Developing an Economic Security Agenda for NATO

In explaining NATO to the American people in a March 1949 radio address, Secretary of State Dean Acheson asked “will the treaty accomplish its purpose?” “No one can say with certainty,” he answered, “We can only act on our convictions.” And Acheson was convinced that NATO was essential for the “restoration of the economic and political health of the world.”

From the outset of the Cold War, this link between economic stability and security was not only pivotal in the formation of NATO but also in Washington’s broader strategy for deterring the Soviet Union. Acheson and his colleagues believed that true international peace and security require not only the absence of military threats but also freedom from economic coercion, political intimidation, and interference in domestic affairs.

In July 2024, 32 NATO heads of state and government will convene in Washington to commemorate the 75-year mark of the signing of the North Atlantic Treaty. To effectively prepare for the new threats posed by Russia and China, NATO leaders should work to build a new sense of political cohesion, recognizing that economic issues have important bearing on allied security.

At the Washington Summit, the assembled leaders should therefore initiate a NATO Economic Deterrence Initiative aimed at fortifying economic resilience and deterrence capabilities across the alliance. This initiative should include proposals to revitalize consultations, intelligence sharing, and policy coordination on economic security, adapting the alliance to a changing global landscape and sustaining the cohesion and unity that underpin collective defense. By reintegrating economic security into its strategic considerations, NATO can ensure a more comprehensive and resilient deterrent posture for the future.

The History of Economic and Security Integration

While Article 5 of the North Atlantic Treaty often captures the spotlight, Article 2 is equally significant. It underscores the importance of economic collaboration among NATO members, advocating for the elimination of economic conflicts and the promotion of economic stability. In November 1949, shortly after its formation, NATO adopted the inaugural Strategic Concept for the Defense of the North Atlantic Area. This foundational document highlighted the necessity of coordinating military and economic strength to create a powerful deterrent against any threats to the peace, independence, and stability of the North Atlantic nations.

The subsequent amendment to decision M.C. 14/1 by the North Atlantic Military Committee further underscored that effective deterrence required not just military strength but also the close coordination of political, economic, and psychological efforts among allies. The economic struggles of Western European allies post-World War II significantly influenced these policies, as economic recovery was deemed essential for maintaining and distributing the burden of defense across the alliance.

But it was not until the May 1956 meeting of the North Atlantic Council, which convened the Committee of Three, that the importance of reinforcing the economic dimension of allied security was fully acknowledged. The council tasked Lester B. Pearson of Canada, Gaetano Martino of Italy, and Halvard Lange of Norway to advise on ways to improve and extend cooperation beyond military fields and to develop greater unity within the Atlantic community.

Their report was transformative, defining security as encompassing much more than military matters. It advocated for strengthening political consultations, economic cooperation, and resource development while advancing public understanding of the alliance. The report emphasized that these elements could be as crucial for national and alliance security as traditional military assets. This broader view of security led to the establishment of the NATO Economic Committee in 1957, which became a vital forum for trans-Atlantic consultations and played a significant role in aligning views among allies on economic issues with direct implications for defense and security policies.

Following the dissolution of the Soviet Union, the NATO Economic Committee continued to function, analyzing the economic and defense capabilities of Russia, assessing regional instabilities, and monitoring energy security and economic stability in various regions, including Afghanistan. However, the absence of a defined great-power competition led to a decreased emphasis on economic matters within NATO. This culminated in the dissolution of the Economic Committee in 2010 amid broader organizational reforms, at a time when the global economic crisis was unfolding — a decision that some critics argued led to a failure in NATO’s economic intelligence and analysis capabilities.

The Re-emergence of Economic Security as Strategic Priority

Today, the weaponization of energy by Russia and the assertive use of Chinese economic power have belatedly highlighted the renewed importance of economic security. These developments underscore the need for a robust trans-Atlantic economic security strategy to address the challenges posed by strategic competitors who use economic leverage as a tool of national power. NATO allies are increasingly acknowledging shared economic security challenges, often within efforts to bolster resilience.

The U.K. Integrated Review Refresh 2023 emphasizes the intensification of systemic competition, identifying it as the primary driver behind the deteriorating security environment globally. The review highlights economic security as a critical area of strategic vulnerability, necessitating a robust response to ensure national resilience. Economic security is underscored as a second priority area, following the direct defense of the realm. The review outlines a comprehensive approach to bolster economic resilience, focusing on the protection of critical capabilities, supply chains, and technologies that are vital not only to the United Kingdom but also to its allies and partners. A significant aspect of the review is the reclassification of China from a “systemic competitor” to an “epoch-defining challenge” to the international order. The review signals a greater scope for trans-Atlantic coordination and an increasing alignment with core allies and partners. In response to the identified challenges, the U.K. government has launched an Economic Deterrence Initiative to “reinforce diplomatic and economic tools to respond to and deter hostile acts by current and future aggressors.”

