Economic War

International Law and the United State’s Response to Chinese Economic War

Economic War: The Logic of Costs Madelette Strategies during the early nineteenth century often referred to as “economic warfare.” In the early years of the century, the concept of economic war had only been applied to international wars between nation-states with significant military interests. In recent decades, however, economic warfare has included conflicts fought between capitalist democratic governments and dictatorial communist regimes, between conservative and liberal governments in Latin America, between mostly Christian and Muslim communities in Africa, and between mostly democratic and pro-business governments in Europe and Asia. Today, “economic war” is being used more often to refer to struggles between economically disadvantaged people in the Global South (those who are economically poorer than the wealthier countries in the region) and economically stronger nations that feel that they are taking advantage of the emerging markets and the rise of China as a major power in the region.

 

In the current period,

however, the economic war is being used by the world’s most powerful countries to bully smaller nations that are either aspiring to greater regional leadership or are currently developing policies that would facilitate greater regional integration and political cooperation. The logic of costs-made letter warfare means that if you accept our terms, you will lose. The United States is using economic leverage and its ability to maintain the preeminence it has enjoyed over the past two decades to push back against Chinese efforts at regional economic enlargement and integration. It is not clear why the Chinese leadership feels it is necessary to bring its economy into its regional grouping. On the other hand, the United States has refused to acknowledge that it is pursuing a similar strategy of containing the rising powers while preventing China from ever becoming a nuclear power.

 

Recently,

the European Union and the United States took the initiative in imposing new U.S. sanctions on China after its government announced a plan to nationalize a large state-owned business in Taiwan. The move was unprecedented and came during a time when the EU appears to be moving away from its traditional focus on economic globalization. The move, however, flies in the face of U.S. claims that the EU is trying to contain China through its trade policies. It also flies in the face of American claims that the EU is somehow trying to re-write the rules for the U.S. in its effort to promote economic globalization. For whatever reason, the European Union and the United States are now locked in an ongoing debate over how to proceed with their mutual trade agenda.

 

The question of how to deal with China’s strategy

to increase its economic clout at the expense of the U.S. economy has been highlighted by a series of events. First, the EU began investigating whether Chinese state-owned banks were acting as conduits for Chinese citizens to obtain European Union government bonds via a backdoor strategy. Second, The EU created a new organization, the European Investment Bank, to oversee all of the European Union’s economic agreements with the rest of the world. The EU plans to use this new organization to offset the effects of Chinese state-owned banks on the value of its currency. This sets up a potential collision between U.S. national security interests and the economic interests of the EU.

 

The European Union’s response

to the recent incidents is that it has threatened to impose more economic coercion on the United States. If the EU chooses to impose more economic pressure on the United States, how should the U.S. react? Should the United States threaten to exclude Chinese students from an American educational institution? Well, there have already been some signs of this in the past, but as history has shown, threats have very rarely led to any sort of reaction from the Chinese government.

 

However,

the United States has recently begun to look for an ally in its fight against international terrorism. Secretary Rice has mentioned the need to come up with a credible strategy to fight international terrorism, but she stopped short of suggesting the United States would “cripple” the terrorists financially or militarily, which many people think of when they hear the term “economic warfare.” There is little doubt that the Chinese government does not want to directly strike at the United States, but it is also fairly certain that the Chinese leadership realizes that economic warfare is a viable tool for bringing international law to their country’s bosom. Perhaps the Chinese leadership should be very careful about what it says publicly and take the long view on the future of international law when it comes to dealing with the United States.

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