What do Moldovan wine, Norwegian salmon, Philippine bananas and Dysprosium have in common? They are all instruments of political suasion exerted upon trading partners by China and Russia, weapons in an international War by Other Means. That is the title of a new book which urges the US to up its statecraft.
'The contest for leadership in Asia is being waged in primarily economic terms,' authors Robert Blackwill and Jennifer Harris argue elsewhere. 'Washington still reaches too quickly for its gun over its purse to solve its problems abroad.'
Their book is not recommending a more retiring world role, but the opposite: an activist strategy to maximise American interests through trade, finance and investment. The Clausewitzian title is provocative, though one has to wonder about the increasingly common conflation of economic and military lexicon in our public discourse. Edward Luttwak, in his high-falutin way, coined geo-economics 'the continuation of the ancient rivalry of nations by industrial means.' And when military commanders say business-y things like 'our customer is the enemy, the product we deliver is violence,' the metaphor is becoming stretched.
Yet Harris and Blackwill's point should be taken seriously. America's major rivals are confronting it not just through military probing but by coercing smaller countries (including its allies) through economic punishment.
The most ruthless practitioners are said to be China, Russia and other state capitalists, countries in which national governments are principal actors in the realm of business. Referring to development banks, the authors argue that 'China's CDB and Brazil's BNDES...can wage diplomacy with capital on a scale largely unmatched within the West.'
It is China's statecraft that most impresses the authors. 'Chinese leaders draw geopolitical leverage from (an) ad hoc regulatory system and the arbitrariness it affords, venting displeasure with the foreign policy decisions of another country through punishing its companies.' When Washington criticises Beijing's state-sponsored hacking of American businesses, purportedly '(it) puzzles the Chinese, for whom their state-owned industries are part of their national security structure. They don't really understand what it is the US is trying to accomplish in making this distinction.' That is balderdash, of course. The Chinese well understand the difference between state mercantilism and private capitalism; they merely prefer to mix rather than separate them. [fold]
In its own region, 'China's entire strategy is predicated on the belief that exercising a military option in the next decade would simply prove too costly for (all parties). Thus Beijing builds and exercises its power projection not primarily through the deployment of military assets...but rather through coercive and incentivizing geoeconomic policies toward its neighbors.' The TPP is an essential instrument of normative American counter-influence; failing to ratify it now would do Washington's credibility in Asia great harm. All the more so because American taxpayers (understandably) would not support largesse-dispensing black holes like CDB and BNDES.
This book raises important questions. Here are three.
First, does cold-blooded power-maximising statecraft actually work in the long run? Weak countries don't like to be bullied. They will try to divert and diversify their trade and finance, to join alternative systems, balancing with others where they can. The US exerts geo-economic influence today partly because of its distaste for overtly linking politics with economics. To quote Robert Gilpin: 'While (the) separation (of) diplomacy and the market...has frequently been violated by the US itself, this ideal has correctly remained a goal of American foreign policy...Depoliticized and non-discriminatory trade not only fostered an unprecedented era of world commerce but it greatly reinforced the harmony of interest among the US and its allies.' Has Putin's bullying geo-economic strategy worked? Does the US really want to play his game? At what point does statecraft just become naked hegemonic mercantilism?
Second, has geo-economics suddenly 'returned' and did it ever go away? Many today feel the WTO's golden era of free trade has passed and that a worrisome new world of mercantilism and protectionism is upon us. Worse, Harris and Blackwill argue that the US has been napping. 'The constraint on geoeconomics in US foreign policy today is not so much ideological discomfort or bureaucratic paralysis as basic neglect.'
But third, has the US really been so idle? The likes of Cuba and Iran might disagree. Sanctions are among the most potent geo-economic tools and have been used by America with devastating effect. The authors give them little more than a passing mention, like this parenthetical aside on page 138: 'the US has been the principal country imposing sanctions on more than 120 instances over the last century.' Oh, right then. A harder question is whether there are more effective ways to influence others and advance American interests than applying embargoes (where China and Russia unfailingly fill the void anyway). 'Skeptics will argue that straightforward attempts to link economic and geopolitical agendas will result in a race to the bottom. But the alternative cannot be to do nothing.' The US has hardly been doing nothing.
The luminaries who blurb the book are an impressive bunch — Kissinger, Summers, Petraeus — so this topic must be getting attention in DC. The authors are senior scholars and diplomats in the highly influential Council on Foreign Relations. They will have the ear of whomever is president by this time next year. Will America become more selfish and sharp-elbowed over trade and finance, even if it sheaths its military blade? The world watches with trepidation. Another reviewer is puzzled: 'it seems odd that the United States — which has one of the world's most lucrative markets, has vast reserves of capital for investment, controls the world's reserve currency and has done a great deal to set the rules of the global business order — chooses not to use these powers much more effectively.' Why couldn't the US become more like Russia and China, perhaps, and exploit its own trading system more cynically? To ask that question is to know the answer.