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New Economic Statecraft: Industrial Policy in an Era of Strategic Competition
Abstract
The 2018 U.S. National Defense Strategy notes that the United States faces “an increasingly complex global security environment, characterized by overt challenges to the free and open international order and the re-emergence of long-term, strategic competition between nations.” In the ensuing months, much has been made of the security-related aspects of this return to great power competition — including Donald Trump’s role in the decline of the existing arms control architecture, responses to Russia’s annexation of Ukraine, and China’s use of subconventional — or “gray zone” — military operations in the South China Sea. What this analysis tends to miss, however, are the economic dimensions of strategic competition. To address the question of how insights from international political economy and security studies can be usefully combined to examine strategic competition, we examine how economic statecraft increasingly takes the form of economic policy beyond sanctions regimes. We argue that economic statecraft has become an increasingly central aspect of geostrategic consideration and consider how economic statecraft is being transformed in the current era.
... Today, we again observe a changing global context. However, both the nature of technology and the patterns of competition and conflict between states are different (Aggarwal & Reddie, 2020;Babić et al., 2022). ...
... For one, the decline of American hegemony and the rise of China have given rise to a 'new global disorder' and a 'decentring of global capitalism' much more so than was the case in the 1980s (Lavery & Schmid, 2021). Crucially, as the literature on geoeconomics and the new economic statecraft has documented, there is a strong economic dimension to this geostrategic competition (Aggarwal & Reddie, 2020;Babić et al., 2022;Weiss & Thurbon, 2021). At the same time, technological capacity has become essential to the effective use of economic statecraft. ...
... Technological dependence, however, not only brought 'new risks' (Interview 5) to the integrity and resilience of European economies. Digital technologies like chips also became a critical battleground in geopolitical struggles given their 'ubiquitous' and 'intrusive' nature (Interview 4), their dual-use potential, and the geopoliticalnot just economicthreat that China poses (Aggarwal & Reddie, 2020;Miller, 2022). Chips, for example, are not only the 'cornerstone' of 'everything we're competing on; they could also be a devastatingly powerful weapon', as a US official put it (quoted in Miller, 2022). ...
The fear of falling behind has been a driving force of European integration. Historically, Europe’s response to the looming angst of declining competitiveness has been more market-creation, not market-direction. Recently, however, Europe has–in the name of safeguarding Europe’s technological sovereignty–taken on a much more active role in directing economic activity towards sectors and technologies deemed geopolitically or geoeconomically important. In this paper, we attempt to explain this ‘geo-dirigiste’ turn. We reconstruct the evolution of EU industrial policy through the lens of Europe’s fear of falling behind, drawing not only on primary (including archival) and secondary sources, but also on original interviews and deep transfer learning applied to an original dataset of 66.548 documents. Focusing on Europe’s changing technological and geopolitical context, its coalitional underpinnings, and the role of ideational politics, we document and explain the historic shift away from market-creation and towards supranational market-direction in EU industrial policy. © 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
... These institutions facilitated the development of interconnected global economic systems, promoting trade, investment and financial cooperation among states. As nations became increasingly interlinked and reliant on one another, economic Margalla Papers-2023 (Issue-I) [1][2][3][4][5][6][7][8][9][10][11][12] interdependence deepened, shaping the modern global economy. In this scenario, multilateralism and economic interdependence dividends are viewed as more vital than pursuing traditional geopolitical rivalries. ...
... 7 It may seem that geoeconomics follows the same logic as geopolitics and pursues statecraft through economic instruments. Scholars such as Scholvin and Wigell view "geoeconomics as an Margalla Papers-2023 (Issue-I) [1][2][3][4][5][6][7][8][9][10][11][12] alternative form of power politics" 8 and consider it a convenient and acceptable instrument to pursue policy objects through economic sanction, cooperation and competition, trade, incentives, etc. Today states increasingly view geoeconomics as a more lucrative and beneficial means of achieving national security objectives. ...
... Furthermore, Pakistan can facilitate China's transit trade with Western Asia, provide an energy corridor for importing oil from CARs and the Gulf, and offer naval facilities on the Arabian Sea coast to safeguard its energy supply line from the Middle East. Pakistan can also act as a bridge between Afghanistan and India for trade Margalla Papers-2023 (Issue-I) [1][2][3][4][5][6][7][8][9][10][11][12] through the Chaman-Wagha border. Pakistan's Karachi and Gwadar ports offer convenient access to the warm waters of the northwestern Indian Ocean, one of the busiest global trade routes. ...
Preferring geoeconomics over geopolitics is trending globally, and Pakistan is also an aspirant to join the suit. In this regard, various factors influence Pakistan's shift towards geoeconomics, including economic interests, regional dynamics, domestic considerations, and external influences. Pakistan must make confident choices despite the challenges posed by its geography and world politics. Although its domestic economy is struggling and requires urgent attention, BRI and CPEC offer a promising opportunity for Pakistan to strengthen its economy. However, the impact of CPEC has been limited due to regional constraints and can only be realised once regional connectivity and trade and energy routes are completed and operationalised. The West has also launched its B3W initiative, recognising China's advantage in connectivity. They have warned against joining BRI, claiming it is a debt trap strategy. This paper argues that at this critical juncture of a geo-economic pivot, Pakistan must re-evaluate its choices and focus on developing its economy while prioritising economic development. It also examines the options available to Pakistan to facilitate this geoeconomic pivot effectively. The choices and their implications are likely to be persuaded by geopolitical constraints.
Bibliography Entry
Bhatti, Amjad Mahmood, and Nataliya Shahrukh. 2023. "Navigating the Path Towards Geoeconomics: An Analysis of Opportunities and Challenges for Pakistan." Margalla Papers 27 (1): 1-12.
... The Chinese government requires a stable supply of chips without increased prices [40] for the stable growth of China's set industry. In contrast, the US intends to widen the gap between itself 1 Integrated circuits (ICs) can be divided into general-purpose products, such as central processing units and memory chips, and application-specific integrated circuit (ASIC) products. The general purpose of the IC product market is relatively large and mainly serviced by integrated device manufacturers (IDMs), which have vertically integrated the production of IC design and IC manufacturing. ...
... We not only empirically determined the statecraft strategies of the US and China during the Chip War but also examined the economic statecraft strategies of East Asian economies. As a semiconductor manufacturing powerhouse, East Asian middle powers "are able to influence the conduct of great powers," while applying balancing, bandwagoning, and hedging behavior toward rising and status-quo powers [1]. East Asian countries can be called middle powers because they are not only influenced by the policies of the great powers but can also influence those great powers through their economic statecraft. ...
In few industries does the transfer of industrial leadership play a more significant role in the hegemonic competition between superpowers than in the semiconductor industry. As shown in the case of the United States (US)-Japan semiconductor conflict in the 1980s, who takes the lead will be critical in determining the future trajectory of the hegemonic competition between the US and China. This study examines how economic-security linkages and chip-related factors jointly affect the US-China Chip War and the evolving dynamics in Asia at the regional level. The economy-security nexus responds sensitively to the geopolitical structure and degree of economic dependence. Changes in the geopolitical structure create variations in which the economic-security nexus is sometimes either integrated or separated. Chips are currently the world's most critical technology, evolving quickly to create technological regimes and path dependence. Among the diverse technological features of semiconductors, this study focuses on the industrial position of an individual economy's specialization in the chip value chain. Individual states devise statecraft strategies to maximize their economic security gains and minimize risks. In the semiconductor sector, the joint effects of the economic-security nexus and chip-related factors shape each involved economy's statecraft strategy. This study theoretically reveals the concrete mechanisms through which the changing economic security nexus shapes the economic statecraft of individual economies in the semiconductor value chain. The study also explores how East Asian economies adopt their own strategies along the spectrum of balancing, hedging, and bandwag-oning in the context of competition between superpowers.
... Rather, in today's world and especially for the EU, power is inherently linked to economics, to the EU's position in the global market, and its ability to reduce one-sided dependencies on other countries (e.g. Aggarwal and Reddie 2020;Meissner 2018). Geoeconomics provides an even more differentiated perspective on the EU's external relations and its position in the international (trade) system. ...
... The concept refers to the 'geostrategic use of economic power' (Wigell 2016, p. 137) in the service of political and security ambitions. Geoeconomics, thus, grasps economic aspects of strategic political and security competition among states and state-like entities (Aggarwal and Reddie 2020). ...
