Economic deterrence, flexibility, resilience at heart of new US defence industrial strategy

It is no secret that since the 1980s, America, like many Western nations, have rapidly and steadily waved goodbye to their industrial base, whether traditional heavy manufacturing or niche, high-skilled technical manufacturing – it has disappeared.

Rapidly spurred on by the expansion of globalisation that accelerated throughout the 1990s and early-2000s, backed by the waves of excitement and hubris, and reinforced by the theory of the “End of History” that spread across the Western academic and political communities, we now know this is far from reality.

While the United States and many of its major allies, including the United Kingdom and Australia, enjoyed a period of economic growth despite the deindustrialisation of this period, potential adversaries rapidly consolidated their position as major hubs of industrial output and capacity.

For the respective domestic populations across the West, the decline of domestic industrial base hasn’t gone unnoticed, with the COVID-19 pandemic and Russia’s invasion of Ukraine both serving to highlight the vulnerability of many “developed” nations to supply chain constraints and economic or even traditional warfare at the hands of what were once believed relatively benign, contributing members of the international community.

Driven in large part by the economic and industrial rise of the People’s Republic of China and its increasingly expansionist and belligerent behaviour towards the post-Second World War order established and expanded by the United States, this state of renewed great power competition has given rise to increasing rates of “reshoring” and “homeland economics”.

In response, the Pentagon has sought to rapidly expand on the reshoring policies of both the former president, Donald Trump, and incumbent Joe Biden, with an emphasis on reigniting the once mighty industrial base of the United States that helped turn the tide of the Second World War and served as the “Arsenal of Democracy”.

To deliver this, the Pentagon has developed and revealed the first National Defense Industrial Strategy (NDIS), designed to tip the scales back in the favour of the United States as it confronts an increasingly competitive and contested world.

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Setting the scene, the NDIS emphasises, “The 2022 National Defense Strategy (NDS) states that the Department of Defense will prioritise coordinated efforts with the full range of domestic and international partners in the defence ecosystem to fortify the defence industrial base, our logistical systems, and relevant global supply chains against subversion, compromise, and theft.

“The National Defense Industrial Strategy (NDIS) offers a strategic vision to coordinate and prioritise actions to build a modernised defence industrial ecosystem that is fully aligned with the NDS. It also calls for sustained collaboration and cooperation between the entire US government, private industry, and our allies and partners abroad,” the NDIS stated.

This was reinforced by Deputy Secretary of Defense Kathleen Hicks, who said, “The current and future strategic environment demands immediate, comprehensive, and decisive action to strengthen and modernise our defence industrial base ecosystem so it delivers at speed and scale for our warfighters.

“DOD’s first-ever National Defense Industrial Strategy will help ensure we build the modern defence industrial and innovation ecosystem that’s required to defend America, our allies and partners, and our interests in the 21st century,” Hicks added.

Building resilient supply chains and a competitive workforce

At the core of the push to help the United States reindustrialise and rebuild its defence industrial base in particular is a series of four, strategic priority areas that serve as “force multipliers” for the US economy and defence industrial base as a whole, focusing on:

• Resilient supply chains
• Workforce readiness
• Flexible acquisition
• Economic deterrence

In order to establish resilient supply chains, the NDIS identifies a number of key policy initiatives to maximise the domestic and allied supply chain resilience for the United States and defence industrial base, namely, “the DOD will incentivise industry to improve resilience by investing in extra capacity; manage inventory and stockpile planning to decrease near-term risk; continue and expand support for domestic production; drive investment in the organic industrial base and production accelerators; diversify the supplier base and invest in new production methods; leverage data analytics to improve sub-tier visibility to identify and minimise strategic supply chain risks and to manage disruptions proactively; engage allies and partners to expand global defence production and increase supply chain resilience; and improve the foreign military sales process”.

This approach seeks to avoid single points of failure both domestically and among key US global allies, like the United Kingdom and Australia, seeking to capitalise on their respective industrial bases, areas of comparative advantage and economies of scale which are essential to rebalancing the “playing field” in the favour of the United States and its allies.

This has largely been driven by Beijing’s own immense industrial capacity and the rapidly developing complex and interconnected web of “partner” nations through multilateral organisations like the BRICS and Shanghai Cooperation Organisation that serve to provide resilient, cost-effective access to energy, critical raw resources and vibrant, growing consumer markets for both consumer goods and military hardware.

Workforce readiness, capacity and in an era of high-technology manufacturing, skills are an equally critical component of the US Defense Department’s National Defense Industrial Strategy moving forward.

The NDIS articulates this emphasis, stating, “To address this priority, DOD will work to prepare the workforce for future technological innovation; continue targeting critical skill sets in science, technology, engineering, and math; increase access to apprenticeship and internship programs; and reduce stigmatisation of industrial careers while expanding recruitment of non-traditional communities.”

Feeding into the aforementioned resilient supply chains and seeking to avoid single points of failure in these supply chains, the NDIS’ emphasis on workforce capacity, competitiveness, and skill identifies and seeks to avoid the risks of, “Insufficient workforce readiness [that] could lead to the inability to successfully onshore critical manufacturing; the inability to compete globally; reduced productivity throughout the full supply chain; and limited innovation.”

Each of these two components ultimately lay the foundation for the success of the flexible acquisition and economic deterrence priorities of the US Defense Department’s National Defense Industrial Strategy.

