Globalization connects the economic activities of the world even though the world is becoming more contested and confrontational. The rivalry between the US and China increases the political frictions while they are deeply connected through global supply chain. Both the US and China are weaponizing trade relations as if they are at war without shooting a single bullet. The concept of “Economic Statecraft” emerged in such circumstances.

A quick definition of the “Economic Statecraft (hereafter, ES)” is “achieving diplomatic and strategic goals of the state by using economic means”. Under this definition, the article examines the measures used in ES such as sanctions, export control, trade restrictions and aid. These measures have different effects on delivering political message to the target state, but they are taken in accordance with the aim and objective of the ES exercising state.

The aim and objectives of the states are threefold. First, the ES is used to change the behavior and action of target state. For example, ES can be used for improving human rights conditions or halting nuclear programs by adding economic pressure. Second, ES is effective for announcing the malign activities and setting up norms of behavior. It is a message to add not only economic pressure but social pressure as well. Third, ES may have an effect to improve international and national solidarity and claim its legitimacy for implementing market distorting measures. If a state exercise ES, it may have negative effect on the economy of its own by cutting trade and investment or not licensing the export from its territory.

The condition for the success of ES does not depend on the size of economy but the monopoly position in the global supply chain. If other countries have no option but to depend on the product from particular state, that state will have the power to use such a product as a leverage. Also the size of the market may create dependence. States in proximity of a large economy tend to fall into this category. Also state which controls the international currency can use such a position as a leverage.

The article also examines the difference between the concepts of “economic security” and ES. The difference is that “economic security” focuses on the defense from economic coercion by improving national autonomy, while ES is an offensive tool for imposing political will on other states.

An economic statecraft is a policy measures utilizing an economic incentives and disincentives to force targeting county to comply with political demand of the sender. It is not a single definable policy measure but multiple measures to attain policy objectives through reflection of the degree and level of economic interaction among states.

Economic statecraft is a policy measures by choice. Its political utilities are wide and politically manipulable since it is flexible in imposing and lifting the measures. It is often used to show senders political discontent without harming the formal political relations. It can also be utilized to execute political and tactical pressure by banning the export of the strategic goods and technologies thus deprive access to those items and control the degree of military development of the target. The UN has imposed various forms of economic sanctions under the UN Charter provisions.

Despite the multiple utilities of these policy measures, a casual mechanism of the economic statecraft in changing the political decision of target is unknown. It may cause economic pain to the economy of the target and the mounting domestic pressure to concede to the demand of the sender could be a political driver. In opposite, it may harden the reaction of the target since it may unite the country to resist to the external pressure. As for the positive economic incentive, the domestic audience of the target may not induce by the reward given, thus may blur the mechanism of causal relationships.

In many cases, economic statecraft is imposed without setting the specific goal or lifted without tangible result and fulfilling the concrete demand of the target. It is a symbolic policy tools to persuade domestic audience of the sender by showing that their government is executing tangible policy measures to exercise power on the target over contested political agenda. At the same token, a defensive economic measure, most notably export controls, may frame economic interaction corresponding to the strategic relationship. The aim of this measure is to shape the political relationship rather than punish or deter specific action.

The assessment of utility of the economic statecraft differs when considering short term and long-term effect of the measures. Additionally, the economic statecraft has positive record when an instant reaction to the developing events is necessary to spare time for further consideration of policy appropriate.

This article examines the practices and studies of economic statecraft (ESC), which refers to economic means for strategic purposes. The aim is to acquire a broad view of ESC to deepen our understanding of ESC and provide useful suggestions for ESC in the 21st century. ESC has been practiced since ancient times, and many states used it in the 20th century. China’s ESC, based on its massive economic power, is now attracting international attention. However, although various countries have used ESC in various times, comprehensive research of ESC is unexpectedly few. Without grasping the whole picture of ESC, it is difficult for us to understand the true value, usefulness, and implications of each ESC practice or study, and to understand the big picture of ESC, we have to explore the history of ESC.

