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Geo-economic competition: global disruptions from the new frontline

Strategic Security Analysis - 2015 n°6


Jonathon Cini

Release Date:

June 2015

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Key points

  • Today states are relying less on traditional means of achieving power through weapons build-up and military conflict. They are instead relying more on economic means, where sanctions have become a tool of first resort, together with the increased use of punitive economic measures, the establishment of competing trade regimes and the manipulation of prices.
  • The interconnectedness of the global economy means that particular countries have the ability and willingness to implement economic instruments, which in many cases are becoming important functions of foreign and security policy.
  • Many political leaders have moved from seeing the opportunities of interdependence to focusing on risks, as they look to protect national producers and supply chains. As risk aversion leads trade and capital to become more regionally-constrained, this could translate into lower equity prices and higher bond spreads.
  • We are seeing a trend to a more fragmented international trading system. So called “smaller clubs of trade” are becoming common in the formation of trade agreements. However, given that regionalism leads to a “patchwork effect” across the globe, as well as within some regions - between members and non-members of trade alliances - this can hinder investments and integration, and lead to increased strategic competition.
  • As countries increasingly revert to economic measures to reassert their geopolitical power, we witness the rise of global risks associated with geo-economics that influence the way countries interact and businesses operate, affecting both global trade and political cooperation. Ultimately, the effects of geo-economics may undermine key governing institutions inhibiting their ability to deal and address future global challenges.