The weaponization of global value chains

In this hour-long discussion, Capri described a framework with which to analyze the emerging 21st century geopolitical landscape. According to Capri: “In techno-nationalism, the world is returning to a kind of mercantilist mindset that links the technical capabilities and prowess of a nation’s institutions and entities with its national security, economic strength, and social stability.” The dynamics of techno-nationalism is changing the way Beijing and the world interact. Here is a summary of Capri's key analysis:

• China’s state-centric model has pushed the western world into an historic paradigm shift. Laissez faire capitalism has given way to “managed trade.” Governments are increasingly interventionist and activist, which has created new contradictions and tensions between markets, states, and non-state actors.
• Governments are in the early stages of weaponizing supply chains as they resort to more export controls and restrictions on the transfer of technology to China.
• The race to innovate and dominate in leading edge technologies such as semiconductors, 5G and 6G, rare earths, electric vehicles, quantum computing, AI and other areas has resulted in the rise of innovation-mercantilism. The governments of G7 nations are pouring record amounts of money into research and development, public-private partnerships, and other funding initiatives.
• A new kind of techno-diplomacy has emerged which binds nations together regarding common technology standards and values. The rise of techno-authoritarianism is accelerating the emergence of techno-alliances and a new kind of “hybrid Cold War”.
• Techno-nationalism is accelerating the fragmentation and localization of global value chains. Decoupling from China in strategic sectors has begun a reshoring and ring-fencing process of “strategic” ecosystems within ‘friendly’ borders.
• Data, human capital (people), and the digital platform economy (especially financial markets) are also caught up in this maelstrom of decoupling, fragmentation, and ring-fencing.
• The COVID 19 pandemic and climate change are acting as accelerants to techno-nationalist localization efforts.

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