A New Stage in US-China Rivalry?
We appear to be entering into a new geoeconomic world order, characterized by great power rivalry between the United States and China, and the clear use of economic tools to achieve strategic objectives. This increased convergence of economic and security thinking as well as strategies thereby is likely to lead to a significant restructuring of the laws and institutions that govern international trade and investment.
In the post-Cold War period, the old international economic world order flourished. It was characterized by a relative separation of the realms of security and economics; a primary focus on maximizing absolute economic gains; and a tendency to treat interdependence as a good that would facilitate the goal of increased economic efficiency. In the new geoeconomic world order, the balance and the relationship between economics and security have changed. The new order is characterized by a higher degree of convergence between security and economics; a greater focus on relative economic gains given their implications for security; and increased concern over the security risks posed by interdependence in terms of undermining state control, self-sufficiency and resilience.
Geoeconomics can be defined as the “use of economic instruments to promote and defend national interests, and to produce beneficial geopolitical results.” The term was originally coined by American strategist Edward Luttwak in 1990 following the fall of the Berlin Wall. Luttwak argued that the triumph of capitalism over communism meant that:
“The methods of commerce are displacing military methods – with disposable capital in lieu of firepower, civilian innovation in lieu of military-technical advancement, and market penetration in lieu of garrisons and bases. States … will not disappear but reorient themselves toward ‘geoeconomics’ … the best term I can think of to describe the admixture of the logic of conflict with the methods of commerce.”
Luttwak’s prediction was not so much wrong as premature. Instead, in the post-Cold War era, national security – or, at least, US national security – and international trade and investment appeared to operate on relatively independent tracks.
On the one hand, trade and investment agreements with compulsory dispute settlement proliferated. In accordance with one strand of liberal international relations theory, economic interdependence was assumed to promote peace and cooperation by increasing the costs of conflict between, and among, states. Increasing economic interdependence and reducing barriers such as tariffs were sold as win-win arrangements that increased economic efficiency and maximized wealth by allowing states to play to their comparative advantages. The proliferation of international economic law agreements, and the legal disputes arising from them, resulted in a vibrant subfield of law with a growing body of highly technically adept legal experts who believed in the “de-politicization” of economic disputes.
Read More: The New Liberal World Order
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