Through our new Economic Statecraft Initiative, we examine the role of economic relations, trade, international capital flows, and energy in foreign and security policy, both in Romania and the European Union. The comprehensive economic measures adopted by the West in the wake of the Russo-Ukrainian war shows the continued salience of economic tools for international relations and geopolitical competition.
We are in the midst of the most important global transition in a generation. The liberal international order is contested from within and without and economic tools prove to be one of the most important instruments in the toolbox of great powers in this competition. By developing comprehensive tools of economic statecraft, great and small powers alike are increasingly able to shape global politics today, seeking to achieve strategic objectives in line with their foreign policy preferences.
Through our Economic Statecraft Initiative, we encourage an open dialogue that aims to better understand the main tools of economic statecraft, the mechanisms through which they operate, how and when are they effective in achieving their state objectives. We aim to provide a platform for policymakers and young professionals to engage in dialogue over salient issues and to discuss differences about economic statecraft in a world defined by strategic competition between the great powers.
What is Economic Statecraft?
Economic statecraft refers to the use of economic, financial, and regulatory tools available to states to pursue and achieve foreign and security policy objectives. As such, economic statecraft seeks to deploy economic connection, capital flows, state and international regulatory frameworks and institutions to achieve strategic interests of nation-states. These have been increasingly deployed by great powers, such as the United States and the European Union, to achieve their aims, such as the protection of the liberal international order or punish norm violation by other great or small powers.
The effectiveness of economic tools for foreign and security policy objectives has been long debated by scholars and practitioners. Economic statecraft comes with costs and benefits and the effectiveness of economic tools for geopolitical competition is not a given. The key challenge is to develop and calibrate economic tools that can increase their effectiveness in achieving their political outcomes and to limit the economic side effects in terms of economic inefficiency, lower economic growth, and instability.
The European Union and the United States have been the key actors relying on economic statecraft, deploying economic, financial and monetary sanctions, export controls, investment screening, regulation of capital markets, and increasingly the use of price caps. These are the key tools of economic statecraft but states are increasingly inovative in developing new tools.
The activities of our Economic Statecraft Initiative are focused across two dimensions. First, we support policy-relevant research on tools of economic statecraft, their implications for world trade, the impact on small and medium-sized states, and the effectiveness of existing tools. Second, we sponsor webinars and policy events with key stakeholders and experts to present and discuss the latest research and policy output on topics related to economic statecraft.