Summary: The development of globalization after World War II has shaped an interdependent world, and in recent years, with the profound changes in the global order, this interdependence has revealed an asymmetrical side, some countries use their dominant position in the economic order to attack competitors, and for others, the past interdependence has brought about the dilemma of "stuck neck" everywhere. The U.S. crackdown on Japan's semiconductor industry in the last century, and the U.S. strategy of "small courtyards and high walls" for China's science and technology industry today, all reflect the typical characteristics of "weaponization of interdependence." This paper analyzes the characteristics of the weaponization of commodity trade in four areas: high-tech industry, general manufacturing products, bulk commodities and key raw materials, and the requirements for its successful application. The "weaponization of interdependence" is at a time when the world political and economic order is being anomie and reconstructed. Geopolitical competition has re-emerged as the dominant force in international relations, and it inevitably collides with the interdependent web created by globalization. The structural power implicit in the asymmetry of interdependence is thus rediscovered and exploited. Although the weaponization of trade in different types of commodities has different characteristics in terms of the subject of implementation, the source of power, the means and the influence, all of them mainly resort to cutting off the connection between the adversary and the flow of the network. The weaponization of commodity trade involves not only using relevant information to find the weaknesses of the adversary, but also emphasizing the destructive effect of surprise sniping on the adversary's economy. The key to its success lies in the low substitutability of commodities, the existence of interdependent asymmetries, the close coordination between domestic governments and enterprises, and the solid inter-state alliances. The practice of counter-weaponization should also be based on this to identify possible risk points and carry out targeted prevention and de-risking. At a time when global inflation continues to rise, global economic recovery is facing challenges, and geopolitical competition is intensifying, the "weaponization of interdependence" will undoubtedly exacerbate the crisis of trust between countries and accelerate the fragmentation and deglobalization of the world. As a major victim of the "weaponization" of trade, China needs to pay attention to the experience of "counter-weaponization" and use its influence in international trade for the benefit of all its people, and work with competing economic blocs to achieve inclusive global growth. The Eurasian Society for Systems Science is republishing this article for readers' considerations. This article was originally published in Journal of International Politics and represents the author's views only.
Weaponization and counter-weaponization of trade in goods between countries
Text: Chen Shaofeng
Source: International Politics Studies
▲ Source: Internet
Based on globalization, which has greatly contributed to the development of global productive forces and the deepening of the interdependence of countries, liberals hope that globalization will make the world a more peaceful place. However, with the outbreak of the Russia-Ukraine conflict and the intensification of strategic competition between China and the United States, the world peace and cooperation that liberals hoped for not only did not come as expected, but the world fell into more disorder and turmoil. Great powers are more concerned about national security than about economic efficiency. The unprecedented level of interdependence, combined with the ongoing struggle for power, has allowed countries that do not wish to engage directly in conflict to resort to all measures other than war. Henry Farrell, a professor at George Washington University, and Abraham Newman, a professor at Georgetown University, have astutely observed that the economic networks created by globalization have instead become sources of power and influence in the international system, creating central hubs of concentration of power in the flow of goods, capital, and information, and that the countries that control these hubs can exploit the asymmetries of the networks and the search for alternative networks to counter their adversaries and achieve their foreign policy goals, which they call "weaponized." interdependence）。
The "weaponization of interdependence" helps to understand the interaction between network structures, state power, and global supply chains. This theoretical framework suggests that, at least in some key areas, the network structure is highly asymmetrical, with countries at different network nodes enjoying different powers. Although in their later writings they dealt with the "weaponization of interdependence" of energy and fighter jets, Farrell and Newman largely based their theories on the invisible flow of finance and the Internet. Lars Jeswijk, a senior researcher at the Norwegian Institute of International Affairs, used the construction and operation of submarine cables as an example to analyze when infrastructure networks are vulnerable to the "weaponization of interdependence" and the constraints that states face when seeking to use this strategy, but he still lacks the necessary attention to the "weaponization of interdependence" of tangible assets. At the same time, Farrell and Newman's research focuses on network asymmetry and assumes that all asymmetries are the same. The problem with this implicit assumption is that it ignores the different outcomes that different forms of centralization and asymmetry can have. This paper focuses on the "weaponization of interdependence" of commodity trade, and analyzes the characteristics of the weaponization of different types of commodity trade and the requirements for their successful application.
