Commerce of economic security

For decades, international commerce was guided largely by the logic of economic efficiency.

Countries sought cheaper production, larger markets, foreign investment and technology transfer, while firms built global supply chains around cost, specialization and access to consumers.

That logic has not disappeared, but it is increasingly constrained by a second principle: economic security.

Governments now increasingly view trade, investment, technology and supply chains not only as instruments of prosperity but also as potential sources of strategic vulnerability.

The result is a transformation of global commerce in which national-security considerations increasingly shape where capital flows, which technologies can cross borders, and with whom countries are willing to trade.

The shift became particularly evident after the COVID-19 pandemic exposed vulnerabilities in global supply chains.

Shortages of medical supplies, semiconductors, and other critical products underscored the risks of overreliance on concentrated production. Russia’s invasion of Ukraine further reinforced concerns about dependence on energy, food, and strategic resources.

At the same time, intensifying US-China technological competition has made semiconductors, artificial intelligence, advanced computing, telecommunications, and other dual-use technologies strategic assets.

Economic interdependence, once widely regarded as a source of stability, is increasingly understood to create leverage as well.

This changing environment is reshaping foreign direct investment. Governments are strengthening investment-screening mechanisms to prevent foreign ownership or control of strategically important assets.

Critical infrastructure, ports, telecommunications networks, energy systems, defense-related industries, advanced technology firms, and sensitive data are receiving greater scrutiny.

The objective is not necessarily to eliminate foreign investment but to distinguish economically beneficial investment from investment that could pose unacceptable security risks.

Consequently, the traditional principle that capital should flow primarily to its most productive destination is being supplemented by a security-based assessment of ownership, control, and strategic dependence.

Investment restrictions, however, pose a significant policy dilemma. Excessively broad screening can discourage legitimate investment, reduce competition, and increase the cost of capital.

If governments classify an ever-larger share of the economy as “strategic,” economic security can become a pretext for protectionism.

The challenge is therefore to establish transparent, narrowly defined, and evidence-based criteria that protect genuinely sensitive assets without unnecessarily restricting productive international investment.

Technology transfer is undergoing an even more fundamental transformation. For developing countries, access to foreign technology has long been an important pathway to industrial upgrading.

Multinational enterprises bring capital, managerial expertise, production techniques and technological capabilities. Yet advanced technologies increasingly have both civilian and military applications.

Artificial intelligence, quantum computing, advanced semiconductor manufacturing, satellite systems, biotechnology and high-performance computing can simultaneously contribute to economic development and military capability.

Governments therefore increasingly regulate exports, investment and collaboration involving these technologies.

This creates tension between technology diffusion and technological sovereignty.

Developed economies seek to protect strategic technological advantages, while emerging economies want greater access to technologies that can accelerate industrialization.

Export controls and restrictions on technology transfer can therefore slow technological catch-up.

At the same time, governments are investing more heavily in domestic research, semiconductor capacity, critical minerals, cloud infrastructure, and skilled human capital.

The objective is shifting from simply acquiring technology to developing the capacity to control strategically important technological ecosystems.

International commerce is shifting from globalization toward selective interdependence.

Concepts such as “friend-shoring,” “near-shoring,” “de-risking,” and “supply-chain resilience” reflect efforts to reduce dependence on countries perceived as strategic competitors or unreliable suppliers.

Companies are increasingly encouraged to diversify suppliers, maintain alternative production locations, and identify vulnerabilities beyond traditional considerations of price and efficiency. Governments are also creating incentives for domestic production of critical goods.

This does not necessarily mean that globalization is ending. Rather, globalization is becoming more fragmented and strategically differentiated.

Products that are relatively non-sensitive can continue to move through global markets, while strategically important goods may increasingly be produced within trusted networks.

The global economy could therefore develop a two-speed structure: relatively open commerce in ordinary goods and services alongside more restricted networks for sensitive technologies, infrastructure, and resources.

For Bangladesh, this transformation presents both risks and opportunities. Bangladesh’s traditional export strategy has relied heavily on participation in global production networks, particularly in ready-made garments.

As economic security reshapes supply chains, the country could benefit from multinational firms seeking diversified production locations.

However, attracting such investment will require more than low labor costs. Reliable energy, ports, digital infrastructure, regulatory predictability, cybersecurity, intellectual property protection, and skilled workers will become increasingly important.

Bangladesh can also position itself within emerging strategic supply chains by developing capabilities in sectors such as electronics, pharmaceuticals, light engineering, semiconductor assembly and testing, renewable-energy components, and digital services.

Yet participation in these sectors requires stronger technological institutions and closer university-industry collaboration.

Economic security therefore creates a development imperative: countries must strengthen domestic capabilities while remaining sufficiently open to international investment and technology.

The central challenge is striking the right balance between security and openness. Complete economic self-sufficiency is neither realistic nor necessarily efficient.

Excessive dependence, however, can expose countries to geopolitical pressure and supply disruptions.

The appropriate objective is therefore not autarky but resilient interdependence, which maintains international economic connections while reducing vulnerabilities in critical sectors.

The commerce of the future will be governed by two intertwined calculations: “What is economically efficient?” and “What is strategically safe?” National-security concerns are already shaping investment screening, technology transfer, supply-chain design and trade policy.

The emerging international economic order will not abandon globalization, but it will place greater emphasis on trust, resilience, diversification and strategic autonomy.

For governments and businesses alike, economic competitiveness will increasingly depend not only on producing cheaply and trading widely, but also on understanding the geopolitical conditions under which commerce itself is becoming a component of national security.

(Author: Former Additional Secretary to the Government; Currently Associate Professor of Public Policy, Bangladesh Institute of Governance and Management –Affiliated to the
University of Dhaka)