Economic defence alliances may help deter economic warfare

The world is entering a new era of economic warfare, but current international institutions are not right to deal with the problem. Anthony Vinci proposes the creation of multilateral economic defence alliances as a way for countries to defend themselves. Companies and investors will also need to consider how to protect their own interests in this new world. This is the second in a series of blog posts summarising the new report ‘Protect, Constrain, Contest’, by LSE IDEAS, the foreign policy think tank at LSE.

The world is entering a period of rapid evolution in economic statecraft driven by the rise of China, economic devastation from COVID-19 and geopolitical flux within the US, EU, UK, and other nations. Such evolution is driving new offensive approaches and in turn this must drive the development of defensive measures by democratic states.

There is widespread recognition that the current national security competition with China is as much economic as military. Chinese economic threats range across a spectrum from traditional economic competition, such as Made in China 2025, to geopolitical power plays like the Belt and Road Initiative (BRI) to outright systematic theft of intellectual property.

China is also using its economic power to achieve geopolitical ends through the threat and execution of unilateral, punitive tariffs and other coercive methods. This has been amply demonstrated through its recent interactions with Australia, for example, in which the Chinese government used tariffs and other economic weapons on key Australian exports like beef, barley, and wine to punish the nation for its investigation of China’s role in the spread of COVID-19. Similar coercive measures have been pursued against Sweden, Germany, and other nations.

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