1 The "weaponization of interdependence" in different commodity categories
There are many types of tangible commodities in international trade, and the United Nations Standard International Trade Classification (UNCCO), revised by the United Nations Secretariat in 1974, divides them into 10 categories, 63 chapters, 233 groups, 786 groups and 1,924 basic items. Tangible trade requires customs clearance, the amount of which is reflected in a country's customs statistics, while intangible trade is not subject to customs formalities and its amount is reflected in a country's balance of payments. In order to facilitate analysis, this paper divides the trade of tangible commodities into four categories: high-tech products, general manufacturing products, bulk commodities and key raw materials according to the characteristics of different commodities. Exploring the "weaponization of interdependence, interdependence, and interdependence" in terms of different commodity categories can help to clarify the inner workings of this strategy, although the division of categories is not entirely clear.
Commodity trade is the most important manifestation of economic globalization. Both sides can expand their own welfare through the exchange of commodities and complementary advantages, but the stability and resilience of the supply chains on which commodity trade depends are also increasingly concerned. Back in 2016, the World Economic Forum's white paper sounded the alarm: "All of the infrastructure of globalization is at risk of being weaponized: the financial sector, the supply chain, the energy sector, and the global trading system." In fact, the United States has been practicing a "weaponization of interdependence" since the beginning of the 21st century. Farrell and Newman highlight two mechanisms of action for the implementation of this strategy: the "panoramic surveillance effect", in which the dominant state can use its position as a central cyber hub to gain an information advantage over its adversary, and the "blocking effect", in which the dominant state cuts off the adversary from network flows. The characteristics of the "weaponization of interdependence" of trade in different types of commodities are different, but similar to the weaponization of intangible assets, the weaponization of trade in tangible commodities mainly relies on the "blocking" effect, that is, the government uses political means to impose restrictions on the trade in goods of a particular country or directly block its cross-border transactions, resulting in a reduction or interruption of the supply of goods. The application of the "panoramic surveillance effect" is mainly related to the status of the international center reserve currency and the international commodity trading center, and based on this, the United States enjoys a unique advantage. The hegemony of the dollar has given the U.S. government a weaponized strategy of merchandise trade by blocking trade settlements. If the "panoramic peep effect" of the weaponization of intangible assets is a combination of goals and means, and pays more attention to process management, the weaponization of tangible commodity trade emphasizes more on the destructive effect of sudden sniping on the opponent and focuses on the result-oriented. The government's "weaponization of interdependence" is often motivated by political considerations, and its essence lies in "control", including control over technology, production capacity, commodity flows, and key geopolitical nodes, so as to defeat opponents and maintain their own advantages through control. This in itself is contrary to the business logic of the enterprise. The result will not necessarily lead to a lose-lose situation, but it will also suffer economic losses while hitting the adversary. Based on the characteristics of the four major categories of tangible commodity trade, this paper analyzes the different characteristics of the "interdependent weaponization" of commodity trade from the aspects of implementation subject, source of power, strategic substance, main purpose, main mechanism, means/approach, and impact on globalization.
1. High-tech products
High-tech products have become the key areas of "interdependence and weaponization" of technology-owned countries, because: First, the fourth scientific and technological revolution represented by semiconductors, artificial intelligence, quantum technology, etc. is the key variable that affects and even determines the adjustment of the international pattern, and is the core competitiveness of a country's economic development and the source of innovation and progress. Second, it is related to the characteristics of high-tech products, that is, it has the characteristics of high capital investment, high intellectual property barriers, high risk, high product added value, and high industrial control. The investment is huge, but it does not necessarily lead to innovation, and once innovation is achieved, the benefits show a marginal increasing trend. Countries that are original or have core technology patents can not only obtain rich returns for a certain period of time through their patents and technological advantages, but also often monopolize relevant technical standards and international rules. While technology diffusion contributes to the development of late-developing countries, it also creates their technological dependence on technologically superior countries, which in turn can use this dependency to blockade their technology or related products. Third, affected by the uncertainty of technological innovation, the high-tech industry is also an industry with uneven development and easy to catch up and surpass, resulting in a strong vigilance on the part of the existing technology-leading countries. Once faced with the overtaking of other countries, the dominant country is prone to fall into strategic anxiety, fearing both the loss of its technological dominance and the fear that the adversary country will use this advantage to strengthen its economic competitiveness and military power. This is also an important reason why the high-tech field is prone to "weaponization of interdependence". Fourth, due to its high precision and complexity, the development of high-tech products often relies more on international cooperation and cross-border trade, which creates conditions for the "weaponization of interdependence" by countries. For example, the chip industry involves design and development, wafer foundry, packaging, testing, equipment, materials and other links, and needs to strengthen cooperation on a global scale. Because of the large number of international divisions involved, the operation of the industrial chain of high-tech products is inseparable from the international trade of a large number of raw materials, components, intermediate goods and final products, so that the share of the added value of this sector in foreign countries in total exports is significantly higher than that of other sectors, and it is more sensitive to decoupling.
