The frame of protection the “domestic” and to minimize “dependence” unraverls the world order

The past years have witnessed a transformation in the logic underpinning global economic relations. Not only China and Russia, but also the European Union, Japan, the United Kingdom, and the United States are increasingly embracing a myriad of economic policies that defy the largely market-oriented rationale of the (neo)liberal order prevailing over the course of the last three decades. This (neo)liberal order was premised on the relative separation of the realms of economic and security policy, and thus of having profit-seeking market players as leading the pace and direction of global economic relations. This attitude is well exemplified by the 1994 declaration which prefaces the agreements launching the World Trade Organization, in which trade ministers hailed ‘the participation of their economies in the world trading system, based upon open, market-oriented policies’ (WTO, 1994, p. 1263). Developments over the last years point in a different direction with major economies actively deploying a mix of innovative as well as time-tested interventions in the economy directed at safeguarding their ‘strategic assets’, ‘critical infrastructures’ or ‘emerging technologies’ from control or influence by foreign state and/or market forces.

In order to make sense of these transformations, this chapter introduces the concept of ‘balancing dependence’ by which we refer to state policies that seek to reduce economic dependencies on foreign actors, both public and private. As great-power competition has been accelerating, most major powers have become increasingly concerned about the security risks that interdependence poses for state autonomy and economic preparedness. On the one hand, these risks are systemic in that they stem from the networked nature of the global economy and the effects of sudden disruptions in multi-tiered supply chains. The fragility of these global economic networks and linkages has been highlighted by the COVID-19 crisis (Farrell & Newman, 2020). On the other hand, these risks are geostrategic, relating to the way asymmetric interdependencies can be manipulated, exploited and leveraged for strategic benefits by the less vulnerable parties in these relationships (Farrell & Newman, 2019; Leonard, 2016; Scholvin & Wigell, 2018). As a result, recent reviews of security doctrines by China, the EU, Russia and the United States have seen unprecedented emphasis put on economic security and policies to reduce strategies dependencies (e.g. Helwig, 2021; McCormick et al., 2020; Trenin, 2021).

The tendency towards balancing dependence can also readily be seen in the EU’s efforts to develop its ‘open strategic autonomy’, the United States’ ‘reshoring’ of supply chains and technological ‘decoupling’, as well as China’s ‘Made in China’-strategy. The ‘New Industrial Strategy for Europe’, for example, declares that ‘Europe’s strategic autonomy is about reducing dependence on others for things we need the most’ (European Commission, 2020b, p. 13). To this aim, the European Commission published a survey in May 2021 on the ‘strategic dependencies’ affecting the EU, revealing 137 products where the EU can be considered highly dependent on imports (European Commission, 2021b). Similarly, the Biden administration, barely a month after taking office in January 2021, issued an executive order on ‘America’s Supply Chains’, based on the premise that ‘the United States needs resilient, diverse, and secure supply chains to ensure our economic prosperity and national security’.1 US government agencies in a number of sectors—from defence to health, from food to semiconductors—were instructed to report on the risks that may affect the supply chains on which the US relies as well as on gaps in domestic manufacturing capabilities, and the structure of supply chains for strategic assets. China’s main strategy for trade and technology—‘dual circulation’—also revolves around an effort to reduce foreign dependence and strengthen self-sufficiency (García-Herrero, 2021).

This newfound urge to balance dependence puts pressure on the interdependent fabric of the global economy. Similar to the familiar notion of ‘balancing power’, balancing dependence creates a security dilemma as states seek to adjust their level of dependence in relation to similar efforts by others. The concern with reducing dependence by key economies triggers a reaction of broader and deeper measures towards economic autonomy by other key players in the global economy. While this reaction sometimes entails increasing the level of self-sufficiency, often it involves efforts to adjust the reliance towards economic partners deemed more reliable from a security perspective. Either way, as suggested by the surveys on strategic dependencies undertaken by the EU and the United States, states show more interest in understanding who their national economies depend on—and in trying to influence the network of dependencies. The notion of “friend and ally-shoring” introduced in the 2021 White House (2021) report on America’s supply chains adds new vocabulary to the set of principles that shaped the neoliberal economic order enshrined in institutions such as the World Trade Organization. As a consequence, the (neo)liberal order may start to unravel (see also the introduction to this volume).

However, to what extent this unravelling takes place will not only depend on state action. The (neo)liberal order has given global business clout to push back on government decisions (for a seminal analysis, see Strange, 1996, p. 29). States will not enjoy free rein in subverting economic relations into the strategic realm. Companies will seek to limit the impact of governments’ actions over their businesses, while also attempting to induce governments to adopt measures—such as industrial policies and tax incentives—that hedge their position in a changing economic order. A priori it may thus be difficult to define how far states can go in merging economics and national security. States are varyingly constrained in their ability to pursue policies autonomously from domestic interest groups (see Gertz & Evers, 2020).

From the perspective of balancing dependence, the nature of domestic business-government relations is of particular importance. Intuitively, state capitalist systems can be assumed to have a comparative advantage over market economic systems when it comes to enlisting companies to balance dependence. As Gertz and Evers (2020, p. 117) contend: ‘Close, cooperative relations between businesses and the government act as a force multiplier – state power increases when firms are aligned with state goals and eager and willing to work hand-in-hand with the government to achieve them’. By comparison, in liberal market economies, where business-government relations are more distant, policymakers will be constrained in using firms to advance state interests. Yet, even in state capitalist systems, enlisting companies to align with state interests is far from straightforward. As research by Kärkkäinen (2016) shows, China sometimes finds it difficult to control its corporate actors, even statecontrolled ones, and get them to pull in the same direction. With a view to shedding light on market reactions to states’ balancing dependence, we also introduce in this chapter the concept of ‘corporate geoeconomics’, with which we propose to describe how firms are trying to preserve a measure of autonomy in an economic environment marked by increased state (geoeconomic) intervention (see also Borchert, 2021).

The chapter proceeds as follows. The next section develops a geoeconomic framework for analysing the transformation of global economic relations. It argues that the notion of balancing dependence provides a novel analytical device for understanding the current repurposing of economic policies. As states seek to strengthen economic autonomy, they increasingly start to balance dependence, thereby feeding a reaction of the same nature by other states that puts pressure on the interdependent fabric of the global economy. Thus, the subsequent section surveys the increasing convergence between economics and national security in the strategies of the major powers in the global economy, chiefly China, the European Union and the United States. But we also argue that an appropriate conceptualization cannot be circumscribed to a standard, state-centric geoeconomic framework. It needs some refinement in order to capture the distinctive elements of the current strategic context, namely the simultaneous economic competition and security rivalry between the world’s great powers as well as the deep-seated interdependence that was ushered in by the regimes of (neo)liberal globalization. For this reason, the third section looks at corporate reactions to the revival of geoeconomics in Europe and the United States. It shows how market players seek to shape and limit state intervention as well as adapt to it, pointing to the agency of also non-state actors in contemporary geoeconomics. The concluding section argues that geoeconomics is ultimately a multilevel dynamic in which states are looking to strengthen their economic autonomy in relation to both other states in the international system as well as corporate actors, and in which these corporate actors in turn are trying to preserve their own autonomy from state intervention in what we call corporate geoeconomics.