Editor’s Note:
This essay is from the Security & Defence PLuS Emerging Voices Series, which highlights the next generation of scholars and practitioners shaping thinking on strategy, security, and defense. The series brings together perspectives from PhD candidates and early career researchers, grounded in the complex geopolitical realities of the 21st century.
The collection explores a “Latticework of Resilience” that connects often-overlooked sectors, such as subnational diplomacy and critical infrastructure inherent in agriculture security, to the core of national security. Taken together, the essays emphasize the importance of adaptive, multidisciplinary approaches to building resilience in an increasingly complex global environment.
The first event in the Emerging Voices series was held at Arizona State University on 2 March 2026, with events to follow at King’s College London and UNSW. Watch the event recording: The Emerging Voices Series: Strategy, Security & Defence at Arizona State University.
There is an emerging direction on the horizon for economic security policies, and Phoenix is on the front line of it. In the last decade, policymakers have been keenly focusing on strengthening the U.S. capacity to regulate the semiconductor supply chain and consolidating the U.S. competitiveness through attracting investments and reshoring. What is becoming more crucial than ever is to build up the capability of the economic system and deliver more substantial results to achieve economic security goals.
In this brief article, I will first review changes in economic security and how they have reshaped global supply chains, firms, and states. Then, I will outline some key aspects of vulnerabilities and blind spots that are underexplored, primarily on weaknesses of the current U.S. economic security policies. Lastly, I will elaborate on the main takeaway of this article, which is the importance of capability building in achieving economic security goals, and as the U.S. deepens its collaboration with several key allied countries and firms, capability will matter more for the actual economic performances.
De-risking and Enforceability in Supply Chain Restructuring
In the Security and Defence PLuS panel on National Resilience and Critical Infrastructure, I have outlined some critical changes in economic security over the past decade, and I will use this section to recapitulate them. First, there has been a re-learning of global supply chains in policymaking. Before the last decade, economic security in most countries only targeted very few states and non-state actors with the focus on dual-use technologies; however, in the current days, broadening the scope to the entire supply chains for emerging technologies can expose additional chokepoints for policy interventions.
Secondly, new strategies have been deployed by firms to de-risk from disruptions. Firms are exposed to more disruptions caused not only by global events but also by regulations and potential conflicts, and many major buyers have pushed their manufacturers to expand their production sites to countries that are less risky. This pressure restructures the supply chains and forces firms to strategize their tangible and intangible assets in various countries and figure out ways to maintain productivity.
Lastly, in response to supply chain restructuring, many countries have further strengthened their capacity to enforce regulations and trace economic activities. Export controls, technology protections, sanctions, and investment screenings are some of the common policies that countries have adopted to regulate the flows of goods, services, technologies, and capital. Countries have to revamp their bureaucratic agencies and political institutions to allow stronger enforcement capacity, and more information sharing and coalition building between governments are in process to improve the traceability across borders.
Unpacking Competitiveness to Uncover Vulnerabilities
Supply chain restructuring and policy reforms have created many uncertainties, opening more spaces for policy researchers to engage in novel approaches to examine the sources and changes of economic competitiveness between countries. Competitiveness (or the lack of it) can come from institutional designs: for instance, one of the DSET reports shows that while China’s Big Fund Policy in 2014 drastically increased the investment in semiconductors, particularly from local governments, it increased the capacity of China’s industry but drove down prices and exacerbated the overcapacity crisis.
Alternatively, competitive edges can arise from influences in global networks. In another DSET report, my colleague and I show that in Johor, Malaysia, one of the booming places for the AI infrastructure industry, almost 60% of the data centers are under the influence of Chinese companies, either through direct investments, subsidiaries, or joint venture partnerships. This creates backchannels for both chip diversions and computing power leakages to allow illicit access for the Chinese to acquire AI chips and develop AI models.
Unpacking economic competitiveness shines light on the foundation of vulnerabilities. Institutions and networks grant firms access to some of the necessary economic endowments, and by broadening firms’ economic competitiveness, states can exert greater power in the economic statecraft. However, they also imply the limitations of the economic system. Institutions aimed at maximizing manufacturing capacity are less capable of achieving advanced innovations, and networks to circumvent regulations call for more collaborations between regulatory regimes to build a more capable body for investigation and enforcement.