This article begins by examining past ESC practices. It surveys the diverse techniques, cases, and objectives of ESC and its changing legitimacy. Next, based on the above research, I focus on how previous studies discussed ESC. Third, the article confirms the problems with the ESC (economic engagement) that the West has used toward China for the past twenty years, discussing more useful and appropriate alternatives toward rising China in the 21st century. Finally, the article confirms the pitfalls of ESC studies, summarizing the theoretical and practical implications of its discussion.

Today’s liberal democracies need an alternative and more systematic ESC toward China because the failure of economic engagement is now obvious. It must be the ESC focused on economic order—the gauze curtain, which is different from the iron curtain of the Cold War period and is based on a high-level multilateral free trade agreement, such as the Trans-Pacific Partnership (TPP).

In today’s global era, the high cost of military means is widely recognized, ESC techniques are expanding thanks to economic globalization, the two major powers—the United States and China—are both outstanding ESC users, and the West wants a new ESC toward China to replace economic engagement. Therefore, ESC bears significant meaning for both practice and research. Traditionally, both policymakers and researchers have considered national security and geopolitics exclusively from the perspective of military means. In the 21st century, however, without the perspective of ESC, they would not be able to fully understand national security and geopolitics.

This study aims to shed light on the reality of economic statecraft under the Trump administration by examining the formation of the Foreign Investment Risk Review Modernization Act (FIRRMA) of 2018. For effective economic statecraft, the state as a unitary actor need to set a clear goal and pursue it in a concerted manner. Does this assumption hold in economic policymaking, where conflicting interests often collide?

FIRRMA is primarily aimed to restrict China’s access to U.S. technology in order to contain the country’s rapid technological development. It is an effort to use American economic power to maintain US hegemony by limiting the operation of Chinese companies on the US soil, especially in the high-tech industries. At first glance, the bill seems to have been passed smoothly with a bipartisan support in Congress and with the full approval of the legislative branch, both of which came to take increasingly hardline stance toward China. They did so without being pushed by the public opinion or economic interests of their constituencies. This can be interpreted as a case in which policymakers came together to exercise economic statecraft in order to protect “national interest” in the face of the rising China threat, as Neorealism predicts.

However, a close examination of the preferences and motives of each actor involved in the policymaking process reveals that the U.S. hardline policy toward China on inward investment was based on a combination of various motives and conditions. As there exists no firm consensus within the U.S. authority on detailed goals, it is highly likely that China’s actions or changes in the U.S. economic situation will lead to a loss of policy unity. It also shows the fundamental weakness of the foundation of economic statecraft, as economic policies usually involve a wide range of interests and preferences.

In the long run, the strengthening of regulations on foreign investment could weaken the U.S. economic power, which is the base of its hegemony. Therefore, the case of regulations on inward investment also highlights such double-edged nature of economic statecraft: overuse of economic power can undermine the very source of power.

This article considers the effects of China’s economic statecraft, conducting a case study of the tourism policy of sending out mainland Chinese tourists to Taiwan in China’s “Favor-Granting policies.” The Favor-Granting policies can be regarded as a particular type of economic statecraft, one which intends to change the behavior and policies of another country by providing economic benefits.

Pursuing the strategic end of the “Peaceful Unification” with Taiwan, China is exerting more influence on Taiwan by economic means in recent years, following China’s emergence as an economic great power and Taiwan’s rapid deepening of economic dependence on China. A typical example of such practices is the Favor-Granting policies, which is essentially a pork barrel project. China has intended to exert its influence on the broader Taiwanese people by promoting the policies to reduce anti-China sentiment in Taiwan and to encourage the people to support or vote for the party in Taiwan that is desirable to the Chinese government, in an effort to create advantageous circumstances for future reunification. The tourism policy of sending out mainland Chinese tourists is a diplomatic means which China has been employing toward other countries also. However, in the case of Taiwan, its precise effect was limited and not successful in achieving the political ends.