Russia’s war against Ukraine unfolded unprecedented geopolitical, economic and energy-related tension in the European Union (EU). Amidst this situation, decision-makers and scholars alike have returned to concepts of geopolitics to reflect the EU’s external affairs and its position in the international (trade) system. Indeed, geopolitical considerations help us to understand the sanctions imposed by the EU against Russia. The restrictive measures against Russia and the Russian-controlled areas in Ukraine are, to date, the most comprehensive measures adopted autonomously by the EU. They reflect the EU’s geopolitical considerations in carving out a strong response to Russia’s military aggression against Ukraine and the unparalleled political and security threat in Europe.
... Hasil penelitian menunjukkan bahwa peran Hukum Tata Negara dalam pengelolaan kawasan hutan sangatlah penting. Melalui Hukum Tata Negara, dapat dibentuk kerangka hukum yang mengatur pengelolaan kawasan hutan, menetapkan kelembagaan yang bertanggung jawab, menyediakan instrumen hukum yang diperlukan, dan menyelesaikan sengketa yang terkait dengan pengelolaan kawasan hutan (Aggarwal, 2020). Dengan demikian, Hukum Tata Negara dapat menjadi landasan yang kuat bagi pembentukan kebijakan, pelaksanaan, dan pengawasan pengelolaan kawasan hutan yang berkelanjutan dan sesuai dengan prinsip-prinsip keadilan, keberlanjutan, dan keseimbangan ekosistem. ...
Hutan merupakan ekosistem yang sangat berharga bagi berbagai jenis kehidupan, termasuk manusia, karena memberikan sejumlah manfaat vital seperti penyediaan oksigen, regulasi iklim, habitat bagi flora dan fauna, serta sumber daya alam yang penting bagi kehidupan manusia. Melalui Hukum Tata Negara, negara memiliki kewajiban untuk melindungi dan mengelola hutan dengan baik. Hal ini tercermin dalam penetapan aturan dan norma yang mengatur pengelolaan kawasan hutan, termasuk penetapan status hutan, hak dan kewajiban pengelola, serta mekanisme pengawasan. Dalam pengelolaan hutan, hukum tata negara memegang peran yang sangat penting dalam menyusun kerangka hukum yang jelas dan efektif, menentukan kelembagaan yang bertanggung jawab atas pengelolaan hutan, serta menyelesaikan sengketa yang terkait dengan pengelolaan hutan. Namun, tantangan seperti penebangan liar, perambahan hutan, dan kebakaran hutan masih menjadi ancaman serius terhadap kelestarian hutan. Penelitian ini bertujuan untuk mengevaluasi peran Hukum Tata Negara dalam pengelolaan kawasan hutan di Indonesia serta meningkatkan efektivitasnya dalam mengatasi tantangan-tantangan tersebut. Metode penelitian yang digunakan adalah metode penelitian hukum normatif yuridis dengan pendekatan studi pustaka dan analisis putusan Mahkamah Konstitusi. Data diperoleh dari sumber-sumber hukum yang relevan seperti Undang-Undang Dasar Negara Republik Indonesia Tahun 1945, undang-undang tentang Kehutanan, peraturan pemerintah tentang pengelolaan kawasan hutan, serta putusan Mahkamah Konstitusi. Data tersebut dianalisis secara kualitatif dengan menggunakan teknik analisis deskriptif. Hasil penelitian menunjukkan bahwa peran Hukum Tata Negara dalam pengelolaan kawasan hutan memiliki dampak signifikan terhadap efektivitas pengelolaan hutan. Rekomendasi untuk meningkatkan peran Hukum Tata Negara meliputi penguatan implementasi peraturan, peningkatan transparansi dalam pengawasan, partisipasi masyarakat, dan pengembangan program ekonomi alternatif bagi masyarakat di sekitar kawasan hutan. Dengan demikian, dapat diketahui bahwa Peran Hukum Tata Negara sangat kuat dan transparansi pengawasan dapat meningkatkan efektivitas pengelolaan hutan serta mengurangi ancaman seperti penebangan liar, perambahan hutan, dan kebakaran hutan, sementara partisipasi masyarakat dan program ekonomi alternatif juga digunakan untuk mendukung kelestarian hutan dan kesejahteraan masyarakat.
... 8 Economic statecraft can thus exert pressure on other states, incentivize preferred behavior, 6 Koo (2011). 7 Aggarwal and Reddie (2020. 8 Albert Hirschman identified two unintended political and power implications of trade for participating parties. ...
The Japan–Korea whitelist dispute (2019–2023) embodies key features of interstate disputes related to economic statecraft ideas. Against the backdrop of the legal dispute over Japan’s “essential security interests” claim based on GATT Article 21 (Security Exceptions), this study analyzes South Korea’s response to the whitelist dispute, with a focus on its materials–parts–equipment localization policy. The findings indicate that the policy process and outcomes align with very few of the criteria suggested by the new industrial policy literature. Notably, the policy’s goals and tools were driven by ideology rather than by science, and the implementing agency—The Ministry of Trade, Industry, and Energy—while competent, was politically captured. In conclusion, this study suggests that policymakers should purposefully and consciously connect security with trade or implement industrial policies within a well-defined strategic framework.
... Korea's economic statecraft can also be explained in the context of industrial policy (Aggarwal and Reddie, 2020;Chang and Andreoni, 2020;Weiss and Thurbon, 2021). In particular, Korea's experience with active industrial policy during the catch-up period makes it possible to explain its economic statecraft from an industrial policy perspective. ...
This study identifies the core of Korea’s economic statecraft as (1) diversification of the supply chain of high-tech industries to proactively mitigate vulnerability to economic coercion, (2) the pursuit of technological sovereignty to increase self-sufficiency in advanced technologies, (3) governance reforms to strengthen supply chain resilience, and (4) industrial policies to enhance the competitiveness of advanced industries. The four strategies mentioned above all have in common that they are predicated on the strategic utilization of high technology. Based on these traits, I define Korea’s new economic security strategy as techno-economic statecraft. Korea’s techno-economic statecraft has two features. First, Korea utilizes high technology as a nexus between economy and security. Second, Korea uses high technology as a nexus to link domestic and foreign policies.
... The transition toward a new geoeconomic order, as illuminated by Roberts et al. (2019) and Shaffer and Gao (2020), signifies a paradigmatic shift. Moreover, the securitisation of economic policy underlines the importance of strategic economic tools, from regulation to industrial policy, as highlighted by Aggarwal and Reddie (2022). This shift is particularly evident in the context of the U.S.-China tech/trade war, which embodies the transition from a neoliberal to a power structure, with China at the heart of a new legal and economic architecture governing international trade . ...
In an era when critical minerals have become the cornerstone of technological advancement and economic security, the evolution of geopolitical trading blocs signifies a transformative phase in international relations. This paper critically examines the evolving landscape of global trade, characterized by the stratification of nations into competing groupings. Through an extensive literature review, the study establishes the current academic discourse on the subject, setting the stage for a deeper analysis of the actual and potential fissures in the Western liberalist rules-based international trading system (RBITS) and the emergence of a 'competing' trading system. The rise of the BRICS+6 nations represents a formidable counterweight in global trade power, especially in the way it challenges the strategic rationale underpinning the RBITS. In the wake of the January 2024 BRICS expansion, the central research question is how will the intense geopolitical concentration and competition between two trade groupings impact on the 'ownership' of critical mineral supply chains? Indubitably, such rivalry will likely shape future international trade policy and economic stability in critical minerals markets.
... While neoliberalism and fair trade view economic interdependence brought by trade as positive for economic efficiency, the TaFP views interdependence as a risk and thus is closer to the foreign policy end. However, inspired by literature on geoeconomics (Adriaensen and Postnikov 2022;Aggarwal and Reddie 2020;Babić, Dixon, and Liu 2022;Baracuhy 2018), we delineate two subtypes within the TaFP paradigm to further specify the relation between trade and foreign policy. One is the economisation of foreign policy, or what we label as 'trade instead of foreign policy' (TiFP). ...
(Open) strategic autonomy (OSA) has quickly become the dominant concept in European Union (EU) trade policy strategy. This article aims to better understand how the concept plays out in policy practice by focusing on its discursive use in the rise and fall of the EU-China Comprehensive Investment Agreement (CAI). We start from the assumption that OSA as an ‘empty signifier’ is sufficiently malleable to account for diverging interpretations. Building on existing literature, we then construct an analytical framework that distinguishes between trade policy paradigms. Subsequently, we utilize Fairclough & Fairclough’s ‘scheme of practical argument’ to analyze how the three signifiers of OSA – openness, sustainability and assertiveness – are connected in EU trade policy debates for or against CAI between May 2020 and September 2021. Our findings reveal that the concept of OSA can be utilized in both economics and foreign policy oriented arguments. While the Trade instead of Foreign Policy’ (TiFP) paradigm was initially co-opted by the neoliberal paradigm, the Trade steered by Foreign Policy (TsFP) paradigm became gradually more dominant. These findings also contribute to explaining, respectively, the rise and fall of the CAI.
