Once upon a time, not so long ago, those who talked of Australian sovereign capability, especially in the technology sector, were generally considered an amusing group of eccentrics. After all, technology ecosystems are global and multinational companies lead the development of cutting-edge capabilities. Australia could just sit back and benefit of technology from elsewhere.
However, the last few years have jolted us out of that comfortable view. Covid-19 taught us that global supply chains are fragile and reminded us that technology is not purely digital. For example, supply and logistics issues with the supply of integrated circuits reduced the availability of new cars.
We have also developed greater awareness of effects of geostrategic tension and competition. Concerns around supply-chain interference by foreign governments drove Australia’s pioneering decision to prohibit high-risk vendors from participating in 5G infrastructure rollouts. This led to discussions around sovereign capability and alternative options for mobile technology, as well as ensuring supply-chain diversity and working with trusted partner nations.
More recently, we have seen that trust, even in long-established partners, can change rapidly. This has forced us to consider what capabilities Australia needs to develop itself to ensure our national security. For example, in a recent National Press Club address, former prime minister Malcolm Turnbull called for Australia to abandon the AUKUS deal and focus on developing sovereign capabilities.
However, it may be neither necessary nor desirable for Australia to become completely self-reliant. Most economists believe that it is inefficient for a country to develop self-sufficiency in industries in which another country has a comparative advantage. Doing so may also prevent us from accessing the latest technology.
In the longer term, if domestic capability is not exposed for overseas competition, the incentives for future innovation may also be reduced. A risk-managed approach is therefore required to ensure that ‘sovereignty’ doesn’t become a byword for protectionism and end up increasing costs and limiting supply if this brings no net benefit to Australia.
It is clear that the discussion needs to move on from ‘We need sovereign capability’ to ‘What sovereign capability do we need?’ This means understanding what needs to be sovereign, and why. In deciding what we should produce ourselves, we must consider three aspects of sovereign capability.
Firstly, we must account for the location of physical assets. Capability and the people delivering related services must be somewhere. Even virtual assets such as software and data have a hardware location. Where will these assets be, and where are the supplier personnel who have ongoing access?
Secondly, we must consider the upkeep requirements of the capability. Are spare parts, support and maintenance services available in Australia? How will the needs of Australian customers be balanced against those of other global customers, especially in a crisis?
Thirdly, controls over the capability must be determined. Who owns the intellectual property and underlying technology? Who decides how it will be developed and where it will be sold and supported? Could the owner effectively make the capability unavailable to the buyer in the future, even after it has been purchased and installed?
It is important to understand what outcomes we can influence by ensuring sovereignty over one or more of the above aspects.
It can provide confidence in the reliability and quality of products and services, and reassure us that a product or service will be available when needed. This would be reinforced by the guarantee of ongoing support and maintenance, as well as assurance over who may have the ability to disable or restrict ongoing usage in the future.
Greater control over the development of capabilities could mitigate many of the problems associated with foreign supply, such as quality-control issues and deliberate interference with supplied products. Local control over design and development would allow some products and services to be tailored to our environment.
It would also benefit our economy, for example by employing Australians, creating Australian-owned intellectual property or paying Australian taxes—though economists would argue that the economic effect is in fact negative, since a directed use of resources must be less profitable than the market-determined one that it displaces.
We can’t just blithely ask for all of the above. To avoid unneeded costs and to ensure we reap the benefits of global advances in technology, we must decide which outcomes are most important. Understanding this will allow us to determine which capability aspects actually need to be sovereign.