Knowledge and innovation critical to economic security

That is one of the conclusions from the paper on economic security published by TNO Vector at the ‘Strategic Autonomy in an Open Economy’ symposium in The Hague in early June. Other pillars of strategic autonomy discussed were the security of our energy supply, national security, and digital sovereignty.

Strong manufacturing industry

‘One of the strengths of the Netherlands is that it is a pleasant place to live and work. This makes us attractive to highly skilled people, enabling us to develop knowledge and deliver high-quality products and services. But it does not guarantee economic security. We must, for example, maintain our commitment to a strong manufacturing industry that is competitive in the global marketplace. We also need to pay more attention to how business benefit society and involve them more in discussions on strategic autonomy’, say TNO experts Elmer Rietveld and Joris Vierhout.

Contributing positively

They are thinking about issues such as what activities we want to focus on as a country, what we should invest in, what infrastructure is needed, the distribution of space, logistics hubs, and the energy transition. The question is how the business community can contribute positively to the desired developments, rather than emphasising what they are not allowed to do. More carrot, less stick.

Strategic dependence becomes visible

In just a few short years, the world has been completely changed by the COVID-19 pandemic, the invasion of Ukraine, and the changing role of China. This is in stark contrast to previous decades, when free trade and open economies were much more commonplace. The security of the supply of energy, raw materials, materials, and components were more or less guaranteed. In today’s world, more and more countries are adopting protectionist measures, exposing our continent’s accumulated dependence. Alternatives are needed. This starts with knowledge.

Building knowledge

‘We have knowledge of value chains in euros, but not in material chains. We know how many euros we buy of a particular product from a country in Asia, but not how many kilos of it, what materials it is made of, and where these materials originate. This knowledge was never developed, even if it is highly necessary to make strategic decisions.’

An observatory for the supply chains of raw materials

TNO is also part of the initiative to establish a service focused on the supply chains of raw materials. In Europe, this initiative is commonly referred to as a ‘Materials Observatory’. This service will collect data on products and materials at all stages, from the extractions of the raw materials needed to the end of the product’s life. It will use methodical research to better understand the material side of the global economy for the sake of our economic security.

‘We have never invested in mapping the global supply chains (and everything that goes with them) of (raw) materials; the routes they take, where products are made, what they are made of, environmental aspects, and so on. This is why we are transferring the observatory to TNO’s Geological Survey of the Netherlands (GDN) and seeking collaboration with ministries, universities, CBS, RIVM, HCSS, Clingendael, and industry. Numerous areas of expertise need to be brought together.’

Reduce dependency

Collaboration at both national and European level is essential to enhance our economic security. Ministries, regional governments, SER, DNB, planning agencies, and many support services are needed here. But decision-making needs to accelerate. This may mean adjusting assessment frameworks, procurement, legal procedures, and democratic rules.

‘If we want to continue to play a role in major transformations such as the energy transition and digitalisation, we need to create conditions for investment in a robust industrial value chain. This includes ensuring an adequate security of the supply of raw materials and semi-finished products. Things are already happening in the EU in this area. Examples include the Chips Act, the Net Zero Industry Act, and the Critical Raw Materials Act, which will reduce Europe’s dependence on third countries.’

Promising interventions

The key question, according to the researchers, is whether polity intentions can also convince the business boards needed to make the necessary public-private investments. ‘The big challenge is a cultural shift to think deeply about democracy, markets, laws and regulations, and the effectiveness of policy interventions. We need to arrive at better public decisions and speed up decision-making. Not just to legislate for business, but to involve it closely in policy making. TNO can contribute to this by showing where public intervention in the market, through money or regulation, is most promising.’