... First, while the Chinese central government has formulated and issued dozens of industrial policy documents concerning 5G and supercomputing, there has been no systemic analysis and comparison of these policies. Second, as industrial policy gains prominence globally, with countries pursuing high-tech industrial policies for foreign policy goals, understanding China's 5G and supercomputing industrial policies is crucial (Aggarwal & Reddie, 2020;Vogel, 2021). Third, since China has risen to the world's economic and geopolitical superpower although its economy is expected to slow down (Eichengreen, 2018;Eichengreen et al., 2011), its industrial policies will impact its relations with foreign countries and companies doing business with China. ...
The Chinese central government has greatly supported two strategic high-tech industries: 5G and supercomputing. However, when both encountered similar U.S. sanctions, the 5G industry failed to make crucial upstream components while the supercomputing industry could. This article argues that the central government-level industrial policies contributed to these divergent outcomes. Using natural language processing and qualitative content analysis of meticulously collected official documents and secondary sources, key policy differences were identified. Before the U.S. sanctions in May 2019, China's 5G industrial policies were significantly unbalanced, with inadequate attention given to research and development of vital upstream components, contributing to a lack of upstream investment. Although recent attempts to rebalance 5G industrial development since 2021, the policy focus remains largely on the mid and downstream segments. In contrast, before the U.S. sanctions in 2015, the supercomputing industrial policies emphasised the development of the entire industrial chain, including crucial upstream components, resulting in China's possession of entirely homegrown supercomputers. Leveraging a tri-level analysis framework rooted in political economics, this study also offers possible explanations for the policy divergence and discusses implications. It contributes to the existing literature and ongoing debate on China and industrial policy amidst great power high-tech competition.
... The European DNS has come to operate in a geopoliticized world where other nations generously support their industries and supply chains are increasingly vulnerable to political and economic shocks (Aggarwal & Reddie, 2020;Meunier & Mickus, 2020). With alliances shifting and China and the United States seeking to decouple themselves technologically, the EU is drastically stepping up its efforts to protect the single market from the ensuing geo-economic shifts (Weyand, 2022). ...
Within Europe’s regulatory state, industrial policy has largely remained within national governments’ remit. Yet, a plethora of new supra- and cross-national industrial policy initiatives have recently emerged whereby the Commission proactively engages in pan-European activities to foster innovation and economic development. This article brings the ‘Developmental Network States’ (DNS) literature into dialogue with EU integration scholarship to explain both the timing of EU industrial policy’s rise since the mid-2010s and the variation in forms of EU integration of different industrial policy functions. Our analysis suggests that the Commission increasingly operates four major developmental functions akin to DNSs and aimed at promoting and protecting the single market. Neofunctionalist theories of EU integration explain these momentous shifts. The timing behind the rise of EU industrial policy is best explained as an interplay of functional, cultivated, and political spillovers, driven especially by the Franco-German realignment on pro-EU industrial policy positions since 2016. Variation in the governance forms of integrated EU industrial policy functions is instead explained in terms of the degree of pre-existing integration of extant policies, the low vs high politics nature of the policy domain and the types of externalities attached to the specific policy area.
... In addition to Transsion's system, China has already established a preliminary model for an overall digital ecosystem containing seven layers of tech stacks (Bräutigam, 2009(Bräutigam, , 2011, though she also admits that its aid is a geopolitical instrument (Aggarwal & Reddie, 2020;Lockhart, 2022). Considering China's planned digital ecosystem that ranges from undersea cables to mobile devices and apps, the country stands to gain economically, and this revenue may rise when the SSA reaches a mature digital economy. ...
In light of the increasingly pivotal role of Sub-Saharan Africa (SSA) in the escalating US-China competition, this paper explores why US-led anti-Chinese information and communications technology (ICT) campaigns have not resonated with African countries. It notes that Washington’s narrative about China’s ICT activities in the region corresponds with Stephen Walt’s “balance of threat,” emphasizing the threat of China and demanding that African states balance against its cyber aggression. It argues, however, that American policymakers should focus more on Randall Schweller’s “bandwagoning for profit” to resist China’s ICT influence in the region because the pitfalls of malignant Chinese ICTs are outweighed by the opportunities and prospects of mobile-driven digital transformation there. This paper explores Washington’s unsatisfactory approach toward the SSA, traces China’s long-term penetration into the digital sector among African countries, and argues that the country’s strategic objective in the region is to establish a digital ecosystem filled with Chinese technologies and devices. It then evaluates the region’s digital prospects and the yearning among African countries to learn from China’s late development path. The paper concludes that China is not winning hearts and minds in the region and both strategies of balancing and bandwagoning persist in Sino-African relations. African countries would not always bandwagon with China if there were more alternatives. To resist the country’s ICT influence in the region, Washington should engage with Africa’s ICT industries, deepen trade relations and help to grow its digital economy.
... I define economic statecraft as using industrial policies, export controls, and investment restrictions in order to achieve national security goals. 4 In the solar industry, we have witnessed the increased usage of economic statecraft by both the United States and China which I argue negatively impacts the Liberal International Order (LIO). Section 2 will analyze China's economic statecraft in the solar industry. ...
Over the past few years, great power competition between the United States and China has intensified. Although economic statecraft is not an optimal strategy that often escalates interstate conflict, both countries are increasingly using it. I define economic statecraft as using industrial policies, export controls, and investment restrictions in order to achieve national security goals. In the solar industry, we have witnessed the increased usage of economic statecraft by both the United States and China which I argue negatively impacts the Liberal International Order (LIO).
... The sanctions imposed in the end against the state do not function in the sense that they are unlikely to lead to a change in the policy of the sanctioned state or the downfall of the regime in it (Morgan, Bapat, & Kobayashi, 2021). At the same time, if sanctions were imposed by a sufficiently broad coalition, they would deal a heavy blow to the sanctioned economy and almost certainly reduce its long-term competitiveness significantly (Aggarwal & Reddie, 2020). Paradoxically, a country's ability to resist broad international sanctions causes far greater harm to that country in the long run (Dumas, 2019). ...
In this edition, we publish the scientific work of researchers in the fields of economics, business, and management from 8 countries, namely Indonesia, Cambodia, Vietnam, France, England, Tunisia, and Russia. We have reviewed scientific articles from various countries and processed them with the authors so that they become scientific works that we present at the April 2022 edition of TMJI.
We would like to thank all those who have helped in the publication of this edition.
Thank you for all the hard work
... The sanctions imposed in the end against the state do not function in the sense that they are unlikely to lead to a change in the policy of the sanctioned state or the downfall of the regime in it (Morgan, Bapat, & Kobayashi, 2021). At the same time, if sanctions were imposed by a sufficiently broad coalition, they would deal a heavy blow to the sanctioned economy and almost certainly reduce its long-term competitiveness significantly (Aggarwal & Reddie, 2020). Paradoxically, a country's ability to resist broad international sanctions causes far greater harm to that country in the long run (Dumas, 2019). ...
This study aims to investigate human development and financial inclusion in Russia. The global bank provided the secondary data for this study, which covered the years 1990 to 2021. This study uses vector analysis. We found that the development of human capital in Russia not only promotes financial inclusion that drives the economy, but also provides a direct impetus to the growth of the Russian economy. The role of human capital is very important in today's modern human development. It is proven that human development through human capital investment provides awareness of the importance of financial inclusion and provides productive human qualities so as to be able to provide an impetus for growth in the economy.This research contributes to adding references related to financial studies and human development including human capital. This research contributes to providing a simulation and an overview of the importance of human capital investment in promoting economic growth and financial inclusion.
... The expansion of digital technologies across the globe has thus led to disruptive dynamics not only in the economic, but in the security realm as well. Cybersecurity has thus become a central issue within the economic statecraft agenda of countries (Aggarwal and Reddie 2020;Schia 2018). Still, in the empirical literature, whether standards and indices of national levels of security translate or 'spillover' onto levels of cybersecurity is still an undecided matter (Sinha et al. 2015). ...