The literature on this topic has not completely grasped the reality of China’s influence exerted by the Favor-Granting policies. While the economic statecraft perspective elucidates the conditions with which China could exercise its influence effectively, it is not clear how the influence would exhibit its effect in Taiwan. Though political sociologists in Taiwan empirically explore the mechanisms of how China’s influence would penetrate Taiwanese society, as well as the importance of the native collaborators in Taiwan, they do not investigate the possibilities that its influence would ultimately be limited. Therefore, we need a comprehensive framework which enable us to analyze the interaction among actors involved with the Favor Granting policies.

This article adopts a clientelism approach to examine the effect of the tourism policy towards Taiwan. This is because China’s influence as seen in ‘Favor Granting’ is viewed as pork barrel politics, which appears in a quasi-nation’s territory called “Liang’an” including the mainland China and Taiwan. We can know the effect of China’s influence by considering whether the clientelism across the Taiwan Strait will operate effectively.

This article argues that the effective operation of the clientelism was constrained not only by a lack of the unity in the Chinese state, the market mechanism, and the existence of the de facto national border between China and Taiwan, but also by Taiwan’s democratic system. A principal-agent problem caused in the pork barrel politics undermined the effect of China’s tourism policy towards Taiwan. We argue that China’s economic statecraft is less lilely to be effective when it is applied to democratic countries.

As the second biggest economy in the world and the leading emerging economy, how does China use its huge economic power to realize strategic goals to make influence attempts toward other nations? What implications would be for the international order? China’s economic statecraft has attracted increasing global attention in both academic and policy circles. However, the existing scholarship on China’s economic statecraft has been mainly on economic inducements particularly China’s overseas investment and finance such as the Asian Infrastructure Investment Bank (AIIB) and the Belt and Road Initiative (BRI). The research on China’s coercive economic statecraft remains understudied and most empirical studies have derived from the cases of import restrictions on agricultural products. China’s rare earth resource diplomacy, particularly the imposition of temporary rare earth embargo on Japan, provides us a valuable case to investigate China’s coercive economic statecraft. The existing literature on China’s rare earth resource economic statecraft could be divided into three major categories. First, there is a bulk of research from the perspectives of economics and law, but the studies from international politics remain to be developed. Second, the research from international political lens mainly considers China’s behavior a diplomatic failure as Japan successfully diversified its rare earth sources in a short period. China’s international reputation is also considered to be damaged as the WTO ruled against China and the Japanese public opinion toward China has deteriorated. Third, China’s rare earth economic statecraft has been largely used as a solid supportive evidence for China’s revisionist vision against the current liberal international order. The aforementioned research has provided significant insights to understand China’s coercive economic statecraft. However, they are mainly based on the outsider’s perspective and do not address the diversified internal debate and complex internal-external dynamic linkage. This paper has two major aims. First, it aims to identify the effectiveness and mechanism of China’s rare earth temporary embargo incident toward Japan in 2010. Second, this paper aims to clarify the full logic of China’s coercive economic statecraft by focusing China’s internal debate on rare earth from the global economic crisis in 2008 to now with an internal-external nexus perspective. With this combination of zoom-in and zoom-out approach, this paper is expected to clarify the conditions, effectiveness and legitimacy of China’s coercive economic statecraft and its implications on international order.

The paper analyzes Middle Eastern countries’ foreign aid and military activities in African countries through the lens of Economic Statecraft (ES), the art of employing economic means to exert influence over other countries and thereby pursue geopolitical and strategic goals.

Due to changes in the strategic environment, such as the United States’ withdrawal from the Middle East and the escalation of intra-regional conflicts, Middle Eastern countries have pursued foreign and security policies that place greater emphasis on their national interests. Arab states in the Gulf and Turkey are upping their foreign aid to Africa and establishing military bases at geopolitical chokepoints to expand their spheres of influence. The economic and military expansion of Middle Eastern countries into Africa also intensifies competition among various state and non-state actors.

