From Hub-and-Spoke to Integrated Production: The Emerging Asian Defense Ecosystem Looks More Like the EEC than NATO

CEE Staff
Feb 18, 2025
7 min read

Executive Summary

Washington's strategic community has spent the past several years debating whether an "Asian NATO" is emerging in the Indo-Pacific. The question itself may be misleading. What is taking shape across the region bears less resemblance to the North Atlantic Treaty Organization than to an earlier, and ultimately more consequential, experiment in strategic cooperation: the European Economic Community and its predecessor, the European Coal and Steel Community.

The distinction is not semantic. It reflects a fundamental difference in how security commitments are being constructed. NATO rests on a collective defense treaty, the political bargain that an attack on one member constitutes an attack on all. The Indo-Pacific architecture, by contrast, is being built through the progressive integration of defense-industrial production, technology supply chains, and control over strategic raw materials. The United States has committed $9 billion to building Australia's submarine industrial base. Four allied nations (US, Japan, South Korea, and Taiwan) now control 82% of global semiconductor production and are systematically relocating critical nodes into each other's territories. The Quad and Five Eyes frameworks are coordinating access to critical minerals to reduce collective dependence on non-allied suppliers.

These are not confidence-building measures. They are structural economic commitments that create what Jean Monnet, architect of European integration, termed "de facto solidarity" or interdependencies so deep that strategic realignment becomes economically prohibitive. When Taiwan Semiconductor Manufacturing Company constructs its most advanced fabrication facilities in Arizona, when Australia hosts production lines for Virginia-class submarines, when Japan integrates its munitions production with U.S. defense contractors, these investments represent sunk costs measured in tens of billions of dollars and supply chains that cannot be rapidly reconfigured. The economic logic of abandonment becomes untenable.

This sectoral approach to integration starts with discrete but strategically vital industries rather than comprehensive treaty obligations. This mirrors the gradualist model that transformed Western Europe from a collection of rival powers into an integrated economic bloc. For U.S. strategy, the implications are significant. Rather than pursuing a formal multilateral alliance that regional political constraints make infeasible, Washington should recognize and accelerate the economic integration already underway. The policy challenge is not to negotiate a grand treaty, but to deepen industrial co-production, harmonize technology-sharing frameworks, and expand the sectoral partnerships that are quietly remaking the strategic geography of the Indo-Pacific.

The Economic Logic of Sectoral Integration: A Historical Parallel

The allure of an "Asian NATO" overlooks the fundamental difference in the strategic landscapes of post-war Europe and the contemporary Indo-Pacific. NATO was a response to a singular, existential military threat, enabling a comprehensive collective defense pact. The Indo-Pacific, by contrast, is a region of immense economic dynamism, political diversity, and deep economic entanglement with China, the very power driving new security alignments.

A formal, binding military alliance is therefore politically untenable for most regional actors.

Jean Monnet's foundational insight in creating the ECSC was that political integration could be achieved as a byproduct of economic necessity. By pooling the means of war (coal and steel) under a supranational authority, the ECSC made a future Franco-German war "not merely unthinkable, but materially impossible." This sectoral integration created what Monnet called "de facto solidarity," fostering habits of cooperation that eventually "spilled over" into broader economic and political domains, culminating in the EEC and later the European Union.

This same logic is at play in the Indo-Pacific today. Instead of a grand political treaty, regional actors are creating "de facto solidarity" by integrating the strategic economic sectors that form the sinews of modern deterrence. The goal is not a mutual defense guarantee, but the creation of a resilient, interdependent, and technologically superior production base that can collectively out-compete and deter a potential adversary.

The New Sinews of Deterrence: Deconstructing Asia's EEC-Style Architecture

The emerging Indo-Pacific security ecosystem operates as a series of overlapping, functionally-defined economic blocs, each mirroring the sectoral approach of the ECSC and EEC.

Sector 1: The Defense-Industrial Base as a Common Market

The most direct parallel to the ECSC's pooling of coal and steel is the ongoing integration of the allied defense-industrial base. This is not merely about arms sales, but about creating a shared production capacity. The AUKUS partnership is the leading example. Beyond the acquisition of submarines, it represents a multi-decade project to create a seamless defense industrial ecosystem. The economic commitments are substantial, including a reported $9 billion U.S. investment in Australia's industrial base and a reciprocal $6.3 billion from Australia . More importantly, legislative reforms in all three countries are dismantling barriers to trade and technology transfer, giving over 200 Australian companies unprecedented access to U.S. and UK defense markets.

The logic extends to the U.S.-Japan alliance, which is explicitly moving from interoperability to integration. The plan to co-develop and co-produce munitions and other defense platforms represents a fundamental shift. It transforms the relationship from a simple buyer-seller dynamic to one of shared production, creating supply chain interdependencies that bind the allies' security together. This is the essence of "production diplomacy": using shared industrial projects to forge a common defense market among trusted partners, thereby increasing collective industrial capacity and resilience against supply chain shocks in a crisis.

Sector 2: Securing the Digital Economy – The Semiconductor Alliance

If coal and steel were the strategic materials of the 20th century, semiconductors are the strategic foundation of the 21st. The so-called "Chip 4" or "Fab 4" alliance (United States, Japan, South Korea, Taiwan) is a clear instance of sectoral integration aimed at securing the digital economy. This informal bloc controls a staggering 82% of the global semiconductor industrial output, with each member playing a specialized role: the U.S. in high-end design and equipment, Taiwan in leading-edge fabrication, South Korea in memory chips, and Japan in specialized materials and equipment .

