The Foreign Service Journal, July/August 2018

THE FOREIGN SERVICE JOURNAL | JULY-AUGUST 2018 99 has held that global prosper- ity advances and America benefits when trade and capi- tal flows are free from political interference. At the end of the 1980s, the International Monetary Fund and other multilateral finan- cial institutions adopted a set of interdependent free-market policies—the Washington Consensus— that the United States urged on their borrowers without regard to geopolitical considerations. This rigid attitude toward reform sometimes produced calamitous effects, as in post-Soviet Russia; but the United States remained unwilling to think in geoeconomic terms. In stark contrast to the U.S. approach is China’s aggressive use of economic measures to advance its interests. In the geoeconomic arena, Beijing has advan- tages the United States lacks. Its poli- cymakers can act swiftly, without the need to build legislative coalitions or follow due process to resolve disputes. They have tools unavailable to their American counterparts: they can direct investment to favored places and proj- ects; control capital flows; regulate, case by case, foreign access to the domestic market; steer consumer preferences among competing suppliers; and harass or facilitate all manner of commercial and financial transactions. China, together with Russia, is the source of “the overwhelming share” of the world’s cyber attacks. And China’s govern- ment has plenty of money: citing Austra- lian China expert James Reilly, the authors assert that “never in history has one gov- ernment controlled somuch wealth.” Economic Warfare War by Other Means: Geoeconomics and Statecraft Robert D. Blackwill and Jennifer M. Harris, The Belknap Press of Harvard University Press, 2016, $19.95/paperback, $15.44/Kindle, 384 pages. Reviewed By Harry W. Kopp American foreign policy, says this wise and provocative book, has lost the art of using economic tools for political ends. Our rivals are more adept. In a strategic contest with China, or with Russia, the United States is at a disadvantage—we rely too much on high-risk military instruments that are potent but expen- sive, while we neglect low-risk economic instruments that are inexpensive and readily available. Geoeconomics—the use of economic measures for geopoliti- cal purposes—is almost wholly absent from our national security strategy. The instruments of geoeconomics include trade, investment, finance, mon- etary policy, energy, commodities, foreign aid, cyber offense and defense, and sanc- tions. For the United States, sanctions are a go-to device, but other tools are rusting in the shed. “While many states are repur- posing economic tools for geopolitical use,” the authors write, “the United States is moving in the reverse direction,” order- ing its international relations to benefit its domestic economy. The authors do not dispute America’s need to use foreign policy as a force for economic renewal, but they warn that ignoring geoeconomics leaves the country vulnerable to the machinations of others. War by Other Means , a Council on Foreign Relations book, dates America’s reluctance to engage in geoeconomics to the 1970s. At least since the Richard Nixon administration, bipartisan wisdom BOOKS Geoeconomics, say the authors, allows China to pursue “a soft but unstoppable form of economic domination” across its region and around the world. Beijing deploys its economic arsenal to iso- late Taiwan diplomatically, entangle it commercially and (through constant cyber attacks) undermine it strategically. In North Korea, Beijing uses assis- tance, oil exports and market access to retain a position of exclusive foreign influence. In Southeast Asia, China employs infrastructure investments, trade and finance to become an essen- tial economic partner, while it presses ahead with a military buildup in the South China Sea. “In many instances,” say the authors, “Chinese geoeconomic coercion has proven costly” but still effective. Chi- nese aid and investment in Africa, often in unprofitable or only marginally prof- itable ventures, buys political influence. And geoeconomics is growing as “a preferred medium of influence” in the complex triangular relations among China, Pakistan and India (where Black- will served as U.S. ambassador)—in part because Chinese economic activities are less likely than military ventures to draw a U.S. response. A future strategic test between the United States and China is likely to be geoeconomic, not military, if only because economic conflict is less expensive and, at least for China, easier to conduct. For this contest, the authors say, “the United States is well-equipped but ill-prepared.” Well-equipped, for example, with A future strategic test between the United States and China is likely to be geoeconomic, not military.