When President Donald Trump signed an executive order in May banning US companies from trading information and communications technology with foreign businesses deemed a national security risk, it effectively prevented Chinese telecom giant Huawei from acquiring the American technology that it needs to market its products. On July 26th, China threatened to blacklist FedEx from the Chinese market. The same week, Europe began testing an alternative financial clearing system to circumvent US sanctions against Iran, and Russia has said that it wants to join. Japan and South Korea are drifting toward a low-level economic war, after Japan restricted key chemicals needed by the South Korean tech industry in retaliation for South Korean demands for reparations. And on August 5, the Dow plunged 3% in response to China’s retaliatory devaluation of the yuan.
These incidents make clear that we are in a new era in which one nation’s economic interdependence on another can be wielded as a political weapon—a phenomenon described as “weaponized interdependence” by Henry Farrell (George Washington University) and Abraham L. Newman (Georgetown University) in a new article in International Security. (Read “Weaponized Interdependence: How Global Economic Networks Shape State Coercion”: https://www.mitpressjournals.org/doi/full/10.1162/isec_a_00351, ungated through September 15, 2019)
This pathbreaking research illuminates how powerful states exert leverage over key products, services, or materials, and use their influence for coercive ends in the globalized economy. Weaponized interdependence flips the script on the typical globalization story popularized by Thomas Friedman (“...the world is flat...”) of decentralized, flat business networks that neutralize state power and make global business king. What Farrell and Newman’s research shows is that in many cases, economic networks rely on central points of exchange. While businesses created these network hubs for efficiency, powerful states now realize that they can turn these hubs into pressure points.
"The very networks of globalization that were supposed to liberate business and bring peace have become a yoke on business and a source of coercion," says Newman. "The practice of weaponized interdependence has important implications for international relations because it requires researchers and policymakers to take the geostrategic consequences of economic interdependence more seriously."
"We live in an interdependent world, but one where the dependencies are asymmetric," adds Farrell. "Some countries—most prominently the US—are able to cut businesses or even entire countries out of these global networks, with profound economic impact. If states overuse their control of central economic networks, however, they run the risk that other actors will start to push back or even create their own alternatives."
The practice of weaponized interdependence has a profound impact on a number of hot-button issues, including the future of secondary sanctions against Iran, the 5G debate concerning Huawei and China, the possible unraveling of global supply chains, and the future of US economic power more generally.
For Morgan Kaplan, executive editor of International Security, agenda-setting scholarship like this is imperative for understanding US national security and economic policy. “‘Weaponized Interdependence’ encourages us to reinvestigate the important role of economics in understanding traditional security issues of global importance,” explains Kaplan. “International Security is proud to provide a venue for key works highlighting the intersection of business, globalization, and security politics.”