The economic logic is to build a resilient, redundant supply network among allies, de-risking the supply chain from potential disruption or coercion. This is being underwritten by massive state-led industrial policy, including the U.S. CHIPS and Science Act ($52 billion), which has catalyzed tens of billions in investments from Taiwanese and South Korean firms into the U.S.

To be clear, this coordinated, state-directed effort to create a secure, allied-only semiconductor ecosystem, mirrors the command structure of the Chinese military economy. The scale of economic integration is sizable even if still insufficient by many analysts' estimation.

More than prompted FDI, these investments represent the physical relocation of critical production nodes into allied territory, creating irreversible economic interdependence. When TSMC builds its most advanced fabs in Arizona, or Samsung expands its U.S. footprint, they are embedding their corporate futures into the American security umbrella, just as French and German steel producers were embedded in the ECSC's common market.

Sector 3: Controlling the Raw Materials of the Future – Critical Minerals

A third layer of this EEC-style architecture is emerging around the supply chains for critical minerals essential for both defense and clean energy technologies. Recognizing their vulnerability to China's dominance in this sector, allied nations are creating cooperative purchasing and processing frameworks. The Quad (U.S., Japan, Australia, India) has established a Critical Minerals Partnership, and the Five Eyes intelligence alliance is now coordinating to counter the dumping of these materials by non-market actors.

These initiatives are moving beyond simple information sharing to concrete economic mechanisms, such as joint investment in mining and processing facilities, coordinated offtake agreements to guarantee demand for non-Chinese suppliers, and the development of shared strategic reserves. The U.S.-Australia Critical Minerals Framework Agreement, finalized in October 2025, exemplifies this approach, establishing protocols for reserve mechanisms and exploring opportunities for long-term offtake arrangements. This represents a sophisticated form of economic statecraft designed to build secure, parallel supply chains for the foundational inputs of the modern economy, directly challenging a key source of a rival's leverage.

Why This Model Works: The Economics of Strategic Co-Dependence

The genius of the EEC model was that it created economic relationships so deeply intertwined that political rupture became economically catastrophic. A French decision to invade Germany would have meant severing its own access to German coal and steel, crippling its own industry. The cost of defection was made prohibitively high through economic integration.

The same dynamic is being constructed in the Indo-Pacific, but with 21st-century strategic materials. When Australia hosts the production facilities for Virginia-class submarines, when Japan co-produces advanced munitions with the United States, when Taiwan's most advanced semiconductor fabs operate on American soil, these are not simply defense partnerships. They are creating structural economic dependencies that make strategic abandonment unthinkable. An American withdrawal from the region would mean severing access to critical defense production capacity. A Japanese pivot away from the alliance would mean losing access to co-developed weapons systems and integrated command structures. The economic costs of strategic realignment are being deliberately engineered to be prohibitively high.

This is fundamentally different from NATO's model. NATO relies on a political commitmen that must be continually reaffirmed through political will. The Asian model is building economic realities that constrain political choices. It is creating what international relations scholars call "costly signals" of commitment, where the investments are so substantial and the integration so deep that reversal becomes economically irrational.

Policy Recommendations for the United States

To effectively lead this emerging network, the United States must fully embrace its role as a systems integrator for a new model of economic security.

Act as a Systems Integrator, Not Just a Hub: U.S. policy should move beyond its traditional "hub-and-spoke" role to become a true systems integrator. A key priority must be the reform of U.S. export control regulations, particularly the International Traffic in Arms Regulations (ITAR), for trusted allies. Creating a tiered system that allows for seamless trade and technology transfer within a core group of industrial partners (like AUKUS members and Japan) is essential to realizing the vision of a common defense market.
Expand the "CHIPS" Model to Other Strategic Sectors: The CHIPS Act provides a powerful template for state-led industrial policy to foster allied co-dependence. Congress and the administration should develop similar funding and coordination mechanisms for other critical sectors, such as biotechnology, quantum computing, and advanced materials. Creating a dedicated "Allied Production Fund" could co-finance joint ventures and R&D projects in these areas, accelerating the development of secure, allied-centric supply chains.
Formalize a "Graduated" Architecture of Integration: The U.S. should explicitly design a multi-tiered architecture. This would involve a core tier of deeply integrated industrial partners (e.g., AUKUS, Japan), a second tier of partners for specific functional cooperation (e.g., South Korea and India in the Chip 4), and a third tier for broader security dialogues (e.g., ASEAN). This approach allows countries to participate at levels consistent with their strategic interests and capabilities, creating a more inclusive and resilient network.
Invest in the Connective Tissue of Integration: The long-term success of this network depends on the "soft infrastructure" that enables deep integration. The U.S. should lead efforts to create common standards for secure data sharing, establish joint R&D hubs, and fund expanded workforce mobility programs (e.g., an "AUKUS Visa") to facilitate the free movement of scientists, engineers, and skilled technicians among allied nations. This investment in human capital is the ultimate foundation of a truly integrated and innovative defense ecosystem.