NS3040 Fall 2016 Geo-economics Europa brazil economy

Overview I Key points Today states relying less on traditional means of achieving power through weapons buildup and military conflict Instead relying more on economic means Sanctions becoming tool of last resort Increased use of other punitive measures Establishment of competing trade regimes, and manipulation of prices

Overview II Interconnectedness of global economy means that particular countries have the ability and willingness to implement economic measures In many cases these are becoming important functions of foreign and security policy Many political leaders have moved from seeing the opportunities of independence to focusing on the risks Look to protect national producers and supply chains As risk aversion leads to trade and capital to become more regionally constrained could translate to lower equity prices and higher bond spreads

Overview II Seeing a trend to a more fragmented international trading system So called “smaller clubs of trade” are becoming common in the formation of trade agreements However regionalism leads to a “patchwork effect” across the globe as well as within regions Can hinder investments and integration and Lead to increased strategic competition.

Overview III As countries increasingly revert to economic measures to reassert their geopolitical power Increase in global risks – These influence the way countries interact and business operate Affects both global trade and political cooperation Ultimately the effects of geo-economics may undermine key governing institutions inhibiting their ability to deal and address future global challenges

Instruments of Geo-Economics I Geo-economics not a new phenomenon Idea of nation-states deploying economic weapons in international situations can be traced back through cold war’s spheres of influence – colonial days However through the twentieth century the balance of power among nations typically views through lens of geopolitics Only recently that geo-economics has become a key paradigm Difference is geopolitics focuses on military power, natural resources and demographics as measures of national influence Geo-economics emphasizes factors such as productivity, trade balances and foreign investment

Instruments of Geo-Economics II In recent years regional or preferential economic integration the more popular geo-economic strategy One of goals countries have sought to achieve through economic integration a geopolitical one Gain relative power by joining forces with others to increase their collective market size and economic opportunities Part of the logic of the EU and the Pacific Alliance Why ASEAN countries are seeking to create a unified market One of the main drivers of U.S. attempts to form the TTIP and TPP

Instruments of Geo-Economics III Other geo-economics tools are Strategic investments through foreign direct investments in other countries Governments purchasing other governments’ debts Such strategies enable countries to exert geo-political influences through economic dependency