Are industrial policies having an impact on countries’ cybersecurity capacity across the globe? When analysing the securitisation of countries’ cyberspace, the empirical assessment of industrial policies is still rather unexplored. In parallel, scholars in the field of development have already raised their concerns regarding the risk for developing countries falling further behind vis-à-vis developed countries as a consequence of the disruptive dynamics brought forth by new technologies. Still, empirical studies that contrast the dynamics that new technologies are posing among developed and developing countries are rather scant. This paper looks to contribute to the empirical literature by assessing the role of industrial policy in cyber-related challenges through a cross-country OLS estimation model. Results show that industrial policies are having a significant impact across countries’ cyber capacities and that, moreover, there is an interactive relationship between countries’ cybersecurity capacities and R&D efforts once development values are controlled.
... Whereas many countries are making great efforts to secure technological competitiveness, the number of malicious cyber activities targeting the intellectual property (IP) of research institutes or universities has been increasing. Accordingly, countries with high levels of technology, such as the US and UK, are implementing strict measures against such technology theft to maintain their technological and economic superiority [18]. In particular, the US government is using name-and-shame processes, such as public indictments on IP theft, to inform countries about these malicious activities and continue efforts to strengthen relevant law enforcement capabilities. ...
... First, current and potential future reconfiguration of cross-border supply chains is taking place in the context of enhanced rivalry between leading economic powers, of which the Sino-U.S. trade and technology war is one salient manifestation (Blustein, 2019; Davis & Wei, 2020;Evenett & Fritz, 2018;Petricevic & Teece, 2019). It is not for nothing that political scientists are rethinking their understanding of Economic Statecraft (Baldwin, 1985;Aggarwal & Reddie, 2020). ...
If taken at their word, senior policymakers in the major economic powers have drawn adverse conclusions concerning the performance of cross-border supply chains during the first 6 months of the COVID-19 pandemic. That such supply chains often implicate China, the origin of the pandemic, has also led to claims that trading partners have become too dependent on Chinese supplies. This in turn has led to policy interventions designed to reconfigure supply chains, which if adopted broadly could revise the terms upon which international business operates. A critical evaluation of this policymaker assessment is presented, based on near-time monitoring of medical and food trade disruption induced by government policy, on fine-grained trade data on the pre-pandemic international sourcing patterns of medical goods and medicines by France, Germany, the United Kingdom, and the United States, on statements from U.S. government health experts before and during the pandemic on the frequency and sources of medicine shortages, and on the U.S. Food and Drug Administration’s latest evidence on the causes of medicine shortages in 2020. Such evidence vitiates the adverse conclusions mentioned above, but raises important questions about the factors that determine policy towards international business during a time of intensifying geopolitical rivalry.
We see four major impacts of digitalization on economies. First, it has created its own sectors and occupations in which it now employs a sizeable share of workers, such as in the information technology and communication industry. Second, it has penetrated each of the industries and service sectors and facilitated growth and development of those industries. The automatization of manufacturing and services through digital technologies is an example in this regard. Third, it has created firm-to-firm, buyers-to-sellers relations, and facilitates local to global trade. Globally, now, a sizeable number of workers and enterprises are managing the communication and flow of information.
Europe’s ambitious energy transition comes with increasing needs for clean transition materials (CTMs), which include cobalt, copper, graphite, lithium, manganese, nickel, and rare-earth elements.These materials are needed to manufacture clean technologies, such as batteries, wind turbines, solar photovoltaic materials, and electric vehicles (EVs). The European Commission estimates that by 2050, the European Union’s (EU’s) demand for lithium will increase more than 50 times and demand for cobalt fifteen times, from 2020 levels. The EU imports between 75 and 100 percent of the critical metals it consumes. While the EU’s energy transition is central to weaning the continent off external fossil-fuel suppliers, this goal must not come with new, uneven import structures for the materials needed for clean solutions. Given that the EU’s Net-Zero Industry Act set an aim for the union to manufacture at least 40 percent of strategic clean technologies at home, a reliable and resilient supply of critical minerals and raw materials is a matter of strategic autonomy. To ensure a timely rollout of clean technologies at scale, Europe must make its import portfolio more resilient, cost efficient, and sustainable. At the same time, the EU needs to hedge against the risk that asymmetric dependencies in supply structures may be used for political coercion, which warrants a geoeconomic approach to CTMs. Short of doing so, the EU may be in danger of significantly delaying or even endangering its energy transition and exposing itself to new threats from the low-carbon push. To make full use of its economic, financial, and regulatory toolbox, the EU should leverage its financial means and network effects while making a clear value proposition to resource-rich countries in the shape of sustainable CTM partnerships. By combining the principles of environmental issues, social issues, and corporate governance (ESG) and CTM partnerships as instruments of economic statecraft, the EU can live up to its potential as a catalytic power and a benign geoeconomic player.
The Chinese government has formally requested to join the CPTPP, making a critical step in China’s FTA strategy. By summarizing the policy debate in China about the TPP/CPTPP and analyzing the motivations behind China’s CPTPP bid, this article argues that outward-oriented considerations are more important than inward-oriented ones. China’s decision to pursue membership in the CPTPP is primarily driven by its strategic goal to strengthen foreign economic relations, rather than focusing on domestic economic reform and growth. Under mounting pressure from strategic competition with the US, China needs to hedge against the risks of the US’s attempt to develop exclusive economic coalitions that target China. Because of the dual challenges from diplomacy and compliance, China’s accession process would be contentious and time consuming. Nevertheless, China has an indispensable opportunity to reassure its major trading partners by implementing high-standard trade rules through the CPTPP accession.
This study posits that U.S.-China technology competition has promoted the spread of techno-economic statecraft in East Asia. The emergence of techno-economic statecraft in East Asia requires systematic analysis because it affects not only the dynamics of U.S.-China technology competition but also the restructuring of the regional order. Since both the United States and China do not have complete self-sufficiency in the high-tech innovation ecosystem, it has become an urgent task for them to reduce their vulnerability to winning technological competition. Against this backdrop, East Asian countries have emerged as actors playing an important role in technological competition. Since East Asian countries are key players in the supply chain of high-tech industries, cooperation with East Asian countries has emerged as a factor that can influence the landscape of U.S.-China technology competition. Based on these observations, this study aims to explain the following four phenomena: First, it explains the process by which the United States and China seek to securitize high technology as a means of reducing their own structural vulnerabilities while redrawing new boundaries for cooperation with East Asian countries. Second, I argue that U.S.-China technology competition has accelerated the rise of techno-economic statecraft in East Asia. Third, I assert that there are significant differences in the techno-economic statecraft pursued by East Asian countries in the U.S.-China technology competition. Fourth, the divergence of techno-economic statecraft in East Asian countries has created systemic effects in the regional order.
Kurzfassung
Ausgehend von Begriffen wie „digitale Souveränität“ und „strategische Autonomie“ untersucht die vorliegende Analyse, gestützt auf eine Vielzahl von Indikatoren, die digitale Dependenz von 37 Ländern. Während die Ergebnisse in Bezug auf verschiedene Sektoren (Software und Hardware) und Dimensionen (Handel, Infrastruktur, geistiges Eigentum) stark voneinander abweichen, zeigt das Gesamtbild einen hohen durchschnittlichen Grad an digitaler Abhängigkeit. Die Daten offenbaren außerdem äußerst asymetrische globale Strukturen. Die USA sind mit einem Wert von 0,46 die bei Weitem am wenigsten digital abhängige Volkswirtschaft. Die ausgeprägteste Asymmetrie zwischen den USA und dem Rest der Welt zeigt sich bei der Abhängigkeit von digitalen Infrastrukturen. China hat in den letzten zehn Jahren enorme Fortschritte gemacht, seine digitale Dependenz zu verringern. Die europäischen Länder behielten hingegen einen sehr vulnerablen Status bei. Die quantitative Messung der digitalen Abhängigkeit legt eine Neubewertung der gängigen Vorstellungen von „digitaler Autonomie“ nahe. Aus der Sicht globaler Strukturen bleibt Autonomie für die Länder Europas, wie für die meisten anderen, eine Illusion.
This book addresses economic statecraft by middle powers in the context of geoeconomic competition in the Indo-Pacific, exploring both the theoretical and thematic contours of this concept and issue-specific dynamics in the areas of finance, trade, shipping, energy, and technology competition. Contributors focus on the impact of renewed great power competition between Washington and Beijing in the Indo-Pacific region, particularly regarding middle power economic statecraft strategies.
