Bart KROON (The Netherlands) - GENERAL REPORT
11 October 2025
This report was adopted by the Economics and Security Committee at the 71st Annual Session held in Ljubljana, Slovenia.
There are few economic and political observers who would argue that the international economic system is becoming more open, even if globalisation remains a powerful force in economic life. There has been a generalised retreat from the ambition to construct and maintain an ever more deeply integrated world economy. Notions of supply chain securitisation and the use of tariffs as a tool of coercion now dominate discussions about the global economy. Trade growth has slowed precipitously, and ensuring the resilience of supply chains now trumps ambitions to maximise their efficiency.
Moreover, governments and market players are adopting increasingly defensive positions that economist would characterise as sub-optimal. Strategic competition among the world’s largest economies, concerns about the resilience of vital supply chains, fears that investment flows engender technology theft, environmental degradation, and political upheaval linked to trade generated job losses have all fed this backlash. Those economists touting the economic benefits of liberalisation are now on the back foot. The view that liberalisation represents a source of instability has gained political currency and many no longer see it as an agent of wealth generation and peace. Indeed, the world economy is moving into a phase of geo-economic fragmentation, which the IMF describes as pattern of “policy-driven reversal of global economic integration”.
Neglected in much of the current discussion is a broad understanding of the generalised welfare gains that open trading regimes confer. Consideration of those gains lie behind ongoing efforts to limit geo-economic fragmentation even while those defending liberal economic paradigms face increasingly formidable headwinds. There is also a growing rift between international economists warning about the costs of retreating from open trading and investment rules and national security thinkers who worry that integration is fomenting rising insecurity. This debate has become a divisive matter of high politics and diplomacy.
Fundamental changes to the international system and the global economy weaken the instinct to contain economic disputes. The withering of the trade consensus has been mirrored in the decline of the WTO as the primary agent for building a rules-based open international trading system. Its demise has been accompanied by efforts to construct regional trading blocs and the emergence of economic nationalism in which protectionism assumes an exalted position in economic policy-making. Trade disputes have become more frequent and shrill, suspicions have mounted about the efficacy and purpose of international economic institutions and the rules of the game that they oversee. This has transpired as new competitors have emerged to challenge the commercial and financial primacy of traditional global economic powers, including NATO member countries.
Economic models suggest that the costs of fragmentation depend on the degree to which governments undermine multilateralism. In the most extreme cases, some countries could undergo as much as a 10% reduction in output, although costs to individual countries would vary depending on the structure of the national economy and its level of openness.
Governments must now strike a balance between achieving security and remaining economically open. Weighing security too heavily can inflict excessive costs when expressed through excessive economic restrictions. Nevertheless, overexposure to overly concentrated international supply chains for strategic commodities needed in the defence industrial, energy and digital sectors can leave countries military vulnerable to rivals and impede the development of industries that will be fundamental to wealth creation over the coming decades. Building greater redundancy within supply chains will, at least in some instances, prove costly. But, over-exposure to single suppliers has even greater potential costs, particularly when that supplier is a strategic competitor.
The Report concludes that policy regarding the structure of international trade and investment should consider the value of achieving greater strategic autonomy for the alliance as a whole and for Europe, in particular, as it works to develop its defence and economic profile. Security and stability are enhanced by greater resilience in energy and food commodity production as this can enhance economic stability and security. Article 2 of the NATO Charter recognises that security and economic development are deeply intertwined and this requires that governments need to factor in security calculations when making economic policy.
The Report offers five concrete actions to be taken by NATO and/or Allies to address the geo-economic fragmentation and enhance transatlantic economic security.
First, to create a NATO Partnership for Essential Raw Materials with an aim to build a common understanding among Allies on strategic raw materials and align their economic policies to secure access to them as well as enhance supply chain resilience.
Second, to reestablish the NATO Economic Security Committee. Recreating this dedicated body within NATO will be crucial to handling economic security issues through monitoring global economic trends, assessing potential threats, and coordinating economic security strategies among Allies.
Third, to foster a more institutionalised NATO-OECD policy alignment that could help to promote security and defence related standards. The NATO Parliamentary Assembly should continue to actively use the OECD Global Parliamentary Network to discuss economic security issues, including standards.
Fourth, to mobilise private capital engagement in the defence sector and stimulate regionally dispersed investment to rebuild Allied industrial capacity. This should lead to building cross-national technological and industrial Allied ecosystems.
Fifth, to reinforce export control mechanisms. Western firms need to do more to control the end use of military and dual-use equipment they export. In turn, Allied governments need to ensure that incentives are in place for commercial operators to comply with these rules, including criminal statutes aimed at those violating these export controls
