal et al., Is an Iron Curtain Falling Across Tech?, Foreign Policy (Feb. 4, 2019), https://foreignpolicy.com/2019/02/04/is-an-iron-curtain-falling-across-tech/.
[9] Sefan Pongratz, Key Takeaways—Telecommunication Equipment Market 1Q20 to 3Q20, Del’Oro Group (Dec. 2, 2020), https://www.delloro.com/key-takeaways-telecommunication-equipment-market-1q20-to-3q20/.
[10] Noah Berman et al., Is China’s Huawei a Threat to U.S. National Security?, Council on International Relations (Feb. 8, 2023), https://www.cfr.org/backgrounder/chinas-huawei-threat-us-national-security.
[11] Id.
[12] U.S. Dep’t. of Com. and U.S. Dep’t. of Homeland Sec., Assessment of the Critical Supply Chains Supporting the U.S. Information and Communications Technology Industry (Feb. 24, 2022). chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.dhs.gov/sites/default/files/2022-02/ICT%20Supply%20Chain%20Report_2.pdf.
[13]Noah Higgins-Dunn, How China’s strict Covid policies led to supply chain bottlenecks, Supply Chain Mgmt. (Aug. 19, 2022), https://www.cnbc.com/2022/08/19/how-chinas-covid-policies-lead-to-hampered-supply-chains-higher-inflation.html.
[14] Noah Higgens-Dunn, How China’s Strict Covid Policies Led to Supply Chain Bottlenecks, CNBC (Aug. 19, 2022), https://www.nbcnews.com/politics/politics-news/chinas-covid-wave-threatens-another-snarl-us-medical-supply-chain-rcna64692.
[15] Act on Promotion of Ensuring Security, supra note 3.
[16] Id. at art. 7.
[17] Id. at art. 8.
[18] Id. at art. 9.
[19] Id. at art. 49.
[20] Summary of Economic Security Promotion Act, Council on Foreign Relations (2022), chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.cfr.org/sites/default/files/pdf/economic%20security%20promotion%20act%20%28summary%29%28English%29.pdf?utm_source=sendupdatelogo.
[21] Act on Promotion of Ensuring Security, supra note 3, at art. 60.
[22] Summary of Economic Security Promotion Act, supra, note 20.
[23] Id. at art. 65.