After the founding of the People’s Republic of China, friendly bilateral relations between China and Pakistan have become increasingly close in various fields following China’s peaceful rise. The space cooperation that started after the end of the Cold War is a sign of the gradual progress of the relationship between the two countries to the current all-weather strategic cooperative partnership. With China’s assistance, Pakistan has achieved significant milestones in the space field. Pakistan is also a key node in China’s strategy to expand international space cooperation. After the 2010s, China-Pakistan space cooperation was integrated with the construction of the Space Silk Road and the China-Pakistan Economic Corridor under the framework of the Belt and Road Initiative, becoming a model for space cooperation specifically promoting the social and economic development of developing countries. This paper outlines the complete picture of China-Pakistan space cooperation under the evolutionary logic and chronological context of "ideological-materialization" two-way mutual construction, so as to reasonably predict the prospects of China-Pakistan space cooperation.
For nearly four decades, Australia’s domestic and international economic policies were anchored by the promotion of open, transparent, and rules-based market exchange. This was considered the best way to increase both Australia’s prosperity and its security, and that belief guided Canberra’s approach to economic statecraft. However, emerging concerns about the vulnerabilities arising from economic interdependence, and the increasingly blurry line between economics and security amid great power rivalry between China and the United States, have placed Australian policy orthodoxy in a difficult position. In this paper, we investigate how these dynamics are shaping change and continuity in Australia’s economic statecraft, and in doing so offer three contributions. First, to advance the emerging comparative economic statecraft research agenda, we propose a modified concept of economic statecraft that captures a wider range of activities undertaken by non-great powers and a distinction between state-based and market-based actions which allows for within- and cross-case comparisons. Second, empirically, we sketch the historical evolution of Australia’s approach and examine three salient domains in which it has recently pursued new economic statecraft initiatives. Finally, in evaluating recent change and continuity, our third contribution is to identify new variables that may illuminate the conditions under which states adapt their prevailing approach to economic statecraft.
As China has made it a top priority to enrich and upgrade its chip capabilities across the value chain, some international observers predict that China's semiconductor industry will eventually, if not immediately, surpass its foreign competitors. Others remain skeptical about its presumed tech supremacy for plausible but largely speculative reasons. Is the Chinese semiconductor industry a game-changer or a paper tiger? Is China's indigenous chip technology attractive to, and usable by, foreign technology? One way to look into these half-empty/half-full questions is to comparatively analyze chip patents granted by the US Patent and Trademark Office. The target domain of this study is integrated circuits (IC) technology, especially thin-film-transistor circuits, where China has recently registered a sharp growth in patent publications. Using the modified forward citation indices of panel display-related IC patents, this study examines whether and to what extent the quantitative growth in the Chinese semiconductor industry has been translated into a gravitational force to pull foreign industries within its sphere of influence. Estimation results of a zero-inflated negative binomial regression analysis show that a Chinese chip patent has a fewer expected modified forward citation index than a non-Chinese patent. These findings indicate that the technological gap between China and advanced countries will take longer to close despite China's accelerated campaign for chip supremacy. This study concludes, with some caveats, that China faces the dual challenge of achieving higher productivity and greater self-reliance, while having to survive in the escalating technological competition with other advanced countries.
Den teknologiske utviklingen vil endre hvordan stater kan benytte økonomiske virkemidler for å
fremme sine interesser i internasjonal politikk, men dette er i liten grad behandlet i eksisterende
litteratur om økonomisk statshåndverk. Formålet med denne rapporten er å styrke forståelsen av
hvordan den teknologiske utviklingen kan påvirke staters evne til å bruke økonomiske virkemidler
og å drøfte implikasjoner for norsk sikkerhet. Rapporten fokuserer spesielt på kunstig intelligens
og stordata, 5G, skytjenester og tingenes internett. Data er samlet inn fra intervjuer og workshop
med forskere ved FFI samt gjennomgang av eksisterende litteratur.
Vi identifiserer først flere måter den teknologiske utviklingen kan påvirke økonomisk aktivitet,
inkludert økt betydning av data, mer komplekse og kompetansekrevende produkter, tjenester og
verdikjeder, økt markedskonsentrasjon og økt internasjonalisering og/eller automatisering. Dette
gjør oss i stand til å drøfte hvordan staters muligheter til å utføre økonomisk statshåndverk
potensielt blir endret av teknologiske fremsteg. Vi skiller mellom økonomisk statshåndverk hvor
en stat utøver makt og hvor en stat akkumulerer makt som muliggjør fremtidig virkemiddelbruk,
også med ikke-økonomiske virkemidler. Innen utøvelse av makt, vurderer vi at den teknologiske
utviklingen blant annet vil kunne styrke enkelte staters muligheter til å utnytte avhengigheter til
kompetanse, ressurser, komponenter, osv. til (fordekt) å sabotere systemer. Innen akkumulering
av makt, vurderer vi at den teknologiske utviklingen særlig vil styrke mulighetene til å utnytte
økonomisk aktivitet til å hente inn informasjon og data, til bruk i etterretningsformål og/eller til å
forsøke å forme (sær)interesser og oppfatninger i mottakerlandet. Enkelte stater kan i tillegg
oppnå økte muligheter til å etablere seg som en sentral leverandør av viktige ressurser, produkter
og kompetanse, og slike avhengigheter kan i neste omgang åpne muligheter for strategisk bruk
for å fremme disse statenes interesser globalt. Den teknologiske utviklingen driver også stater,
særlig USA og Kina, til å implementere innenlandsk næringspolitikk for geopolitiske formål – i
litteraturen kalt «det nye økonomiske statshåndverket».
Hva har dette å si for norsk sikkerhet? Vi argumenterer for at det blir stadig viktigere å forvalte
data som produseres i det norske samfunnet som en strategisk ressurs. Vi vurderer også at ny
teknologi bidrar til at Norge kan bli mer avhengig av visse typer kompetanse, tjenester, råvarer,
komponenter og produkter, og at det er behov for å skaffe en bedre oversikt over hvilke typer som
er kritiske for norsk sikkerhet, med tilhørende leverandører. Videre tror vi at rivaliseringen mellom
USA og Kina i økende grad også vil ha implikasjoner for Norge, blant annet ved økt press fra USA
og NATO om å beskytte norsk (og alliert) teknologi og skape større uavhengighet fra kinesiske
leverandører i høyteknologiske forsyningskjeder. For å håndtere disse potensielt sikkerhets�truende implikasjonene, vurderer vi at det er behov for å styrke evnen til koordinering på tvers av
domener nasjonalt og på tvers av likesinnede land. Det vil også være viktig å spre kunnskap til
næringslivsaktører og forbrukere om hvilken rolle økonomisk aktivitet kan spille i å tilrettelegge
for datainnsamling, etterretning, påvirkning, undergraving og sabotasje, slik at eventuelle forsøk
på sikkerhetstruende virksomhet blir forebygget eller oppdaget. Rapporten identifiserer og
anbefaler også videre forskning på en rekke områder som denne studien ikke har hatt mulighet
til å gå i dybden på, men som vil bidra til å styrke kunnskapsgrunnlaget for politikkutforming og
beslutningstaking.
The accumulated potential in digitalization suggests the need to create a new paradigm for managing scientific-innovative and production-technological processes, which is reflected in the author’s article. In these conditions, there is the problem of developing a mechanism for innovative management of the industrial sector of the economy. The study aims to analyze statistical and analytical data of modern industrial sector management in the context of digitalization. By analytical, comparative, and statistical analysis of international innovation management approaches, according to the rating of the global innovation index 2020/2021 and business activity of technological leaders in Asia, North America, and Europe, the authors developed a methodological approach to improve the mechanism for implementing innovative management in industrial sector. The mechanism includes such core elements: state industrial policy—purposes of industrial development—decision on innovative management implementation—development of mechanism to implement innovative decision—expected short- and long-term results based on the traceability of innovation and the overall economic context from a global perspective. The study results can be applied for implementing innovative management in industrial sector and developing industrial policies.
