The Weaponization of Global Value Chains
The race to achieve technological supremacy, which is at the heart of the 21st Century great power rivalry between the US and China, is affecting the world more profoundly than most realize. This phenomenon is what Alex Capri, a writer and research fellow at the Hinrich Foundation describes as “techno-nationalism.”
According to Capri: “In techno-nationalism, the world is returning to a kind of mercantilist mindset that links the technical capabilities and prowess of a nation’s institutions and entities with its national security, economic strength, and social stability.”
In an hour-long discussion with the Association of Foreign Press Correspondents’ Susan Tehrani, Capri described a framework with which to analyze the emerging 21st century geopolitical landscape.
This information is of particular use to journalists who specialize in foreign affairs and the workings of the global economy. The following is a summary of the most important takeaways from the presentation and the subsequent Q&A segment.
The elements of techno-nationalism
21st Century techno-nationalism is fundamentally changing the way that Beijing and the world interact. Here is a summary of Capri’s key analysis.
China’s state-centric model has pushed the western world into an historic paradigm shift. Lasssez-faire capitalism has given way to “managed trade.” Governments are increasingly interventionist and activist, which has created new contradictions and tensions between markets, states, and non-state actors.
Governments are in the early stages of weaponizing supply chains as they resort to more sanctions, export controls and restrictions on the transfer of technology to China.
The race to innovate and dominate in leading edge technologies such as semiconductors, 5G and 6G, rare earths, electric vehicles, quantum computing, AI and other areas has resulted in the rise of innovation-mercantilism. The G7 Governments are pouring record amounts of money into R&D, public-private partnerships, and other funding initiatives.
A new kind of techno-diplomacy has emerged which binds nations together regarding common technology standards and values. The rise of techno-authoritarianism is accelerating the emergence of techno-alliances and a new kind of “hybrid cold war”.
The fragmentation and localization of global value chains
Techno-nationalism is accelerating the fragmentation and localization of global value chains. Decoupling from China in strategic sectors has begun a reshoring and ringfencing process of “strategic” ecosystems within ‘friendly’ borders.
Data, human capital (people), and the digital platform economy (especially financial markets) are also caught up in this maelstrom of decoupling, fragmentation, and ring-fencing.
The COVID 19 pandemic and climate change are acting as accelerants to techno-nationalist localization efforts.
Key Questions
Capri explores how the world’s trading system must navigate between two parallel tracks in the global economy, after decades of investment and economic integration with China. On one extreme, trade has become restricted and off-limits in strategic tech, on the other extreme, there appear to be no issues with the continued trade of seemingly innocuous goods - for now. It is the middle ground that is constantly shifting.
Capri explores the question of how far governments will go to push techno-nationalist agendas and how non-state actors must adopt new corporate governance practices.
