Emerging technologies are the Achilles heel of the geo-economy and NATO needs to be addressed to deter aggressors, wrote General John Allen, Heiko Bolchert and Marcin Zaborowski.
General John Allen is the chairman of the Brookings Institution and the former commander of NATO’s International Security Assistance Force in Afghanistan. Dr. Heiko Borchert leads Borchert Consulting & Research AG, a strategic consulting boutique, and Marcin Zaborowski is the policy director of the future security program of the GLOBSEC think tank based in Bratislava.
NATO Secretary-General Jens Stoltenberg stated at the Riga summit on November 30, 2021 that in order to ensure NATO’s relevance and ensure “the safety of our people”, the alliance “must continue to strengthen our deterrence and defense And modernize it”. Innovation plays a key role in this. Realize the modernization of the armed forces in a complex strategic environment.
To this end, Stoltenberg launched the North Atlantic Defense Innovation Accelerator (DIANA) on October 22, 2021. DIANA will unite defense and commercial companies with military users to develop new solutions that meet the needs of future battlefields. He also launched the NATO Innovation Fund, investing up to 1 billion euros to support innovators in developing emerging technologies.
The announcement comes as the alliance is formulating a new strategic concept. As the Secretary-General pointed out in his 2030 Food of Mind document, innovation will be the key to maintaining NATO’s superiority. Although NATO is a powerful defense organization, its focus on emerging technologies has exposed its Achilles’ heel.
Artificial intelligence, autonomy, biotechnology, quantum technology and other technologies are at the core of geo-economic competition. Geo-economic competition revolves around the projection of economic power within and across fields of land, air, ocean, space, and cyberspace to achieve political goals.
In the context of increasing divergence between market-driven and state-driven countries, today’s geo-economic dynamics define successful business models. It aims to formulate rules, principles and standards that guide economic activity and the acquisition and ownership of emerging technologies.
NATO’s current emphasis on emerging technologies with defense and commercial applications may expose the alliance to this new geo-economic dynamic. This dynamic would undermine NATO’s innovation agenda and endanger its strategic advantages. Therefore, NATO needs to respond.
First, NATO needs to take the reality of economic security seriously. This call conforms to the logic of Article 2 of the North Atlantic Treaty and encourages economic cooperation among allies.
We believe that economic security combines national security and economic policies with technology and innovation policies to determine economic disruption. It can also prevent these disruptions and strengthen the ability to respond to economic emergencies.
For example, economic security requires allies to set key defense standards, increase transparency in the defense supply chain, and consider the interaction between technology development, foreign direct investment, and export controls. Therefore, the new strategic concept should take economic security as a basic element.
Second, economic security requires NATO to shape a mentality about defense investment and sustainability. Today, with banks canceling bank accounts or not taking export risks, defense companies are already facing financial challenges.
The emphasis on environmental, social, and governance standards (ESG) that increasingly influence and determine financial investments will exacerbate these problems because national defense is considered toxic. However, the narrow interpretation of ESG believes that national defense is incompatible with the world view that underpins ESG, which is not conducive to the ambitions of NATO Investment Corporation. This also means that other investors may avoid investing in the same company.
Therefore, the Union needs to strengthen its activities with the European Commission. The European Commission is committed to establishing a classification system to identify ESG-compliant activities in order to make defense investments compatible.
Third, business is the first line of defense in the geoeconomic world. NATO needs a platform for discussing geoeconomics with business.
Today, the NATO Industrial Forum is the main gathering for defense companies to solve defense industry issues. However, the emphasis on emerging technologies emphasizes the importance of non-defense companies.
Therefore, the North Atlantic Treaty Organization should envision a new special form of the North Atlantic Council, meeting with NATO Industrial Forum members (and possibly the European Commission) to allow national and business leaders to participate in the proposed economic security agenda.
Fourth, the strategic public-private dialogue has also injected new vitality into deepening cooperation with the private sector. NATO should be an early adopter of alliance funding development solutions.
Making NATO a launch customer will send an important market signal and provide the company with a preliminary track record to confirm the relevance of its solutions. In addition, the alliance should increase its efforts to integrate commerce into military operations. Logistics companies have played a vital role, while traditional defense companies provide frontline support.
The next stage is to tightly integrate digital companies to take advantage of their contributions. But for non-defense companies to provide front-line support, NATO not only needs the right attitude, the alliance also needs to consider incentives such as covering the risks of overseas deployments.
Finally, NATO’s ability to stimulate innovation and ensure economic security also depends on how it conducts business.
Crucially, NATO needs to work hard to achieve an innovative combination based on mission and capabilities to maximize the value of allied funds. NATO may learn from the financial services industry and use real options methods to manage technological risks and promote technological development. This approach sets prices for technical building blocks such as financial options, promotes risk mitigation, accelerates technology adoption, and provides military planners and developers with greater leeway to maximize input and output.
In addition, NATO should provide strategic hedging solutions for key defense raw materials by combining enterprise demand estimates with artificial intelligence-based financial and raw material market insights. This will promote the best, company-specific hedging strategies to mitigate the company’s supply security and price risks.
Overall, NATO’s 21stYingshi Century is still responding to defense challenges in a new strategic environment, more and more emerging and rapidly changing technologies, and the extremely important role of the private sector. To this end, NATO has adopted innovative and emerging technologies.
However, this step makes NATO subject to new geo-economic dynamics surrounding competition in standards, business models, technology, and supply chains.
This requires NATO to make economic security a core element of its new strategic concept to ensure NATO’s advantages. In turn, this will lay a good foundation for expanding cooperation with the EU and make NATO a respected partner of the new Transatlantic Trade and Technology Committee, which is designed to strengthen EU-U.S. technology, economy, and trade. A new institution established by the partnership.
