Beyond sheer size, sums, and growth rates, four more variables help explain a country’s ability to translate its domestic market into geopolitical leverage:
ability to exercise uniquely tight rein over access to domestic markets,
capacity to redirect domestic import appetites to make a geopolitical point,
actual or perceived consensus that a country’s domestic market is too large to ignore (this, of course, especially applies to China and is merely a regional dynamic in the case of Russia), and
a growth trajectory that makes other countries see rising future costs to opposing its foreign policy interests today. Of the various geoeconomic instruments currently in use, these domestic market features are probably most relevant in determining how fruitful particular trade and investment policy and sanctions efforts will be in producing geopolitical benefits.
That is a great framework to think of international trade in geoeconomic terms. It is from the book, ‘War by other means’ by Robert Blackwill and Jennifer Harris. I have finished reading five of the ten chapters of the book. I found it rich in terms of information. The geoeconomic strategies and tactics adopted by Russia and China are extremely interesting and useful.
I was pleased to note that the authors confirm my understanding of geoeconomics: the use of economics as a tool to further the nation-state’s geopolitical and international power projection goals and not the other way around.
In general,the authors note that China has scored tangible gains – at least in the near term – from their application of geoeconomics as a weapon/tool to achieve their goals. This is what they write:
China openly flexes geoeconomic muscle—both positive and negative—and much of the time it succeeds in advancing Chinese geopolitical interests, at least to some degree, on issues of concern to it. This is not to suggest that China’s geoeconomic tactics are always efficient, in either economic or geopolitical terms, or that there are not cases of overreach and backfire. But by exercising this pressure China has managed to deter arms sales to Taipei and to steadily reduce the number of countries to recognize Taiwan; it has curtailed the activities of the Dalai Lama; it has deterred countries from political showings of support for human rights issues; it has registered noticeable impacts on votes in the UN and frustrated various Western efforts to pressure North Korea; it has given tactical support to a newly emboldened Russian foreign policy; and, not least, it has challenged the balance of power in Southeast Asia, forcing some countries to alter course in pursuing territorial claims, and placing others on notice.
In that sense, what President Trump has been doing in his seven months is to bring back geoeconomics to American foreign policy which, the authors say, America has grown out of. My guess is that, in principle, the authors might approve of what the Trump administration is doing.
In that context, read what Professor Graham Allison had written in the Wall Street Journal on the President’s handling of North Korea. He seems to find a logic in the seeming irrationality. In fact, that is the very idea.
Also, recall what William Galston wrote on August 9 in WSJ on technology transfers and China:
If turning over our technological crown jewels to a foreign power is against the national interest, then our government should have the power to prevent it. But wielding this power without blowing up the international trade regime will not be easy. [Link]
In other words, it is not easy dealing with someone who thinks they obey only the rules they make. Of course, today’s superpowers behaved the same way when they were rising powers. Now that they are status quo powers, the aspiring powers would challenge the order that they established. So, both the US and China are doing what they are expected to do. But, from the American point of view, confronting the challenge of China would not be easy and criticising the approach of the Trump administration is easier than coming up with more feasible alternatives.
Chinese reactions show that they are worried by the U.S. announcing an investigation into the theft of intellectual property by Chinese firms. The investigations could pave the way for retaliatory action by the United States. See here and here. China says that the American actions threaten to blow up the global trading system but that is what is needed, according to William Galston, to stop China’s ‘unfair trade practices’.
One final point: we should not forget that China’s domestic economic vulnerabilities have risen in tandem with its ability, willingness and brazenness in wielding geoeconomic tools. Perhaps, there is a causation from the former to the latter? I am yet to read the latest IMF Article IV Annual Economic Assessment of the Chinese economy and ‘Selected Issues’. I understand that the Fund has been rather forthright in its bleak assessment of the Chinese economy risks.