Overhauling acquisition and building economic deterrence

The acquisition process, procedures, force design decisions, and export applicability have long been identified as a convoluted, complex, and increasingly costly area that effectively makes or breaks the success of major defence programs, with examples like the F-22 Raptor, the F-35 Joint Strike Fighter, C-17 Globemaster III or the M1 Abrams, all recent examples of varying acquisition success.

In recognising this, the US Department of Defense “will work to broaden platform standards and interoperability; strengthen requirements to curb ‘scope creep’; prioritise off-the-shelf acquisition where applicable and reasonable; increase DOD access to intellectual property and data rights to enhance acquisition and sustainment; consider greater use and policy reform of contracting strategies; continue to support acquisition reform; and update industrial mobilisation authorities and planning to ensure preparedness”.

Going further, the NDIS states that, “Flexible acquisition planning will allow the DOD to work with a broader set of industry partners and balance the tension between the need for customisation and adopting, where appropriate, industry standards. While some level of customisation is necessary to meet specific mission requirements and stay ahead of potential adversaries, there are risks associated with excessive customisation that hinder the development of a modern industrial ecosystem.”

This approach seeks to avoid some of the failed and extremely costly capability development and acquisition programs that have characterised both American and Australian defence acquisition over the last three decades. Think programs like the Zumwalt Class, Littoral Combat Ships, the Bradley IFV replacement, and the KC-47 Pegasus tankers in the case of the United States or Australia’s own Attack Class submarines, Super Seasprite helicopters, and both the Arafura and Hunter Class vessels, respectively.

To do so, the NDIS states, “Thus, COTS approaches versus customised systems must be balanced to meet warfighter requirements at speed and scale. Failure to balance these risks strategically can significantly hinder the delivery of critical capabilities. Other risks of failure include limited scale; high costs and lengthy development times; technology obsolescence; diminished industrial base resilience; sustainment and logistics challenges; reduced operational effectiveness; and increased technological risk.”

Each of these strategic priorities ultimately seek to maximise and enhance the economic deterrence capacity of both the United States, and by extension, its central global allies, including Australia, essentially by ensuing that the sum of the whole is far more capable than the individual components.

In light of this, the NDIS states, “Economic deterrence will promote fair and effective market mechanisms that support a resilient defence industrial ecosystem among the US and close international allies and partners and economic security and integrated deterrence. As a result of effective economic deterrence, fear of materially reduced access to US markets, technologies, and innovations will sow doubt in the mind of potential aggressors.”

Adding to this, the NDIS articulates that in order “To address this priority, DOD will work to strengthen economic security agreements; enable international interoperability standards through active participation in standards setting bodies; fortify alliances to share science and technology; strengthen enforcement against adversarial ownership and against cyber attacks; and strengthen prohibited sources policies to protect the DIB from adversarial intrusion.”

Developing economic deterrence is an essential part of reinforcing the post-Second World War order and the global balance of power in this era of renewed great power competition has been recognised as a central component of many national economic policies, Australia included.

This is reinforced by the NDIS, which states, “Failing to deter adversarial entities could generate critical economic, supply chain, and infrastructure vulnerabilities; increased costs and reduced defence budgets; a weakened industrial ecosystem; intellectual property theft and adversarial capital IP control; degraded technological edge, innovation, and quality; and eventually lead to the loss of trust and reputation with international partners.”

An Aussie approach?

For Australia, the NDIS identifies the central pillars for rebuilding a national industrial base which would require some tweaking in the Australian context to maximise the efficacy and impact on Australia’s own burgeoning defence industrial base.

Critically, for Australia to capitalise and indeed implement policies of “reshoring” or “homeland economics”, we need to be careful to avoid over-engineering our policies (as is often the case in Australian policy making, where often we make perfect the enemy of good) and we need to avoid having too much government intervention once the soil has been prepared for the crops to grow.

Additionally, Australia needs to begin planning it’s force structure, its force posture, and its acquisition plans for what the nation actually needs and will need in coming years and decades, rather than adhering to strict, yet arbitrary numbers of vessels, aircraft or vehicles because that is how it has always been done outside of wartime, because, the risks have never been greater, or closer to home.

Final thoughts

Australians are going to be asked to accept a number of uncomfortable realities in coming years. First and foremost, we will have to accept that while the world is increasingly becoming “multipolar”, the Indo-Pacific, in particular, is rapidly becoming the most hotly contested region in the world.

This has been underpinned by the emerging economic, political, and strategic might of powers like China, India, Pakistan, Thailand, Vietnam, and the established and re-emerging capability of both South Korea and Japan, in particular, are serving to create a hotbed of competition on our doorstep.

Second, both the Australian public and our policymakers will have to accept that without a period of considered effort, investment and reform, current and future generations of Australians will be increasingly impoverished, living in a nation pushed around by the region’s now rising powers.

Recognising this array of challenges and opportunities, both the Australian public and its policymakers need to look beyond the myopic lens of short-termism that has traditionally dominated our diplomatic, strategic, and economic policy making since Federation.

Ultimately, we need to see Australia begin to play the long game to fully capitalise on the opportunities transforming the Indo-Pacific.

The most important question now becomes, when will we see a more detailed analysis and response to the challenges and opportunities facing Australia and when will we see both a narrative and strategy that better helps industry and the Australian public understand the challenges faced and opportunities we have presented before us?

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?

Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at This email address is being protected from spambots. You need JavaScript enabled to view it. or at This email address is being protected from spambots. You need JavaScript enabled to view it..