The introduction of the EU’s FDI Screening Regulation is not only extraordinary but also harmful to its legitimacy, as the open market mantra is built into the Union's liberal identity. This thesis aimed to answer why the EU introduced this extraordinary measure. Presenting an issue as an existential threat – securitisation – can legitimise an extraordinary measure (Buzan et al., 1998, p. 26), hence, discourse analysis was conducted on the Commission’s documents and speeches about the Regulation (EU) 2019/452 from 2016 to 2020. Using the securitisation theory of the Copenhagen School, this thesis uncovered the securitisation of Chinese FDI in the Commission’s policy discourse on the proposal for establishing a framework for the screening of FDI into the Union. It reveals that the idea of a ‘China threat’ is based on a binary distinction between the EU as the market-oriented protagonist and China as the strategic antagonist. Against this background, economic, military, and political securitisation were prevalent in the European Commission’s discourse, with each showing dominance in a discourse format that is appropriate for their designated style of speaking security. This may suggest that the Commission considers when to speak which type of security rhetoric. Only societal securitisation proved to be irrelevant, but it is outweighed by the other forms of securitisation. [Published on E-International Relations]
Using detailed information on policy interventions by US sub-national governments between 2009 and 2019, the contribution of such public bodies to Sino-US geopolitical rivalry is examined, in particular since President Trump took office in 2017. While US sub-national governments accounted for 28% of all US policy interventions that harmed Chinese commercial interests, awarding firm-specific subsidies in 88% of cases, the timing and sectoral incidence of such intervention suggests that economic statecraft considerations could only be part of the explanation for their actions. Ironically, the interventions of US sub-national governments and their weak commitment to transparency have much in common with their frequently maligned Chinese counterparts.
The paper examines the global and regional implications of China's revitalized state capitalism model through the sectoral lens of the Chinese automotive industry, which stands at the intersection of both traditional and green industrial policy. At the multinational level, China skillfully facilitates local policy implementation that creates excess capacity by propping up local and national champions through convenient compliance with the WTO. At the bilateral level, China closely links purchasing and coercive diplomacy with protections for Chinese players both at home and abroad. Key endeavors like the Belt and Road Initiative open up overseas markets to develop global champions and secure foreign footholds for Chinese champions. Additionally, China's increasing reliance on exclusionary diplomacy provides political justifications to discriminate against foreign competitors within the Chinese market while moving forward with industrial upgrading of domestic players. When linked together, these factors – all byproducts of China's approach to state-led capitalism – combine to explain China's efforts to create a race to the top.
This article examines how Japan has adapted economic statecraft to serve changing strategic aims through case studies of trade arrangements, official development assistance, and dual-use technology. After World War II, Japan continuously adapted these economic tools to pursue shifting non-economic goals related to international reintegration, comprehensive security, human security, and traditional security. More recently, in response to escalating US–China strategic competition, Japan has employed economic statecraft to simultaneously reduce international instability and to counter China in targeted ways as part of a broader hedging approach. First, Japan has attempted to bolster multilateral trade arrangements amid a volatile policy environment, while also using them to both engage and counter China. Second, Japan has used official development assistance to stabilize and build defense capacity in Asian countries facing pressure from China. Third, Japan has increasingly militarized its dual-use technologies to enhance its ability to respond to Chinese activity in outer space.
Additive manufacturing is being adopted by nuclear programmes to improve production capabilities, yet its impact on strategic stability remains unclear. This article uses the security dilemma to assess incentives for arms racing as the emerging technology becomes integrated into nuclear supply chains. Innovations sow the ground for competition by making it easier to produce weapons and harder to distinguish civil from military motives. But additive manufacturing could still mature into an asset by revealing greater information about nuclear aspirants. Beyond the nuclear realm, the article refines offense-defence theory to explain how changes in non-military technology shape the practice of deception.
China’s emergence as a great economic power has brought an epochal shift in patterns of world trade. This shift has toppled much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside its heralded consumer benefits, trade has both significant distributional costs, which theory has long recognized, and substantial adjustment costs, which the literature has tended to downplay. These adjustment costs mean that trade impacts are most visible not in national-level outcomes for broad skill types, as canonical theory would suggest, but in the local labor markets in which the industries most exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and local laborforce participation rates remaining depressed, local unemployment rates remaining elevated, and public transfer benefits take-up rising across a spectrum of programs for at least a full decade after trade shocks commence. Within impacted localities, the workers who are most affected by rising trade exposure are those initially employed in firms that compete most directly with China. These workers, and in particular those in lower earnings deciles, experience greater job churning and reduced lifetime income. Recent literature also addresses the aggregation of local-level impacts of trade shocks into national-level outcomes. Employment has fallen in U.S. industries more exposed to import competition, as expected. So too has overall employment in the local labor markets in which these industries were concentrated. Offsetting employment gains in non-tradables, export-oriented tradables, or imported-input-using industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.
This paper introduces a Special Section on Chinese and Brazilian engagements in African agriculture. The paper asks if a new paradigm for development cooperation is emerging, and argues that we must move beyond the simplistic narratives of either “South–South” collaboration or “neo-imperial” expansion of “rising powers” to look at the dynamic and contested politics of engagement, as new forms of capital and technology enter African contexts. Historical experiences in Brazil and China, as well as domestic political and economic debates, affect how interventions are framed, and by whom, and so influence what technologies are chosen, which investments are funded, and who gets trained. There are both political and economic drivers at the heart of these choices, but these are not uniform or uncontested, either in Brazil and China or in Africa. The Special Section argues for a focus on the encounters on the ground, moving beyond the broader rhetoric and generic policy statements. A key feature of Brazilian and Chinese engagements in African agriculture is the role of state–business relations in shaping and steering development, suggesting new forms of developmentalism. The paper concludes that there is a growing opportunity for learning from the Brazilian and Chinese experience, as this will be a long-run feature of African agricultural development.
India's recent economic transformation has fascinated scholars, global leaders, and interested observers alike. In 1990, India was a closed economy and a hesitant and isolated economic power. By 2016, India has rapidly risen on the global economic stage foreign trade now drives more than half of the economy and Indian multinationals pursue global alliances. Focusing on second-generation reforms of the late 1990s, Aseema Sinha explores what facilitated global integration in a self-reliant country pre-disposed to nationalist ideas. The author argues that the impact of globalization on India has affected trade policy as well as India's trade capacities and private sector reform. India should no longer be viewed solely through a national lens; globalization is closely linked to the ambitions of a rising India. The study uses fieldwork undertaken in Geneva, New Delhi, Mumbai and Washington DC, interviews with business and trade officials, as well as a close analysis of the textile and pharmaceutical industries and a wide range of documentary and firm-level evidence to let diverse actors speak in their own voices. Explores India's rise on the global economic stage from the perspective of both international and domestic interests and activities. Draws on fieldwork undertaken in Geneva, New Delhi and Washington DC. Argues that the impact of globalization on India since 1990 needs to be understood not just in terms of national policy, but also in terms of changing trade capacities and private sector reform.
China's stunning growth rates have corresponded with the rise of 'state capitalism'. Since the mid-2000s, China's political economy has stabilized around a model where most sectors are marketized and increasingly integrated with the global economy; yet strategic industries remain firmly in the grasp of an elite empire of state-owned enterprises. What are the implications of state capitalism for industrial competitiveness, corporate governance, government-business relations, and domestic welfare? How does China's model of state capitalism compare with other examples of state-directed development in late industrializing countries? As China enters a phase of more modest growth, it is especially timely to understand how its institutions have adapted to new challenges and party-state priorities. In this volume, leading scholars of China's economy, politics, history, and society explore these compelling issues.
A burgeoning literature has emerged on the relationship between economic interdependence and political conflict. This literature is evaluated, and three issues are raised for future research. First, there is a need to improve the theoretical basis of claims about the influence of interdependence on conflict and to specify more clearly the causal mechanisms underlying any such relationship. Second, future research should identify the boundary conditions of the effects of interdependence on conflict. Third, much more attention must be paid to the definition and measurement of interdependence and conflict.
China's growing presence in Africa introduces a new dynamic in the continent's relations with the outside world. Motivated by vital resources and new markets to fuel its economy, coupled to a commitment to multilateralism, Beijing has embarked on a comprehensive trade and diplomatic offensive that is challenging Western pre-eminence in the region. African governments have responded enthusiastically to this new source of investment and aid as well as China's professed willingness to ignore political conditionalities. Chinese–African cooperation, however, remains constrained by the asymmetric nature of relations and Africa's changing attitude towards issues such as humanitarian intervention.
This comparative project evaluates the role of firms, governments, and other key stakeholders in the rise of industrial policy in important states in the cybersecurity industry. In particular, we focus on the US, China, Taiwan, Japan, the EU and key European states. Our goals are as follows: 1) to examine the motivation for government promotion of the cybersecurity industry; 2) to inventory existing measures employed by these countries; 3) to understand the driving forces of cybersecurity industrial policy in these countries; and 4) to examine the likely conflicts that will arise from the competitive pursuit of such industrial policies and how they might possibly be resolved through international cooperation. To this end, we provide an analytical framework to serve as the structure for this project by drawing on a variety of theoretical approaches to understand industrial policy.
