The mirage of geoeconomics

[MILAN] A few years ago, there was an overarching global consensus on trade: the freer, the better. Only nerdy economists spent much time agonising over the details of trade policy, and special-interest groups were pretty much alone in advocating protections. Overall, tariffs were relatively low, most governments sought to attract foreign investment, and technology transfers were viewed as a way to spread prosperity. Not anymore.

Thirty-five years after the military strategist Edward N Luttwak coined the term “geoeconomics” to describe when the “logic of conflict” meets the “grammar of commerce”, the concept is gaining new resonance. There is a growing consensus in many countries that trade policy should be viewed mainly through the lens of geopolitics.

But as Luttwak observed, a geopolitical conflict is, at best, a zero-sum game: one side’s gains are the other side’s losses. By contrast, trade is typically a win-win game – no matter how vociferously US President Donald Trump argues that other countries are ripping off the United States. This tension is unavoidable; any attempt to use economic measures for geopolitical ends will eventually run up against it.