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Securing American Interests: A New Era of Economic Power

Securing American Interests: A New Era of Economic Power

Eric B. Lorber
6th February 2017 - FDD Press

Download the full report here. 

Foreword 

American economic power has become an increasingly critical national security tool in recent years. For well over a decade, the United States has leveraged the size of its economy, the centrality of the dollar, and America’s ability to set economic and financial global standards and norms to drive its national security goals.

Yet the geo-economic landscape is changing, and a new era of economic statecraft is upon us. Our competitors have chafed at our use of such power. Our enemies have likewise witnessed our vulnerabilities and understood their own potential to use economic power directly or asymmetrically against the United States and its allies. As a result, the economic statecraft challenges facing the United States are daunting.

They include North Korea’s growing use of offensive cyber capabilities that target the international financial system, in addition to the threat from its nuclear weapons and missile programs. Similarly, in the context of the Joint Comprehensive Plan of Action, identifying ways to put economic pressure on Iran for its malign activities throughout the Middle East will require immediate attention.

The administration and Congress will also need to address longer-term, but no less pressing, challenges to U.S. national economic security. Such challenges include an increasingly assertive China that is using all the elements of its national economic power to undercut U.S. interests in East Asia, steal American intellectual property, and pressure Washington’s allies and partners. Likewise, the United States will need to address Russia’s increasingly assertive use of its natural resources, cyber capabilities, and hybrid warfare, which threaten U.S. interests.

Moreover, as adversaries leverage mechanisms for blunting U.S. tools of economic coercion, such as alternative currencies and sophisticated sanctions-evasion techniques, it may become more difficult to impose the biting economic pressure that has until now proven successful in targeting terrorist financing and undercutting rogue states’ economies.

Underpinning the United States’ national economic security is the integrity of the international financial system. Washington, the private sector, and the international community have made great strides over the past decade in countering corruption, terrorist financing, and money laundering activities, but much remains to be done. Without a concerted effort to improve the transparency, accountability, and effectiveness of this system, America will be hamstrung in its ability to fight these destabilizing financial flows.

The United States is uniquely positioned to compete on this economic battlefield. U.S. markets are highly attractive and the dollar underpins the majority of cross-border international trade, providing America with unparalleled economic leverage and the ability to shape international standards and norms.

Nevertheless, the United States is unprepared to fully capitalize on these advantages. For example, U.S. economic statecraft is not driven by a coherent, unified strategy; elements of its coercive power, such as sanctions, are not effectively paired with other components of our economic power, such as strategic investments to advance our national security. Likewise, the United States lacks the organizational structure to further its national economic security and to coordinate with our allies and the private sector. Core components for this structure are dispersed across various agencies with little coordination between them.

In this report, experts from the Center on Sanctions and Illicit Finance at Foundation for the Defense of Democracies lay out the contours of this new economic battlefield, and how the United States can take the necessary steps to safeguard its national economic security. Drawing on unparalleled expertise in economic statecraft, coercive diplomacy, international banking and financial integrity, positive economic power, and a deep knowledge of the United States government, these experts identify key threats and opportunities.

The report is the first of its kind to bring together elements of America’s economic power into a single, coherent framework. Until now, policy memoranda, papers, and articles have focused on specific components of national economic security, but none has fully explained how these elements interact to best protect our security. This report endeavors to fill this crucial void and serve as the framework for developing the field of national economic security.

Competing successfully in the evolving economic security battlefield will require innovative strategies, structures, and authorities. The Trump administration and Congress must pay close attention to the economic security threats America faces, and devise sophisticated ways to overcome them. This report aims to provide a roadmap for doing just that.

Tags

cyber, illicit-finance, iran, national-security, north-korea, russia, sanctions