In June 2023, Germany unveiled its first-ever National Security Strategy. Built around three foundational pillars — robust defense, resilience, and sustainability — it incorporates an integrated security approach to tackle multifaceted threats. A significant aspect of the strategy is its focus on the risks associated with economic dependencies. The strategy explicitly acknowledges that Germany’s reliance on foreign energy, particularly Russian gas, has posed substantial security risks. To mitigate these risks, one of the strategy’s key priorities is the reduction of economic dependencies on rivals. This involves diversifying energy sources, securing supply chains for critical materials and technologies, and enhancing domestic production capabilities to create a more resilient economic framework that can withstand geopolitical pressures and reduce leverage that adversaries might seek to exploit.

While the United States has not formalized a comprehensive economic security strategy, it actively implements a wide array of policies that collectively serve to enhance its economic security. The Biden administration has placed significant emphasis on enhancing economic security as a fundamental component of national defense. Key areas of focus include ensuring resilient supply chains for critical technologies and minerals, an “invest, align, compete” approach to China, and strengthening partnerships with key allies. In April 2023, National Security Adviser Jake Sullivan highlighted the dangers of ignoring economic dependencies that have developed over decades of globalization. The release of the National Defense Industrial Strategy marks a significant development, as it explicitly acknowledges the interdependence of economic and national security.

The need for enhanced cooperation in addressing economic security has also gained recognition among international organizations. In May 2023, economic security became a key agenda item at the G7 Summit for the first time. G7 leaders emphasized the importance of improving strategic coordination to bolster economic resilience and security by reducing vulnerabilities and countering exploitative practices. The summit highlighted several critical areas for collective action, including enhancing the resilience of supply chains and critical infrastructure, countering digital threats, cooperating on international standards, and preventing the leakage of critical and emerging technologies.

In parallel, the European Union has actively addressed economic security challenges. In June 2023, it unveiled its first Economic Security Strategy, which aims to promote E.U. competitiveness, protect against risks, and foster partnerships to advance shared economic security interests. Additionally, the European Parliament and the Council agreed on the Anti-Coercion Instrument, designed to empower the European Union to counter economic coercion more effectively. Building on this foundation, in January 2024, the European Union announced additional initiatives aimed at enhancing economic security. These initiatives focus on improving the screening of foreign investments, coordinating export controls, identifying risks from outbound investments, supporting research and development in dual-use technologies, and bolstering research security at national and sector levels.

Fortifying Economic Deterrence through NATO

So far, this shared recognition has not led to a shared strategy. To gain a strategic advantage over competitors and adversaries, there is a critical need for a more coordinated trans-Atlantic approach. Robust economic security instruments can play a key role in complementing military and political means of achieving traditional trans-Atlantic security objectives, including through deterring coercive activities. Acting collectively — and decisively — would give NATO allies and partners the ability to significantly leverage their full economic power that accounts for 67 percent of global GDP, compared to the 27 percent of China and its allies in 2023.

Fortifying economic deterrence should be a central pillar of NATO’s strategy to enhance trans-Atlantic security more effectively. As the sole platform that unites Europe and North America daily, NATO is ideally positioned to address economic security issues, supporting the development of credible deterrence while complementing, rather than duplicating, the efforts of the European Union.

First, NATO should revitalize its approach to economic security by reintroducing regular high-level meetings and consultations focused on economic matters. Despite the 2021 agreement under the NATO 2030 agenda to re-establish these consultations, there has been a lack of comprehensive discussion at high levels since then. Regular engagements would ensure that economic security remains a priority and is integrated into the broader strategic objectives of the alliance.

Second, NATO should rebuild economic security capabilities at NATO Headquarters. The dissolution of the Economic Committee has left a significant gap in NATO’s capability to conduct thorough economic analysis. This gap can be addressed by establishing a new internal mechanism and a structure dedicated to the coordination of economic topics. This would prevent the duplication of efforts and ensure a unified approach to economic policy, which is essential for managing long-term strategic competition.

Third, NATO should strengthen global partnerships. In particular, NATO should enhance its existing strategic partnerships with the European Union and Indo-Pacific countries (IP-4) and form new ones, particularly focusing on economic security. Establishing a dedicated task force between these three existing groupings could address shared challenges more effectively. Additionally, fostering relationships with organizations like the OECD, the World Bank, and the European Investment Bank would bring additional value.

