What happens to trade promotion when economics takes a back seat to security
The global trade environment that shaped the last 30 years is changing fast - and trade promotion is changing with it.
As Michael Every has argued in his recent Rabobank analysis - and in his extended conversation with Adam Taggart on Thoughtful Money - we are moving into a neo-mercantilist era. Governments now prioritize supply chain resilience, strategic autonomy, and allied production capacity over lowest-cost efficiency. This shift is not ideological. It is practical - driven by pandemic disruptions, semiconductor shortages, and rising geopolitical risk. Every frames it as a defensive posture rather than an offensive one: countries rebalancing trade toward domestic production and allied integration, not simply waging tariff wars.
The United States and its allies are actively rebuilding industrial capacity in critical sectors - defense, energy, logistics, and advanced manufacturing - even when that capacity costs more than offshore alternatives.
For trade commissioners and economic development organizations, this fundamentally changes what success looks like.
Why the Old Playbook No Longer Delivers Results
What Neomercantilism Changes for Your Manufacturers
Under neomercantilism, the United States is not reshoring semiconductor fabrication because Taiwan became uncompetitive. It is reshoring because geographic concentration in Taiwan creates unacceptable geopolitical risk.
This creates three shifts that matter for how you position your manufacturers:
Manufacturing location is now a strategic decision, not just an economic one. When the U.S. Department of War (DoW) needs to expand shipbuilding capacity, repair infrastructure, or critical component supply chains, allied nations with qualifying country status have structural advantages. A Malaysian precision manufacturer or Philippine logistics provider is not competing purely on price - they are offering supply chain resilience the United States cannot achieve domestically at reasonable cost.
Bilateral defense agreements now carry commercial value. Qualifying country status under Defense Federal Acquisition Regulation Supplement (DFARS), Buy American Act exemptions, co-production agreements, and defense trade cooperation treaties are no longer diplomatic abstractions. They are market access mechanisms that allow your manufacturers to participate in U.S. defense procurement on terms that bypass restrictions domestic suppliers face - particularly for innovation development contracts where allied expertise accelerates capability delivery.
Your role shifts from attraction to implementation. The question is no longer "how do we convince companies to invest here" but rather "how do we position our strategic manufacturers to capture value as supply chains reconfigure." You are not selling tax incentives. You are implementing bilateral industrial policy.
How This Works in Practice
Traditional FDI attraction required convincing a foreign corporation to build a facility in your country first - a multi-year capital commitment with significant execution risk. Then chase contracts.
The new model flips that sequence. Validate demand first, then invest.
The DoW uses Commercial Solutions Opening (CSO) procurement to bring in non-traditional contractors with proven dual-use technology. Following the January 2026 Hegseth Memorandum that restructured the innovation ecosystem under a single Chief Technology Officer, the Defense Innovation Unit (DIU) - now designated a DoW Field Activity - continues to serve as the primary interface between commercial technology companies and Department needs. A Lithuanian defense technology company or Philippine logistics provider can submit white papers directly to DIU, demonstrate capability through technical demonstrations, secure prototype awards, and transition into multi-year production contracts - all without relocating operations or forming a U.S. entity.
For manufacturers from qualifying countries that are not on the covered foreign country list (China, Russia, Iran, North Korea, Cuba), no U.S. entity is required for this pathway.
This is not theoretical. The new U.S. maritime industrial strategy explicitly calls for allied shipyard capacity to close domestic production gaps. The Defense Production Act Investments program prioritizes critical supply chain resilience. CSO allows manufacturers to access DoW buyers without navigating traditional proposal processes or establishing U.S. subsidiaries first.
Your manufacturers already have the technical capability. What they lack is knowledge of procurement pathways, understanding of regulatory requirements, and relationships with contracting officers who control budget authority.
This is where bilateral industrial policy implementation becomes tangible - helping priority manufacturers navigate from market validation to supply chain integration to multi-year production contracts.
Strategic Positioning vs Business Development
Here is the critical distinction:
A Philippine manufacturer winning a $40 million host nation logistics contract at Clark Air Base is not just another export deal.
It is the Philippines becoming embedded in U.S. Pacific military infrastructure in ways that create:
Diplomatic leverage: When your manufacturers are critical nodes in U.S. defense supply chains, alliance value extends beyond security treaties. You become operationally indispensable, not just strategically aligned.
Technology access: Department of Defense contracts require military specifications, quality standards, and production processes that elevate manufacturing capability. This is technology transfer through commercial relationship, not government-to-government assistance programs.
Investment security: Defense contracts are multi-year, inflation-adjusted, and insulated from commercial market volatility. A manufacturer with a five-year Department of Defense production contract has revenue certainty that enables facility expansion, workforce development, and R&D investment.
Geopolitical insurance: Economic integration with the United States through defense industrial participation creates mutual dependency that reinforces security commitments. It becomes harder to walk away from allies when your supply chains depend on them.
This is not just good for your manufacturers. It is national strategy implementation.
The Countries Where This Matters Most
Malaysia: You are navigating economic exposure to China while strengthening security alignment with the United States and AUKUS partners. Your semiconductor manufacturing capacity positions Malaysia as a critical friend-shoring destination - but only if manufacturers can demonstrate they meet U.S. military standards and supply chain security requirements.
Philippines: You need economic returns from Enhanced Defense Cooperation Agreement (EDCA) sites and military infrastructure investments. Host nation logistics contractors at Clark, Subic, and future EDCA locations can capture hundreds of millions in DoW spending - but only if positioned as strategic partners, not just service providers.
Lithuania: You are leveraging frontline state status into economic value beyond NATO burden-sharing. Your defense technology manufacturers can become indispensable suppliers to U.S. European Command - creating resilience the United States needs while generating revenue your economy requires.
Australia: You are implementing AUKUS without the domestic industrial capacity to build submarines, maintain increased U.S. naval presence, or support expanded military infrastructure. Your precision manufacturing and shipyard capacity can capture massive defense spending - if positioned correctly within procurement frameworks.
What Success Looks Like Now
Stop measuring success by FDI announcements and trade mission attendance.
Start measuring: number of manufacturers with active DoW contracts, value of multi-year production agreements versus one-time purchases, technology sectors where your country has qualified supplier status, depth of integration into U.S. defense supply chains, and bilateral framework utilization including co-production agreements and defense trade cooperation.
This is not about helping more companies export to America.
It is about embedding your strategic manufacturers into supply chains the United States is rebuilding regardless of cost - and ensuring your country captures the geopolitical and economic value that positioning creates.
The Bottom Line
Neomercantilism is not coming. It is here.
Trade commissioners who understand this shift will position their countries as indispensable partners in allied supply chain resilience. Those who keep running the old FDI playbook will watch strategic value flow to competitors who recognized the game changed.
The commissioners who act on this first will not just attract investment. They will shape how allied industrial capacity gets built - and their countries will be the ones embedded in the supply chains that matter most.
If you are a trade commissioner exploring how to position your manufacturers for U.S. defense supply chain integration, we should talk. SelectGlobal works with allied-nation trade offices to navigate the specific procurement pathways, regulatory requirements, and contracting relationships that turn strategic alignment into commercial value. Reach out at selectglobal.com to schedule a discovery conversation.
