Policy issues at the intersection of international security and international economics loom increasingly large for Australian and US policymakers. Geoeconomic statecraft is the use of economic policy instruments to further geopolitical, foreign policy and security objectives.
This report examines the evolution of geoeconomic thinking from classical political economy, through the Cold War and post-Cold War periods and in the more contemporary context of US-China strategic rivalry.
- A shift in alliance strategy towards China, from engagement to strategic rivalry and competition, has reframed international and domestic economic policy settings in light of the security concerns presented by China’s growing power and influence.
- China’s use of geoeconomic policy instruments has become a major concern for Australian policymakers. However, its use of economic statecraft has mostly been counter-productive in advancing its geopolitical interests.
- Australia and the United States have increased cooperation in some geoeconomic policy areas — most notably in relation to defence industry, technology and critical minerals — but geoeconomics remains an underdeveloped element of the alliance relationship, reflecting its foundations in a security treaty that is silent on economic issues.
- The key analytical issue raised by geoeconomics is how to reconcile the positive-sum logic of the gains from international trade and the cross-border flow of goods, services, capital, people and ideas with the often zero-sum logic of strategic competition between nation states.