The Trump administration’s enactment of the Defense Production Act to support the nation’s COVID response was met with mixed reviews. For retired US Air Force Colonel Jeffrey Green, it delivered what it aimed to do – boost the economy, the health response and national security – again raising the question, should Australia formalise a similar policy?
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The rise of Indo-Pacific Asia means the tyranny of distance has been replaced by a “predicament of proximity”: China, India, Indonesia, Thailand, Japan and several other regional nations are reshaping the economic and strategic paradigms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.
When contentious US President Donald Trump confirmed that he would initiate the Defense Production Act (DPA) it drew a mixture of condemnation and support depending on the side of the political aisle, despite this, for retired US Air Force Colonel Jeffrey Green, the DPA has seen some measure of success in delivering in support of the nation's economy, the COVID-response and enduring US national security.
Explaining this, Green explained, "The headline news — evil defense contractors taking funds meant for sick people — looks like something out of a Hollywood script. However, as with most bad movies, there are missing pieces of the plot that need to be addressed.
"Yes, funds from the Defense Production Act were used on projects other than those strictly related to health care. No, the projects in question were not fraudulent, arbitrary or some feature of corrupt behaviour. Here’s why:
"First and foremost, the Department of Health and Human Services has no active solicitations for offerors to submit DPA projects, having left that responsibility to the Department of Defense.
"Even if there were unmet or emerging requirements, the less than $1 billion spent by the DoD from the Coronavirus Aid, Relief, and Economic Security Act is more than offset by a $17 billion investment from HHS. Without direction from HHS, the DoD did what it should do when given DPA funding: It moved quickly and decisively to secure important gaps and nodes in national security supply chains."
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."
Green explains, "This remains a national imperative, especially as the industrial base and the American workforce have been weakened by the pandemic. The virus has exposed vulnerabilities in our military and its supply chains: service members are at risk of this debilitating disease, and companies that supply critical technologies and services are at risk of going out of business, while Chinese suppliers increase their stranglehold on US markets and supply chains."
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.
Green explains the importance and impact the DPA had upon shoring up American national security at a time of increasing domestic and global disruption: "As a unique program meant for unique circumstances, this was the ideal authority to address the fallout from COVID-19. In turn, DPA projects created a win-win scenario for American workers, public health, national security and the economy.
"DPA projects related to national defense have prevented the collapse of US government contractors and other businesses critical to the essential medical and defense supply chains that are irreplaceable in the current environment.
"These businesses, often small in size, are subject to budget cuts and market conditions — things to which Chinese firms are immune. This is key to emphasise: Chinese manufacturers create market conditions in which US companies cannot fairly compete, which often leaves US companies with no choice but to further instantiate their reliance on Chinese manufacturing."
Keeping workers employed
One of the key impacts of COVID-19 has been its dramatic impact on labour markets, with unprecedented levels of unemployment wreaking socio-political and economic turmoil across the US, Australia, UK and Western Europe.
In response, governments around the world, including in Australia have moved to ramp up employment opportunities to lower unemployment and prevent mass lay offs, which would have dramatically impacted the capacity of the US defence industrial base and its economy, something Green believes the DPA has delivered for the US.
"On a related point, DPA projects that fund defense contractors help those businesses retain skilled or specialized employees who perform functions that could take years to restart in the US if lost due to COVID-19. In the worst-case scenarios, contractors may fire skilled employees or simply outsource their capabilities to foreign nations to retain operating capital," Green explains.
"Additionally, during a time when our manufacturing sector is most vulnerable to nefarious actors with blank government checks (e.g. China), DPA funds have provided contractors the ability to maintain and expand domestic operations, which bolsters US manufacturing capabilities and employment opportunities."
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.
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.