There have been studies on foreign aid to African countries and on the establishment of military bases by Middle Eastern countries. By examining these regional dynamics from the perspective of ES, this paper seeks to decipher the complex and multi-dimensional competition, confrontation, and cooperation. Additionally, the paper investigates the effectiveness of the ES as practiced by non-major powers, which is often overlooked, the impact of ES on regional politics and security, and the linkage with international order and international security.

ES is frequently discussed in the context of great power politics and strategic competition, such as the US-China rivalry. However, the same is true for regional and middle powers that use economic means to pursue their geopolitical objectives. The distinction is that great powers such as the US, China, and Russia are exceptional in the scale of their military and economic clout in international politics. Therefore, to better understand ES, it is necessary to focus on tactics being employed at the regional level and the geopolitical shifts that arise.

This paper outlines the debate on ES in/towards/from the Middle East and examines the trends and background of the pursuit of geopolitical goals linked to foreign aid, which has accelerated in recent years. Then, as a case study, this paper focuses on the Middle Eastern countries’ intervention in Sudan and the Horn of Africa region, as well as the competition among the regional countries. The intervention of Middle Eastern countries in Somalia and Libya is also analyzed to demonstrate that ES involves various actors, including unrecognized states and non-state actors.

This article reconsiders Japanese diplomacy towards China during the period of the initial establishment of the Hara Takashi cabinet, concentrating on the problem of having industrial loans included in the formation of the “New Four-Power Consortium”.

Previous research has concentrated on the transition from “Old Diplomacy” to “New Diplomacy”, and has stated that the Hara cabinet altered the policy of the previous Terauchi Masatake cabinet. Compared with the old consortium, the new consortium is characterised by the inclusion of industrial loans in its scope of business. However, this has only been pointed out by a few researchers, who have clarified the relationship between this problem and “New Diplomacy”. My research concentrates on the domestic preparation for participating in the new consortium, and the changes it brought to Anglo-Japanese relations.

In October 1918, the Hara cabinet decided not to supply loans that would pose an obstacle to North-South peace in China, such as the “Nishihara Loans”. This decision was certainly ground-breaking, but the Army Ministry demanded certain exceptions.

The US government tried to restrain Japanese economic influence on the Chinese government and proposed forming a new consortium. The US State Department insisted that the new consortium should include not only administrative loans, but industrial loans. The British government and the Hongkong and Shanghai Banking Corporation had been opposed to including industrial loans when the Six-Power Consortium was formed in 1912. The Japanese government expected that the British government and bankers would be opposed to including industrial loans this time as well. However, the British government pledged “exclusive support” to the British syndicate to unify British banks connected to China. Therefore, the Japanese government could not expect the British party to state its opposition.

J. J. Abbott, an American banker who had visited Japan, had held talks with Prime Minister Hara and Deputy Foreign Minister Shidehara Kijuro. Abbott and the State Department were optimistic that Japan would want to include industrial loans. T. W. Lamont, representing the American syndicate, suggested in the inter-group conference in Paris that the new consortium should include not only administrative loans but industrial loans. Yokohama Specie Bank, representing the Japanese syndicate, agreed to his proposal. However, the bank’s stance did not represent all Japanese banks closely related to China. These banks could not fully agree to his proposal because the Hara cabinet had not yet made preparations to organize a syndicate formed of multiple banks. It was only after the Paris conference that the Hara cabinet assembled eighteen banks in Tokyo and Osaka to let them participate in the new consortium.

In conclusion, it was not difficult for the Hara cabinet to agree to include industrial loans in the process of forming the new consortium. However, the Hara cabinet had not been able to organize the Japanese syndicate. The argument is also advanced that the Japanese syndicate formed by the Hara cabinet had its origins in the syndicate under the Terauchi cabinet.

The nuclear non-proliferation norm, or the limitation on the number of nuclear weapon states, has been institutionalized in the Nuclear Non-proliferation Treaty (NPT) centered regime. It is notable that the 25 years term limitation of the treaty was extended indefinitely and the International Atomic Energy Agency inspection system strengthened in spite of the unfairness of the treaty. Why then, was the non-proliferation norm institutionalized in such a strong regime beyond the merely ideological norm?