Fourth, NATO should leverage the economic security agenda to synchronize military and non-military instruments of power. In the coming years, NATO will need to better integrate private-sector capabilities across domains, expand industrial base capacity, and protect critical infrastructure from kinetic and non-kinetic attacks.

NATO’s most significant contribution to economic security lies in its focus on collective defense and strengthening the military-civil nexus, which is crucial for achieving the alliance’s objectives. This strategy, vital during the Cold War for deterring Soviet influence and aggression, gains renewed importance today. Enhancing resilience now demands a high degree of coordination between civilian and military sectors, including the efficient integration of civilian resources into military plans.

Conducting enhanced economic security analysis to identify vulnerabilities is essential for gaining a comprehensive understanding of potential risks. For example, adversarial control over critical infrastructure and transportation assets presents a significant threat. These activities could impede the deployment and reinforcement of allied forces during conflicts or emergencies, negatively impacting response speeds. Therefore, it necessitates a collective effort that can help mitigate these risks.

The Balancing Act of Trans-Atlantic Alignment

As NATO endeavors to revamp its economic security agenda, it navigates a complex terrain of political dynamics and internal discords. The divergence in perspectives among European allies, notably France and Germany, poses a significant challenge. These nations often perceive economic security as a domain primarily under E.U. jurisdiction, relying on platforms like the E.U.-U.S. Trade and Technology Council and the G7 to sustain the trans-Atlantic connection. This viewpoint is partly fueled by differing policy approaches towards China among the allies, which complicates the prospect of a unified NATO stance on economic security. It is further amplified by concerns that intensifying NATO’s focus on economic security could elevate contentious issues within the alliance, such as export control policies, resilience of critical infrastructure, and a more rigorous approach to defense spending.

However, recent geopolitical developments have led to greater convergence. Russia’s invasion of Ukraine and China’s support for Moscow have prompted a significant shift in the way the United States and Europe approach China, fostering a closer alignment in their strategic outlooks. The United States has been proactive in recalibrating its policies to address the challenges posed by China, adopting measures that range from trade tariffs to sanctions and bolstering military alliances in the Asia-Pacific. This shift reflects America’s broader global strategic imperatives and the immediate recognition of China as a formidable competitor. For European leaders, the invasion of Ukraine shown the dangers of relying on authoritarian regimes. This has led to a reevaluation of strategic postures within Europe, stressing the need for a balanced strategy that navigates between cooperation, competition, and rivalry with these major powers.

Given NATO’s historical efficacy in orchestrating collective defense and security strategies, there is a strong case for leveraging the alliance to synchronize approaches among that are essential for maximizing collective strength and effectively tackling global challenges. However, achieving this alignment necessitates overcoming the political and internal hurdles. This balancing act will require diplomatic finesse and strategic vision to ensure that NATO remains a relevant and unified force. 

Making the Most of the Washington Summit

The upcoming Washington Summit represents a pivotal opportunity for NATO to strengthen its economic security posture. The strategic objectives for the summit should include launching the NATO Economic Deterrence Initiative to enhance the economic resilience and deterrence capabilities of the alliance. This initiative should implement specific proposals to establish a centralized mechanism for sharing economic intelligence and information on threats, vulnerabilities, and adversarial strategies. Morover, it should seek to bolster collective resilience through policies to reduce dependencies on adversarial nations and secure critical supply chains. The initiative should also initiate programs to enhance the security of critical economic infrastructure, particularly in high-tech industries, energy, and telecommunications. Additionally, it should promote joint research initiatives focusing on crucial technologies andprioritize efforts to enhance the trans-Atlantic defense industrial base. These efforts will help boost defense production, strengthen supply chains, increase stockpiles of strategic systems, and improve the quality and quantity of the allied military workforce.

Furtheremore, NATO should reestablish the NATO Economic Security Committee. Recreating this dedicated body within NATO will be crucial to handling economic security issues through monitoring global economic trends, assessing potential threats, and coordinating economic security strategies among member states. In addition, establishing the Secretary General’s Economic Security Advisory Group can together the European Union and other international organizations, partner nations, industry, and academia to enhance cooperation on economic security among key stakeholders.

In recognizing that economic strength and security are fundamentally intertwined, NATO founders like Acheson helped lay the groundwork for Cold War victory. Today, as NATO faces complex global challenges that span the military and economic domains, revisiting and revitalizing this integrated approach is more relevant than ever.

 Anna M. Dowd is a senior international/defense researcher at RAND, a nonprofit, nonopartisan research institution, and an adjunct fellow at the Center for Strategic and International Studies.

Dominik P. Jankowski is the deputy permanent representative of Poland to NATO.

The views expressed in this article are those of the authors and do not represent the position or views of their respective organizations/institutions.

Image: Yoichi Okamoto, Wikimedia