How should we theorize about international political economy in an era of complex interdependence? The global economy is much more interdependent today than it was 40 years ago. As a result, there is a widening appreciation that we need new theoretical tools to understand how complex interdependence arose, how it operates, and where it might be headed. I argue that to develop such tools, we must embrace new theoretical logics that more readily accommodate and explain change. I develop this point by drawing on complexity theories, ecology, and information theory. I first develop the core elements of a complexity-based approach and contrast it to the central assumptions of the Open Economy Politics approach. I then illustrate this complexity-oriented approach by using the logic of coevolution and the information–entropy cycle to explain key elements in the development of the 2008 global financial crisis.
Why do nations break into one another's most important computer networks? There is an obvious answer: to steal valuable information or to attack. But this isn't the full story. This book draws on often-overlooked documents leaked by Edward Snowden, real-world case studies of cyber operations, and policymaker perspectives to show that intruding into other countries' networks has enormous defensive value as well. Two nations, neither of which seeks to harm the other but neither of which trusts the other, will often find it prudent to launch intrusions. This general problem, in which a nation's means of securing itself threatens the security of others and risks escalating tension, is a bedrock concept in international relations and is called the 'security dilemma'. This book shows not only that the security dilemma applies to cyber operations, but also that the particular characteristics of the digital domain mean that the effects are deeply pronounced. The cybersecurity dilemma is both a vital concern of modern statecraft and a means of accessibly understanding the essential components of cyber operations.
The European Union was founded as an economic cooperation of its member states. It has as a major objective to create a large internal market with free flow of people, goods, services and capital. Over its 60-year history, the EU’s mandate has expanded beyond economic matters and the internal market into areas such as justice and international affairs. In this paper, I discuss EU policy to address cybersecurity concerns, bolster the cybersecurity market, and assess the impact of these interventions. EU-level cybersecurity policymaking is challenging due to the wide diversity of interests of the EU countries and the limited EU mandate where matters of national security are concerned. The conclusion is that, nevertheless, it has been possible to establish clear EU policy in cybersecurity and even to a degree joint EU cybersecurity industrial policy. The EU approach, though sui generis, may also provide insights for wider international cooperation in cybersecurity.
This paper investigates the relationship between the US government and its domestic cybersecurity sector drawing on the special issue framework. We show how there has been, and argue that we will likely continue to see, substantial public investment in the sector by the US government via industrial policy to address cybersecurity market failures. This analysis is particularly important given that both the market failures associated with the provision of cybersecurity and the government role in addressing this challenge remain under-explored in the existing academic and policy literature. The paper proceeds in three parts. First, it outlines the unique categories of three types of firms – those in the cybersecurity sector, large technology companies and internet-adjacent firms – involved in the under-provision of cybersecurity and examines possible market failures. Second, we inventory existing measures employed by the US government to engage with each type of firm to address real and perceived market failures in these different sectors. Finally, we examine how state-society relations have conditioned US government intervention approaches in this sector and argue that well-established IT firms now have a privileged lobbying role related to state-society relations in the United States.
The United Kingdom (UK) forms the largest internet economy in the G20 and has the stated ambition of being the ‘safest place in the world to live and work online’. Cybersecurity is, thus, regarded as both a challenge as much as an opportunity. Since the publication of UK's first National Cyber Security Strategy (NCSS) in November 2011, the government has implemented many proactive as well as reactive measures to enhance both its cybersecurity capabilities as well as its market power in this space. This article provides an analysis of the shift away from a reliance on market forces that dominated Western approaches to cybersecurity over the recent years. Specifically, it highlights three ‘market failures’ that have prompted UK's industrial policy responses: ongoing data breaches; inadequate private cybersecurity investments; and a continuous digital skills gap. An analysis of these drivers as well as UK government's responses demonstrates that the UK's cybersecurity strategy has evolved from an initial heavy reliance on market forces towards a more state-driven public-private partnership.
The 2008 White Paper on Defence and National Security was the first major document to focus directly on national cyberthreats as a key risk to France’s sovereignty. It defined new priorities – such as cyberattack prevention and response – and established, in July 2009, the National Agency for the Security of Information System (ANSSI) as an inter-ministerial agency with national authority for the defence of information systems. In 2013, a new version of the White Paper reiterated that the capacity to detect and protect against cyberattacks was ‘an essential component of [France’s] national sovereignty and economic well-being’. The same year, the French government launched an ambitious programme and invested considerable efforts and expenditure into cybersecurity industrial policy. This article summarises the structural characteristics of public-private partnerships and outlines the different conflicts behind the industrial movements in the 2009–2015 period: representation of digital sovereignty versus corporate interest in the global market, national defence champions versus the start-up ecosystem.
This paper explores Japan’s industrial policy toward cyber security. I begin by describing the perceived market failures with regard to cyber security, and the Japanese government’s rationales for intervention. Next, I briefly describe the institutions involved in Japan’s cyber security policy-making. I follow by discussing three models of Japanese intervention: government as provider, government as facilitator, and government as promoter. Then, I examine the factors that have led to this particular constellation of measures. Finally, I look at the effectiveness of these measures as well as make some concluding remarks about likely future trends.
International Relations scholars have long recognized that technology plays a critical role in power transitions, but the field lacks a framework to understand how technology and innovation strategies generate rivalry between dominant and rising states. With an empirical focus on contemporary United States–China relations, this paper addresses that gap. We identify the ‘innovation imperative’ that drives rising states to pursue technological modernity, and highlight two ways in which this pursuit can challenge the strategic interests of the dominant state. First, the dominant state experiences a significant impairment of its security environment: negative security externalities. Second, the dominant state experiences a threat to its preferred international order: negative order externalities. We further explain how the dominant state responds to the negative externalities generated by the rising state's pursuit of innovation. By theorizing the technological rivalry between rising and dominant states, we move beyond the traditional focus on military conflict in power transitions and offer new insight into the current dynamics in US–China relations.
Many observers recognize policy continuity as a prominent feature of India’s statecraft, but practitioners see fundamental changes in the last quarter century. In this article, we explain how India’s economic expansion because of sustained economic growth altered its statecraft. That prosperity is a prerequisite to sustain power has been well recognized through history by major thinkers of strategy. We examine the relationship between India’s economic strategy and its congruence with its foreign policy strategy. In particular, we illustrate how India has viewed geoeconomics, defined here as “the use of economic instruments to achieve specific geopolitical results.” We highlight the degree and instruments of India’s economic statecraft as an integral component of its foreign policy, and its strengths and limitations relative to other rising powers.
Britain's BREXIT vote and Trump's victory in the US presidential elections sent shockwaves through the Western liberal establishment, including academia. Both events suggest yet another ‘rethinking’ of International Political Economy (IPE). Yet we have been here before. After the global financial crisis of 2008, ‘Open Economy Politics’ (OEP) was criticized for being unable to either anticipate or adequately explain the global financial crisis. Now that IPE has been caught short twice in a decade, any rethinking must go beyond critique and beyond OEP. To stop being surprised, we argue that IPE needs to shift its focus from micro-foundations back to macro-effects. IPE today strangely lacks an appreciation for the global macroeconomics that drives the outcomes it has such difficulty explaining, such as recurring financial bubbles, increasing levels of inequality, and the global rise of populism. Bringing the global macroeconomy back into the IPE, we argue, is a necessary corrective.
The article aims to provide some additional empirical support and theoretical consolidation for the emerging 'alternative' interpretation of the Korean developmental experience, which emphasizes the role of the state. After briefly reviewing some mainstream interpretations, it presents a detailed account of state intervention in Korea, where it is revealed that industrial policy played the central role. Then it explains how the Korean state was able to avoid some of the obvious dangers of such a policy, which is often associated with economic failures in developing countries. It then explores the basis of state power in Korea which provided a background for such an outcome. Copyright 1993 by Oxford University Press.
China’s increased trade with, and investment in, Africa have boosted the continent’s economic growth but have also generated considerable controversy. The aggregate data on China’s overseas direct investment (ODI) in African countries reveal that China’s share of the stock of foreign investment is small, though growing rapidly. China’s attraction to resource-rich countries is no different from Western investment. China’s overall ODI is uncorrelated with a measure of rule of law, whereas Western investment favors the better governance environments. As a result, Chinese investment in strong and weak governance environments is about the same, but its share of foreign investment is higher in the weak governance states. Micro data from MOFCOM’s database on registered Chinese firms investing in Africa between 1998 and 2012 provide a different perspective. Key words in project descriptions are used to code the investments into 25 sectors. This database captures the small and medium private firms investing in Africa. Contrary to common perceptions, there are few projects in natural resource sectors. Most projects are in services, with a significant number in manufacturing as well. Country-sector-level regressions based on firms’ transaction-level data find that Chinese ODI, both horizontal and vertical, is profit-driven, like investment from other countries. In particular, regressions show that Chinese ODI is relatively more concentrated in skill-intensive sectors in skill-abundant countries but in capital-intensive sectors in capital-scarce countries. These patterns are mostly observed in politically unstable countries, suggesting stronger incentives to seek profits in tougher environments.
