The growing securitization trend in the international relations domain refers to the disposition to transform so-called “non-traditional” issues, such as climate, technology and supply chains into national security concerns to enable the use of extraordinary measures by governments. Moreover, governments are less hesitant to use economic power to advance their foreign policy agendas. Thus, economic and security affairs are becoming more intensively intertwined.

As a community of small and middle powers exposed to these risks, the AEC cannot afford to maintain business as usual where its economic and security agendas are developed or considered separately, respectively under the AEC and ASEAN Political Security Community.

Securitization affects the AEC through trade and investment. On trade, the pursuit of supply chain de-risking by industrialized nations has benefitted some ASEAN member states, at least in the short term.

As United States imports from China have fallen, its imports from countries like Vietnam, Thailand and Cambodia have increased. However, with the incoming US administration expected to take a more mercantilist approach to trade, ASEAN member countries with considerable trade surpluses with the US or sourcing significantly from countries like China may come under more scrutiny.

In the European Union, another major market for ASEAN, there has been a rise in environmental, social and cybersecurity-related trade measures. In theory, these rules should be applicable equally to all without pre-emptively targeting certain countries, but resource-rich ASEAN member states with substantial ties to China-led supply chains may suffer disproportionately from higher compliance costs and indirectly from reduced EU demand from China-led supply chains.

As ASEAN does not have free trade agreements (FTAs) with the US or EU, it has little leverage in negotiating existing and emerging trade barriers, except for those ASEAN member states with bilateral FTAs.

Simultaneously, ASEAN should not be complacent about the risks of its economic dependency and entanglement with China. For example, ASEAN member countries with overlapping claims with China in the South China Sea might face greater vulnerability to China’s potential use of economic statecraft.

Increasingly, countries are erecting trade barriers around raw materials or technology critical for digital transformation and green transition on national security grounds. While there may be legitimate security concerns, the interplay of economic statecraft may further enmesh economic and security considerations.

Arguably, international economic institutions are not sufficiently equipped to offer solutions to manage the effects of geopolitical tensions. The AEC needs to be more proactive in considering the impact of growing securitization and its response.

Similarly, more countries are introducing investment screening. For inward investment, they impose restrictions on sectors deemed too critical for competitors or non-allies to influence, for instance, in critical infrastructure. For outward investment, restrictions focus on dual-use technologies and critical raw materials.

This higher scrutiny may affect third countries, including ASEAN member states. The region may witness more restrained foreign direct investment, despite possession of assets like critical minerals and renewable energy resources.

Investment decisions will not only be based on financing, infrastructure, human resources and domestic regulatory environments, but also on geopolitical alignment. Where the US-China rivalry is concerned, those ASEAN member states that one superpower deems as being too close to the other may be excluded from opportunities to benefit from investment inflows to support digital transformation and green transition.

Rising securitization may also undermine ASEAN’s regional approach to economic community-building. While the AEC has prolifically produced statements, strategies and frameworks, how successful AEC initiatives are depends on how much regional businesses have benefitted from them.

While some ASEAN members have joined initiatives such as China’s Belt and Road Initiative (BRI) and the US-led Indo-Pacific Economic Framework (IPEF) and are eyeing other plurilateral groupings such as OECD and BRICS, ASEAN-led initiatives may lend member states increased bargaining power and a strong baseline when dealing with their largest markets and trading partners.

Notwithstanding the right to pursue independent foreign policy, the AEC still holds value for the ASEAN member states, which should in turn retain if not redouble their focus on, and give resources to, the AEC.

A start in preparing ASEAN for this new playing field would be to have a clear understanding on the impact of greater securitization on ASEAN’s future economic agenda. We recommend periodic briefings on geopolitical developments and their economic implications for broad ASEAN policy officials dealing with digital, mineral industry, foreign affairs and defense, not just trade officials.

Working with like-minded partners is equally critical to defend rules-based multilateralism and to better manage the use of national security exceptions. For this to work, ASEAN should leverage ASEAN-related institutions. For instance, ASEAN member states could better utilize the Regional Comprehensive Economic Partnership to provide business certainty for regional supply chain development.

The potential ASEAN Digital Economic Framework Agreement, as the world’s first regional digital economy agreement, will set the baseline for ASEAN and its member states’ engagement with other partners on digital economy.

Last, the effective mainstreaming of the ASEAN Outlook on the Indo-Pacific (AOIP) into relevant sectoral work can facilitate practical cooperation and policy coordination with external powers.

As the AEC supports the ASEAN Community Vision 2045, it should anticipate and manage the impact of evolving global security agenda. The successful navigation of increased securitization of the global and our region’s economy will help the AEC, and ASEAN, to emerge stronger.

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Julia Tijaja is an associate senior fellow at the ASEAN Studies Centre, ISEAS-Yusof Ishak Institute. Muhammad Habib Abiyan Dzakwan is a researcher at the Department of International Relations, CSIS Indonesia. This commentary first appeared on ISEAS-Yusof Ishak Institute’s blog, Fulcrum.