Sharper: Economic Statecraft

As competition between the United States and China escalates, and the war in Ukraine continues, countries have embraced new forms of economic statecraft to accomplish key foreign policy objectives. From export controls to targeted sanctions, these actions are actively reshaping the interconnected global economy with significant possible ramifications. CNAS experts are sharpening the conversation on economic statecraft and the future of economic competition. Continue reading this edition of Sharper to explore their ideas and recommendations.

Features

Sanctions by the Numbers: 2022 Year in Review

The CNAS Sanctions by the Numbers series offers comprehensive analysis and graphical visualization of major patterns, changes, and developments in U.S. sanctions policy and economic statecraft. Members of the CNAS Energy, Economics, and Security Program collect and analyze data from publicly available government sources, such as the Treasury Department’s Office of Foreign Assets Control and the Department of Commerce’s Bureau of Industry and Security. Michael Frazer and Jocelyn Trainer provide this update on the impact and utilization of sanctions in 2022.

Containing Crisis

The United States and its allies are increasingly forced to respond to coercive economic statecraft—i.e., restrictions on trade, investment, and financial transactions intended to impose economic costs on a target in pursuit of strategic objectives—employed by China. At the same time, the United States lacks a broader strategy for the effective use of economic tools to manage and respond to scenarios of geopolitical tension. A CNAS report sets a new strategic framework for U.S. coercive economic statecraft toward Beijing.

The Role of Investment Security in Addressing China’s Pursuit of Defense Technologies

On April 13, 2023, CNAS Senior Fellow and Director of the Energy, Economics, and Security Program Emily Kilcrease testified at the U.S.-China Economic and Security Review Commission on the importance of mitigating national security risks associated with investment in China's military modernization efforts.

Effects of the Russian Oil Cap with Dep. Sec. Wally Adeyemo

It has been over six months since the U.S. Treasury Department instituted a price cap on Russian oil in an effort to restrict Moscow’s revenues to fund their invasion of Ukraine. To discuss the price cap’s effects on global energy prices and the war in Ukraine, the Center for a New American Security hosted a virtual fireside conversation with U.S. Treasury Deputy Secretary Wally Adeyemo and Richard Fontaine, Chief Executive Officer of CNAS.

Commentaries

Decoupling Wastes U.S. Leverage on China

"In October, the Biden administration announced sweeping export controls on semiconductors to China," observes Paul Scharre in Foreign Policy. "Denying access to chips is necessary, the administration said, to keep them out of Chinese weapons and protect U.S. national security. The new policy is a mistake, however, and will harm U.S. security rather than defend it. In cutting off China’s access to advanced chips today, the United States is giving up its long-term leverage over Chinese artificial-intelligence development and accelerating China’s drive toward chip independence. Recent U.S. export controls are the latest step in “decoupling” U.S.-China technology ties, yet decoupling is not enough to secure U.S. interests in a long-term competition. A better approach would be to keep China dependent on U.S. technology, giving the United States the ability to deny China access to key technologies when necessary."

Sand in the Silicon: Designing an Outbound Investment Controls Mechanism

"The stakes for rethinking the investment relationship between the United States and China are high," write Emily Kilcrease and Sarah Bauerle Danzman for The Atlantic Council. "China is the world’s second-largest economy and second-largest destination for foreign investment, after the United States. US firms have $118 billion in investments there. While foreign companies are increasingly pessimistic about the geopolitical risks associated with operating in China, the majority intend to stay in the market. To ensure that new authorities are consistent with the United States’ commitment to open markets, support the global competitiveness of US business, and can be implemented effectively, an outbound investment mechanism must be narrowly targeted, clearly defined, non-duplicative of existing tools, scoped proportionately to administrative capacity, and paired with meaningful multilateral engagement with allies and partners."

The Unintended Consequences of Economic Sanctions

"While sanctions clearly bring economic stress and political impacts, including potential consolidations of power within the target governments, there is less evidence about their ability to bring behavioral change, as even policymakers like Janet Yellen seem recently to have pondered," argues Rachel Ziemba in Lawfare. "Policymakers in the U.S. have begun to shift away from a prior assessment that sanctions are meant to prompt policy change, and more applications seem designed to degrade and limit the access of malign actors to the global economy. Russia is a case in point."

A Tool of Attrition

"A year on, it is easy to feel disappointed with the sanctions," writes Edward Fishman in Foreign Affairs. "Neither the Russian elite nor the Russian public shows any signs of breaking with Putin, and the war in Ukraine grinds on, with no end in sight. But sanctions are more of a marathon than a sprint, and the long-term picture looks much more promising than the short-term one. By cutting off Russia from foreign technology and investment and slashing the Kremlin’s energy revenues, Western sanctions have fundamentally altered Russia’s national trajectory. They are destroying the economic model Putin relies on to pursue his imperialist foreign policy."

In the News

Featuring commentary and analysis from experts including Emily Kilcrease, Edward Fishman, Emily Jin, Rachel Ziemba, and Hannah Kelley.

About the Sharper Series

The CNAS Sharper series features curated analysis and commentary from CNAS experts on the most critical challenges in U.S. foreign policy. From the future of America's relationship with China to the state of U.S. sanctions policy and more, each collection draws on the reports, interviews, and other commentaries produced by experts across the Center to explore how America can strengthen its competitive edge.

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