This paper briefly summarizes the development experiences of special economic zones (SEZs) in China and Africa (especially the Sub-Saharan Africa), the lessons that Africa can learn from China, and the preliminary results of the Chinese investments in SEZs in Africa. The study makes recommendations on how to unleash the power of SEZs and industrial parks in Africa through strategically leveraging the Chinese experiences. While the Chinese experiences with SEZs and industrial parks are generally successful, Africa's experience has been relatively poor. Moving forward, they can greatly benefit from the Chinese experiences, especially the Chinese zones in Africa.
This is the golden age of economic statecraft—and the study of economic statecraft. This is in large part due to the evolution of economic coercion from trade embargoes to targeted financial sanctions. Targeted financial sanctions are attractive because they can generate economic costs similar to those of more comprehensive sanctions, with fewer negative externalities. Over time, however, the intersection of economic sanctions with globalized capital markets will provoke three interesting research questions. First, do financial sanctions spare a target country’s population from negative humanitarian and human rights outcomes? Second, to what extent are financial sanctions an exercise in learning by both targets and senders? Third, will the United States’ use of financial sanctions trigger blowback against US primacy in the international financial system? These last two questions offer the prospect to linking research on economic statecraft with larger questions of international security and global political economy.
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I.M. Destler is Professor at the School of Public Affairs, University of Maryland, and Visiting Fellow at the Institute for International Economics.
Michael Nacht is Dean of the School of Public Affairs, University of Maryland, and was Acting Director of the Harvard Program on U.S.-Japan Relations.
This article was prepared for a forthcoming volume on United States Foreign Policy Towards the Year 2000, edited by Robert Art and Seyom Brown, and presented in preliminary form at an April 1990 conference at Brandeis University. We are grateful to C. Fred Bergsten, and to participants at the Brandeis conference, for their helpful critical comments on that draft.
1. See Fred Hiatt and Margaret Shapiro, "U.S.-Japanese Relations Seen At Low Point," Washington Post, February 12, 1990, pp. A1, A16.
2. "Japan Survey" for New York Times/CBS News/Tokyo Broadcasting System, June 5-8, 1990 (U.S.) and May 31, June 7, 1990 (Japan); results summarized in New York Times, July 10, 1990. Reciprocal popular sentiment remained predominantly favorable. The number of Americans who saw themselves as "generally friendly" to Japan dropped modestly, from 87 to 75 percent, between July 1985 and July 1990, while the percentage of "generally unfriendly" rose from 8 to 18. The parallel Japanese percentages in 1990 were 66 percent friendly and 30 percent unfriendly, little changed from past surveys. For comprehensive, balanced assessments of polling data, see William Watts (in collaboration with Seizaburo Sato), "America and Japan: How We See Each Other," Washington, D.C.: Report for the Commission on U.S.-Japan Relations for the Twenty-first Century, May 2, 1990; and Eileen M. Doherty, "American and Japanese Polls on the Bilateral Relationship: Trends and Implications," Washington, D.C.: Japan Economic Institute, Report 9A, March 2, 1990. As Doherty reports, the overall trend in American attitudes toward Japan appears to be "toward the negative," but the picture is decidedly mixed, with citizens in both nations giving major weight to the domestic roots of bilateral economic problems.
3. Prominent "revisionist" writings include James Fallows, "Containing Japan," Atlantic Monthly, May 1989, pp. 40-54; Karel van Wolferen, The Enigma of Japanese Power: People and Politics in a Stateless Nation (London: Macmillan, 1989); Clyde V. Prestowitz, Trading Places: How We Allowed Japan to Take the Lead (New York: Basic Books, 1988); and, across the Pacific, Akio Morita and Shintaro Ishihara, The Japan That Can Say No (unpublished ms., unofficial Washington translation).
4. Kevin L. Kearns, "After FSX: A New Approach to U.S.-Japan Relations," Foreign Service Journal, December 1989, pp. 43-48. (The "Team B" reference comes from the "Team B" assessment of the Soviet strategic threat conducted by conservative analysts under President Gerald Ford and then-CIA Director George Bush.)
5. This was more rapid than overall improvement in U.S. trade: global U.S. exports rose by 27 percent in 1988 and 13 percent in 1989, while global imports grew by 9 percent and 7 percent, respectively. And it was at least comparable to changes in U.S. trade with the European Community (EC): there U.S. exports grew by 25 percent and 14 percent, and imports by 5 percent and 0.2 percent, respectively, during the same two years. The U.S. bilateral trade deficit with Japan receded only moderately—from 49 billion in 1989—whereas the U.S. balance with the European Community swung from a deficit of 1 billion. But this relatively small shift in the overall balance, cited by critics as evidence of the failure of exchange rate adjustment to affect U.S. trade with Japan, was inevitable given the arithmetic involved: since Japan's sales to the United States in 1987 were triple those flowing in the other direction, a much higher rate of growth of U.S. exports was necessary just to keep the overall deficit from growing. (See Table 1 for the numbers since 1980.)
6. As stated in the 1990 report of the Council of Economic Advisers, "removal of [Japanese] import barriers is likely to increase both Japanese imports and Japanese exports. The net effect...
China’s growing economic engagement with other developing countries has aroused heated debates. Yet there has been relatively little research on when, how, and why the Chinese state intervenes in the overseas economic activities of its firms. We examine China’s program to establish overseas special economic zones as one tool of Beijing’s economic statecraft. We trace the process by which they were established and implemented, and we investigate the characteristics of the 19 initial zones. China’s state-sponsored economic diplomacy in other developing countries could play three major strategic roles: strengthening resource security, enhancing political relationships and soft power, and boosting commercial opportunities for national firms. We conclude that even in countries rich in natural resources, the overseas zones are overwhelmingly positioned as commercial projects and represent a clear case of the international projection of China’s developmental state. In Africa (but not generally elsewhere), they also enhance China’s soft power.
Recent literature attributes the relative scarcity of open international markets to the prisoner's dilemma structure of state preferences with respect to trade. We argue that the prisoner's dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system, namely, their security externalities. We consider these external effects explicitly. Doing so leads us to two conclusions: (1) free trade is more likely within, rather than across, political-military alliances; and (2) alliances are more likely to evolve into free-trade coalitions if they are embedded in bipolar systems than in multipolar systems. Using data drawn from an 80-year period beginning in 1905, we test these hypotheses. The results of the analysis make it clear that alliances do have a direct, statistically significant, and large impact on bilateral trade flows and that this relationship is stronger in bipolar, rather than in multipolar, systems.
In a rapidly evolving business environment, many successful companies have transformed themselves by reexamining their core missions and competencies and exploiting innovation in nontraditional ways. General Electric still manufactures products, but now identifies itself as a services company. Wal-Mart has become the premier retailer by capitalizing on its logistics and support systems. These two giants and other companies have realized that they can become more profitable by exploiting new regions of the business landscape. Applying this business model to national defense, the innovation landscape can be said to have three regions: products (airplanes, tanks, ships), processes (integrated systems), and retrofits of legacy systems. While the Department of Defense (DoD) is not a commercial enterprise, nor can it change its critical missions as a private firm might do, it, too, operates in a dynamic environment and should be in a continual process of transformation to adjust to and exploit change. Achieving the right balance of effort in these three regions will pay handsome dividends. Until recently, DoD has invested most heavily in region one, the acquisition of new hardware based on new technologies. Already expensive to acquire, new hardware is even costlier because of its added complexity and need for extensive contractor support. To increase value realized from defense investments, the authors recommend shifting some resources to regions two and three. Creating a framework for exploiting process and retrofit innovation would provide significant increases in capabilities while facilitating successful integration of new product technologies into the existing infrastructure.
China's defense economy has been vigorously developing a comprehensive set of innovation capabilities that will eventually allow it to join the world's top tier of military technological powers. China's target is to catch up by 2020. Although this maybe possible in a few select areas, the defense economy as a whole will likely require another decade or more to successfully master the ability to produce major innovations of a radical nature. This paper analyzes the key areas in the Chinese defense economy's gradual but accelerating shift from imitation to indigenous innovation.