In terms of the characteristics of the "weaponization of interdependence" of high-tech products, taking the U.S. science and technology war against China as an example, in order to curb China's high-tech development and maintain the leading edge of the United States in this field, the Biden administration has used its basic technology and patent advantages (sources of power) to use complex and diversified means such as prohibition, restriction, self-improvement and alliances to artificially create the "blocking effect" of "weaponization of interdependence", that is, the so-called "choking the neck". Huang Qixuan found that the foreign technology policy of the hegemonic power is mostly used to serve the needs of the strategic competition between the major powers, and the usual strategy of the United States is to "use the strong to defeat the stronger." For this reason, on the one hand, the United States has engaged in "small courtyards and high walls" against China, encircled and suppressed Chinese high-tech enterprises with international competitiveness, and imposed two-way investment and personnel restrictions; on the other hand, it has built a "democratic technology alliance" that "de-sinicizes," enlisted Japan, South Korea, and the Netherlands to jointly impose export restrictions on China, and vigorously supported the development of its own high-tech enterprises. Gregory Allen, a senior fellow at the Institute of Strategic and International Studies, outlined four key "choke points" for the Biden administration's implementation of Chinese AI development: (1) Prevent China from designing AI chips domestically by stifling access to high-end AI chips, (2) Prevent China from designing AI chips domestically by stifling access to American-made semiconductor manufacturing equipment, (3) Prevent China from manufacturing advanced chips by stifling access to American-made semiconductor manufacturing equipment, and (4) Prevent China from producing semiconductor manufacturing equipment domestically by stifling access to American-made components.
2. General manufacturing products
The general manufacturing industry has a wide variety of products, and after the Second World War, it replaced raw materials and mineral resources as the main body of international commodity trade. High-tech products also belong to manufacturing products, but compared with the former, the technology and capital investment required for general manufacturing products are not unattainable for most countries, and the technical routes and technological processes that rely on the production of such products are relatively mature, but their development still needs to rely on the combination of technology, capital, management and other resources. In the rising period of globalization, this kind of products have formed a relatively complete global supply chain system, and their international trade is closer to a perfectly competitive market, and the key to product success lies in quality and price. Although countries have paid more attention to the return of manufacturing capacity after experiencing the crisis of shortage of masks and ventilators during the epidemic, in the era of pan-security, the "weaponization of interdependence" on general manufacturing products mostly comes from the demand side, that is, the relevant importing countries restrict the import of products from a certain country, artificially creating a "blocking effect". Some scholars even assert that global supply chains have become a key front in the power competition between major powers. The Trump administration's trade war with China covers most of these goods. The power of this strategy comes from the fact that a country can use its large consumer market as a bargaining chip, or even mobilize a network of allies to impose penalties or threats on specific exporters. Its practices include: imposing import tariffs or quota restrictions on certain manufactured goods, using non-tariff barriers such as technology and environmental standards, and implementing "friendly shoring" and "nearshoring" or encouraging "reshoring" of manufacturing industry chains. The essence of these attempts is to restructure globalization and restructure the global industrial and supply chains of general manufacturing products based on the comparative advantages of each country, so as to discourage competitors and protect domestic industries and jobs.
3. Dajong Products
Compared with other commodity categories, commodity trading can be described as an anchor of stability of economic globalization, which is related to its high production, demand and trading volume, and the "weaponization of interdependence" by any stakeholder (producer, consumer and intermediate trader) to commodity trading will be detrimental to the interests of all parties at the same time. At the same time, cross-border transportation facilities for commodities such as oil often serve as a lubricant to improve bilateral relations. But that doesn't mean commodities are insulated from the "weaponization of interdependence." The political and financial nature of commodities makes them vulnerable to the "weaponization of interdependence" of countries at certain times, such as the energy sanctions and counter-sanctions between the EU and Russia after the outbreak of the Russia-Ukraine conflict. This is mainly rooted in: First, the basic position of bulk commodities in modern industrial and livelihood projects and their irreplaceability in military and national defense make them naturally closely linked to national security; second, the scarcity and non-renewable nature of mineral resources in bulk commodities make them naturally linked to wealth, and the distribution of wealth affects the distribution of power; third, most bulk commodities have the characteristics of an oligopolistic market, and a small number of producers control the supply of products in this industry and have a greater influence on prices. For example, OPEC has a strong influence on international oil prices. For their own benefit, these oligarchs often influence the price of commodities through production regulation.
