Geo-economics, rendered as the interplay of economics, geopolitics and strategy and the use of economic tools to advance geopolitical and economic objectives of nations, has become a significant aspect of the world in recent decades. Powerful countries including Russia, the United States and China use geoeconomic tools more. But less powerful countries also use geo-economic policies/strategies against enemy countries. The deep integration of global trade links and financial markets has made geoeconomic tools more powerful. Also, geoeconomic aspects will play significant roles, along with military powers, in world affairs in the future. But it sometimes causes heavy economic losses for enemy countries. Yet, it is desired that no country becomes poor because of the usage of geo-economic tools.
No doubt, countries use a range of institutionalist, liberalist, constructivist and other geo-economic tools to advance their geopolitical, economic and strategic interests. Some of the important geoeconomic tools are trade policy, investment policy, official development assistance, conditional foreign aid, financial and monetary policy, technology policy, energy policy, economic and financial sanctions and embargos and asset freezes. Also, there are many other important geo-economic tools including tax incentives, granting licenses, bailout packages, debt forgiveness and free trade agreements and other bilateral and multilateral economic treaties. Notably, geo-economic tools, which are transforming global economic relations and reshaping geopolitical strategies, are economic development oriented and coercive. Countries use positive inducement oriented tools to foster economic development and win allies and negative action oriented tools to coerce adversaries or punish enemy countries.
But the employment of geoeconomic tools brings both positive and negative outcomes. While it brings positive outcomes for the countries that employ geoeconomic tools and their allied countries, it brings negative outcomes for the targeted countries. It helps to develop economic conditions but it can also lead to devastating economic conditions. But the effects mainly depend on which types of geoeconomic tools are employed. Many countries use economic tools especially liberal economic tools to advance economic interests. Such tools mostly bring positive outcomes. But many counties use hegemonic economic strategies to advance political interests with the usage of economic powers at the regional and/or global levels. Consequently, geo-economic competition often results in devastating negative consequences for enemy countries especially politically and economically enemy countries.
As noted, geo-economic strategies/tools are sometimes used for economic cooperation between or among countries that leads to positive economic outcomes. No doubt, there are many multilateral treaties and trade agreements that aim to foster economic cooperation among countries. For example, the European Union provides the scope of multilateral economic cooperation by facilitating trade among European countries. Besides, there are bilateral free trade agreements and customs agreements that are made to foster economic cooperation between countries. Even major powers also use development oriented geo-economic tools among them to generate economic cooperation, foster economic growth and bring financial benefits.
But coercive geo-economic strategies are used to harm the economic progression of enemy countries, along with providing punishment for undesired political or other behaviors, leading to negative economic outcomes. The United States and China recently engaged in an unprecedented economic war with the imposition of restrictions and increased tariffs on each other’s products worth hundreds of billions of US dollars. Besides, sanctions and counter-sanctions are imposed on many countries including the recent war-driven sanctions and counter-sanctions between the West and Russia. Of course, coercive geo-economic tools are not used by all countries, they are mainly used by globally and regionally powerful countries.
But there are several causes or factors that drive geoeconomic conflicts among countries including conflict over the distribution of costs and benefits from cooperation, asymmetry of interdependent relationships, an unfavorable shadow of the future and conflict over the regulation of economic activity across the geographic space. Moreover, there is a range of causes or factors that drive economic cooperation among countries. Some notable causes/factors include the benefits of economic cooperation, the interest in the minimization of economic risks and conflicts over economic control. No doubt, the benefits of countries in economic cooperation helped to develop many inter-governmental organizations and make many bi-lateral and multi-lateral treaties for economic cooperation.
Of course, the use of geo-economic tools especially coercive ones is not undesired at all since all countries want to progress in economic and other terms and there is geopolitical competition among countries. But it is desired that the usage of coercive economic tools to advance the geopolitical goals of countries does not make any country including the enemy country poor and unable to function. In this respect, responsible acts are needed. But developed and powerful states have more responsibility here. Coercive measures especially sanctions and embargos need to be avoided as much as possible against enemy countries including rich countries. But the imposition of economic sanctions needs to be avoided for less developed and newly developed countries altogether. Alternatives to economic sanctions need to be used.
It is desirable that countries including globally and regionally powerful countries in economic terms use geo-economic tools more to increase economic cooperation and facilitate economic growth. But more emphasis needs to be given to economic diplomacy to effectively respond to the challenges which are put by the integration of economic, security and geo-political dimensions by countries. Moreover, private companies need to build up interest connections and institutional linkages and participate in state-private sector coalitions to foster economic growth. No less important is that inter-governmental economic organizations need to be made more capable of promoting economic cooperation and fostering economic growth across countries including less developed countries. Strengthened transnational trade organizations can strengthen transnational economic activities.
No less important is that providing compensation/economic benefits or economic opportunities to unintentionally affected economically weaker states to withstand the challenges caused by the usage of coercive geo-economic tools. This is the case when sanctions that are imposed against a powerful state by another powerful state affect the trade of untargeted economically weaker states. Moreover, states need to do more to save their own economy and the harmful effects of the use of coercive geo-economic tools. In this respect, regional and global economic ties with bilateral and multilateral economic treaties may be helpful. Also, economic planning needs to be made to improve the capacity to tackle coercive geo-economic challenges and use resources in the best possible ways.
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