Capability-Building Between Allies as the Next Main Task
The main message this brief essay wants to convey is that capability matters. Capability refers to the quality that actors have to achieve the economic security goals. In social sciences, the capability approach is distinctively different from capacity, as capacity only reflects the static inputs, such as GDP or tax revenue, and the capability approach, instead, focuses on tools and skills that actors have access to achieve their goals and values. The capability approach centers actors’ agency in the analysis, as actors would have to possess the necessary skills and will to pursue welfare that aligns with their values, and the cultivation of these qualities inspires much of the following research on human development.
In recent years, many policymakers and commentators have noticed that capability building is also crucial to economic security. Many countries have reformed their policies and strengthened their capacity to regulate global supply chains. However, stronger capacity does not guarantee successful economic security goals. Firms and states need to be empowered to align their goals and cultivate the necessary know-how for production, which can be broader than supply chains and incorporate factors from the workforce, platforms, and infrastructures.
What makes the capability approach to economic security more prominent is the ongoing process of supply chain restructuring and international cooperation. As firms expand their global footprint, they have to figure out not just the advantages of potential new locations but also strategies to convert their capital and advanced technology into skills and know-how that can be used in production processes. National and subnational governments also play a crucial role in fostering capabilities, as they are key to the development of the workforce, education and skill formation, infrastructures, and policy regulations. For example, TSMC’s investment in Arizona is, on the one hand, a de-risking strategy to avoid political and infrastructural bottlenecks, and on the other hand, aligning with Arizona’s existing industrial bases and business environment. There are still challenges in capabilities, primarily in energy and workforce, and the future TSMC expansions in the area require more cooperation between firms and both the Taiwanese and the U.S. governments on multiple levels.
Most importantly, under the scope of economic security, stronger capabilities contribute directly to the resilience of the economic and national security. While many countries have viewed resilience as a matter of national self-sufficiency, this overlooks the ongoing processes of supply chain restructuring and international cooperation. The future of economic security cannot be achieved solely by one country or its firms: firms have become multinational with multiple production sites, and most countries have specialized in some sectors and processes in the global economy.
Resilience, as a main goal of economic security, should shift from self-sufficiency to recovering from disruptions for allies, as many allied countries are more exposed than the U.S. to disruptions of resources and energy supplies and retaliations from adversaries. Pax Silica and its newly announced Pax Silica Fund is another important case study: capability building around the goal of resilience should not be only about joint investment on critical sectors and boosting U.S. tech stack exports, but it should also build the capability of both the U.S. and allied countries on the national and subnational level to align both manufacturing know-how and regulatory means.
What Is To Be Done?
Within the framework of capability building, several policy directions can help with achieving economic security goals. First, economic cooperation and investment agreements between allied countries should include clauses on capability building. The current administration tends to prioritize the “Trade not Aid” rhetoric on investment deals and brands it as economically beneficial to American public; however, both the U.S. and its allies should go beyond and recognize the need for capability building on both sides and across all aspects, including workforce, infrastructures, and education, and devote some resources on assessing and developing these capabilities to achieve greater resilience between allies.
Second, there should be more diplomatic talks to strengthen international cooperation on regulations. The newly introduced MATCH Act is a great attempt to align U.S. regulations with its allies, but several problems should be noted.
On the one hand, the MATCH Act aims to solve the imbalance between strong U.S. unilateral regulations and relatively weak regulations in allied countries and requires the U.S. to multilaterally negotiate with allies; however, allies that are willing to participate in the talk and align their regulations with the U.S. should and must have an equal say in setting regulations to prevent unfair practices, such as special exemptions to firms. These talks should also become the platforms to negotiate joint programs to develop human and economic capabilities among participating countries to further build trust among allies and secure the result of economic resilience.
On the other hand, the MATCH Act focuses on hardware and export controls, where the U.S. has more unilateral authority than most of its allies; however, there are many other economic security regulations, such as investment screening and standardization, that are beyond the scope of export controls, and a more comprehensive cooperation between governments on various regulations should be the goal to create a more capable global economic security regime.
