The Defense Production Act has re-emerged in the public consciousness in recent weeks as President Trump moved to re-enact the Cold War-era legislation to help the US respond to COVID-19. The legislation provides a powerful example for Australia to emulate to enhance national sovereignty and security in the face of supply chain disruption.
Robust, innovative and globally competitive industry is critical to any national security equation – clearly identifying and supporting the strategic industries Australia needs for prolonged national security supports the development of a holistic national security and sovereignty strategy.
Australia has long had a tough relationship with the “tyranny of distance”. On one hand, the nation’s populace has treated it with disdain and hostility, while Australia’s political and strategic leaders have recognised the importance of geographic isolation.
The rise of Indo-Pacific Asia means the tyranny of distance has been replaced by a “predicament of proximity”: China, India, Indonesia, Thailand, Japan and several other regional nations are reshaping the economic and strategic paradigms with an unprecedented period of economic, political and arms build-up, competing interests and rising animosity towards the post-World War II order of which Australia is a pivotal part.
The rise of these economic powerhouses driven by a combination of increased resource, energy and consumer goods consumption and the development of an advanced domestic manufacturing base – places Australia in both an opportune and precarious position.
As the growing economic wealth has translated to not only increased demand for resources, energy, agricultural and consumer goods, but also increased investment in defence capability.
This rapidly evolving global and regional environment, combined with the increasing instability of the US administration and its apparent apprehension to intervene or at least maintain the global rules-based order following the radical shift in US politics, also forces Australia to reassess the strategic calculus – embracing a radically new approach to national security strategy and policy – more specifically, the role industry plays in supporting long-term national security.
Add into the mix the catastrophic wrecking ball of the COVID-19 pandemic and this perfect storm of political, economic and geostrategic factors has shattered the long-held belief that Australia’s isolation is a bulwark against external conflagration and disruption.
For Australia and comparable Western nations, like the US, UK and increasingly across the European Union, the outbreak of COVID-19 has only served to further hasten the economic decline, stagnation and political malaise experienced throughout the developed world, with many once-powerful, world-leading nations beginning to feel the pressure.
In particular, recent threats of economic coercion, made by Beijing’s ambassador in Canberra, Cheng Jingye, combined with growing domestic sentiment about breaking Australia’s economic dependence on the rising power has prompted many within Australia’s public and strategic policy communities and the Australian media to begin expanding the debate.
The US Defense Production Act
Established in the early days of the Cold War, The Defense Production Act of 1950 was established to secure the US industrial base after the production height reached during the Second World War while also supporting the broader civil defence and mobilisation programs established by respective US administrations.
Indeed, the “long title” of the act defines it thus: “An act to establish a system of priorities and allocations for materials and facilities, authorise the requisitioning thereof, provide financial assistance for expansion of productive capacity and supply, provide for price and wage stabilization, provide for the settlement of labor disputes, strengthen controls over credit, and by these measures facilitate the production of goods and services necessary for the national security, and for other purposes.”
The act is broken down into three main, individual components, each designed to support the broader national security objectives of the US in response to a range of national security and/or sovereignty challenges and provides an interesting model for future Australian consideration as the public discourse continues to trend towards enhancing Australia’s national security and sovereignty.
These individual components include:
The President is hereby authorised (1) to require that performance under contracts or orders (other than contracts of employment) which he deems necessary or appropriate to promote the national defence shall take priority over performance under any other contract or order, and, for the purpose of assuring such priority, to require acceptance and performance of such contracts or orders in preference to other contracts or orders by any person he finds to be capable of their performance, and (2) to allocate materials and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to promote the national defence.
In order to prevent hoarding, no person shall accumulate (1) in excess of the reasonable demands of business, personal or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as scarce materials or materials the supply of which would be threatened by such accumulation. The President shall order published in the Federal Register, and in such other manner as he may deem appropriate, every designation of materials the accumulation of which is unlawful and any withdrawal of such designation. This section shall not be construed to limit the authority contained in section 101 of this act.
Any person who willfully performs any act prohibited, or willfully fails to perform any act required, by the provisions of this title or any rule, regulation or order thereunder, shall, upon conviction, be fined not more than $10,000 or imprisoned for not more than one year, or both.