Existing research points to the Great Powers preference and/or civil society movements as the factors behind the norm institutionalization. In contrast, this paper focuses on the norm violations and presents a hypothesis that the norm violations prompted the institutionalization of the nuclear non-proliferation norm. Specifically, the norm violations, that is, possession of nuclear weapons, gave policy makers accurate information about the costs and effects of nuclear weapons. Subsequently, many states who renounced nuclear weapon possession created the strong regime in order to bind other potential norm violators.

The theoretical kernel of this argument is the uncertainty of the costs and effects of nuclear weapons. Many policy makers were not well-informed about the effects and costs after the first atomic bomb was introduced. This discouraged policy makers from planning nuclear weapon policies, then dampened their resolve to establish the nuclear non-proliferation regime. Against this background, nuclear non-proliferation norm violations, that is, new nuclear weapon possessors emerged, which reduced the uncertainty around the nuclear weapons and decisively influenced the institutionalization of the nuclear non-proliferation norm.

This paper derived the hypothesis from theoretical consideration. Policy makers faced a range of uncertainties regarding nuclear weapons, including deterrent effect, costs, international relations, and normative behavior of other states. These played a role in their decisions regarding compliance with the norm. The uncertainties of nuclear weapons are reduced and the policy makers clearly recognize the costs and effects of nuclear weapons when the nuclear non-proliferation norm violations occurred. Almost all policy makers renounce possession of nuclear weapons because of their relatively high costs. They then want to bind others to abandon the aspiration for nuclear weapons. Hence it follows that a strict institution is created.

The sections which follow the theoretical consideration empirically verify the above hypothesis. The third section posits that no violations led a weak institution, that is to say the 1968 NPT. The fourth section shows that the policy makers who became informed about the costs and effects of nuclear weapons by norm violations, renounced possession of nuclear weapons and strengthened the nuclear non-proliferation regime to bind other states.

In international relations theory, balancing can be defined as provision of protection against a threat to a weaker state (junior partner) by a stronger ally (senior partner). Though there are several related works on this, the following question remains unanswered.

If the senior partner suddenly stops engaging balancing, what would the junior partner’s policy choice and its related consequences be?

This paper aims to provide an answer to this question by presenting two patterns of behaviors of the North Korea (DPRK) and Taiwan (ROC) as cases.

The DPRK found itself in a state of confusion when its two senior partners—the Soviet Union and China—established diplomatic ties with South Korea, while the ROC found itself in a difficult spot when the U.S. officially recognized the Mainland.

These changes have led to the following internal balancing strategies having contrasting patterns: the DPRK has chosen nuclear weapons as a means to protect itself from U.S.’ threat, whereas the ROC has decided to continue to depend on the U.S. to balance against China.

Asymmetric patterns can also be observed when we compare the two nations’ international economic policies. The DPRK’s level of economic interdependence with other nations, barring senior partners, has been low because of its closed and self-reliant economy. This has resulted high vulnerability to the change in the economic relations with their senior partners and the low sensitivity to the turbulence in the international economy. The situation in the ROC, on the other hand, is completely opposite as it has always been open to the global economy with diversified economic interdependence with other nations.

The DPRK’s continued nuclearization has resulted in the international society imposing economic sanctions on it, but effects of consecutive sanctions have been hedged by their closed and self-relied economy with dependence on the economic relations with China. The strategy that the DPRK employed—holding summits with the U.S.—can be described as bandwagon; this has, however, been unsuccessful due to the DPRK’s continued internal balancing strategy armed by nuclear weapons.

The ROC, on the other hand, has succeeded in establishing economic relations with its two former Cold War rivals—Russia and Vietnam; the ROC’s domestic market and investments by its private companies have attracted the two nations. The ROC’s approaches to these two were part of its hedging strategy to avoid vulnerability to economic interdependence with a limited number of nations, as well as isolation in the international society.