Nationally critical heavy industries
Australia as a nation, like many Western contemporaries, has been an economy and nation traditionally dependent on heavy industries – capitalising upon the continent’s wealth of natural resources, including coal, iron ore, copper, zinc, rare earth elements and manufacturing, particularly in the years following the end of the Second World War.
However, the post-war economic transformation of many regional nations, including Japan, Korea and China, and the cohesive, long-term, nation-building policies implemented by these nations have enabled these countries to emerge as economic powerhouses, driven by an incredibly competitive manufacturing capability – limiting the competitiveness of Australian industry, particularly manufacturing.
Recognising this incredibly competitive global industry and the drive towards free trade agreements with nations who continue to implement protectionist policies buried in legislation, Australia needs to approach the development of nationally significant heavy industries in a radically different way, recognising the failures of the past and the limitations of Australia’s past incarnations of heavy industry.
Identifying these industries is the first step in building a cohesive, long-term plan as part of a broader National Strategic Industries Act – using the legislative power of government to counterbalance industry development policies of allied yet still competitor nations like South Korea – which leverages the industrial development policies of export-oriented industrialisation (EOI) to develop its economy into a major economic and modern, advanced manufacturing powerhouse.
Water security, agriculture and strategic resource reserves
As the driest permanently inhabited continent, Australia is dependent on reliable access to water both for consumption and industry use, particularly the agricultural industry, which is responsible for feeding both Australia’s growing population and increasingly the populations of the Indo-Pacific’s rising powerhouses.
Both agriculture and water security serve as pivotal components of a truly holistic nationally strategic industries policy and the broader introduction of a National Strategic Industries Act – embracing the potential of these factors, particularly water security infrastructure and the flow-on economic impact on traditional heavy industry and manufacturing, combined with the environmental and broader national and regional economic opportunities, should necessitate the inclusion of both in the development of a national policy platform.
Furthermore, the growing importance of strategic resource reserves is another area of critical importance within the confines of a national strategic industry support and development platform.
Until recently, contemporary Australia has been far removed from the harsh realities of conflict, with many generations never enduring the reality of rationing for food, energy, medical supplies or luxury goods, and even fewer within modern Australia understanding the sociopolitical and economic impact such rationing would have on the now world-leading Australian standard of living.
Transitioning to an advanced manufacturing economy
Despite Australia’s widely recognised position as providing a world-leading research and development capacity – supported by both private and public sector R&D programs driven by organisations like the CSIRO – traditional areas of high wage costs and low productivity in Australia’s manufacturing industry (exemplified in the failure of Australia’s domestic car industry and in the series of cost overruns and delivery delays on both the Collins and Hobart Class programs) have characterised Australia’s reputation as a manufacturing economy.
Enter Industry 4.0 – the combination of additive manufacturing, automated manufacturing and data sharing with a coherent National Strategic Industry development policy can compensate and in some cases overcome the traditional hindrances faced by the Australian economy, with public-private collaboration essential to ensuring the long-term sustainability and success of Australia’s defence industrial base and broader manufacturing economy.
While industry largely provides the technological expertise, government policy provides the certainty for investment – particularly when supported by elements of Australia’s innovation and science agenda combined with grant allocation and targeted, contractual tax incentives (signed between the Commonwealth and the company as a memorandum of understanding) linked to a combination of long-term, local job creation, foreign contract success, local industry content, and research and development programs, which are critical components that can be used to empower and enhance the overall competitiveness.
Australia’s position and responsibilities in the Indo-Pacific region will depend on the nation’s ability to sustain itself economically, strategically and politically.
Despite the nation’s virtually unrivalled wealth of natural resources, agricultural and industrial potential, there is a lack of a cohesive national security strategy integrating the development of individual yet complementary public policy strategies to support a more robust Australian role in the region.
Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability, serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia.
However, as events continue to unfold throughout the region and China continues to throw its economic, political and strategic weight around, can Australia afford to remain a secondary power or does it need to embrace a larger, more independent role in an era of increasing great power competition?
Further complicating the nation’s calculations is the declining diversity of the national economy, the ever-present challenge of climate change impacting droughts, bushfires and floods, Australia’s energy security and the infrastructure needed to ensure national resilience.