The "weaponization of interdependence" of commodities can come both from the supply side, where producers impose export restrictions on specific consumers, and from the demand side, where consumers impose import restrictions on specific producers. For example, after the outbreak of the Middle East war in 1973, OPEC imposed an oil embargo on Israel and its supporters, triggering the first oil crisis. The opposite example is the oil embargo imposed by the European Union on Russian oil after the outbreak of the Russia-Ukraine conflict. Therefore, the means of "weaponization of interdependence" of bulk commodities usually include: (1) restricting exports or imports; second, imposing sanctions on specific producing or consuming countries; (3) preventing foreign investors from entering the exploration, development, refining, processing, or import and export business of bulk commodities in their own countries; (4) sacrificing the "lore" of nationalization; (5) the choke points through which the relevant facilities and cross-border transportation of bulk commodities pass through often become the key nodes of "weaponization of interdependence"; (6) using information advantages to exploit the advantages of bulk commodities in the spot, Go long or short in the options and futures markets, taking advantage of price fluctuations to hit specific countries. In addition to the central position of the US dollar, the United States and the United Kingdom, as the three most important commodity trading centers in the world, have become the key nodes of the financial trading network, and have a more adequate information advantage. Thus, the "weaponization of interdependence" of commodities can resort to a "blocking effect" or a "panoramic surveillance effect", the power of which derives from the huge production capacity of the major exporters, or the huge demand of the major importers, and the financial hegemony of the central currency countries.
4. Critical raw materials (including critical minerals)
Some key raw materials, such as crude oil and lithium, are also considered commodities, but not all. In the era of rising globalization, although the economic activities related to it are regulated by governments, the exploration and development of key raw materials, international circulation and cross-border investment are not much different from other commodities, and the needs of countries can basically be met through international trade. However, in an era of intensifying strategic competition among major powers, major powers are not only pursuing a stable supply of key raw materials, but also paying more and more attention to the resilience and diversification of their supply chains. In recent years, the United States, Europe, Japan and other countries have promulgated their own key raw material catalogs, which are updated from time to time. The list of products is not consistent across countries, but there is some overlap. Back in 2018, the Trump administration developed the first list of critical minerals in the United States. The Biden administration has also taken a series of measures to improve the resilience of critical minerals and raw material supply chains and reduce overdependence on other countries. In June 2021, the White House released an assessment report titled "Building Resilient Supply Chains, Reviving U.S. Manufacturing, and Promoting Broad-Based Growth," announcing a "Mineral Security Partnership" with allies to ensure the supply of critical minerals that are critical to clean energy and other technologies. In March 2023, the EU's version of the Critical Raw Materials Act was released, with the goal of ensuring that the EU "has access to a safe, diverse, affordable and sustainable supply of critical raw materials". China has also given the raw materials industry a very high strategic positioning. The "14th Five-Year Plan for the Development of Raw Material Industry" jointly formulated by the three ministries and commissions emphasized: "The raw material industry is the foundation of the real economy, the basic industry to support the development of the national economy and the key area to win international competitive advantages, and the main force of industrial base reconstruction and the main battlefield of industrial green development." ”
As discussed below, the source of power for key raw materials lies in the resource endowment, processing capacity and environmental carrying capacity of the resource country. By limiting or cutting off supply, the blocking effect is artificially created. In addition, restricting foreign investors' access to critical raw material industries is another way to "weaponize interdependence." However, unlike the "weaponization of interdependence" of other commodities, the restriction or interruption of the supply of key raw materials does not focus on the raw materials themselves, but uses them as a weapon to indirectly attack the political objectives of other important industries and service providers in the target country. Stephen Krasner, a professor at Stanford University, believes that the U.S. foreign policy on raw materials pursues three main goals: (1) minimizing costs for U.S. consumers, (2) ensuring the security of supply to the U.S. economy, and (3) broadening foreign policy goals.
In short, commodity trade is the most important pillar and external form in the period of rising economic globalization, but in the context of intensifying competition among major powers, commodity trade is also facing the risk of "weaponization of interdependence", but there are great differences in the source of power, ways/channels and impact on globalization of different categories of commodity "interdependence and weaponization". In short, the source of power for the "interdependence and weaponization" of high-tech products lies in the basic technology and patents of the core countries, and for the purpose of decoupling and breaking the chain, the means are more complex and diverse, and cannot be accomplished by the power of one country. Therefore, the "weaponization of interdependence" of high-tech products will inevitably bring about the consequences of deglobalization, and the source of power for the "weaponization of interdependence" of general manufacturing products lies in the huge consumer market of importing countries or their allies, which is intended to reorganize the industrial chain and break the international division of labor in the old era of globalization, including restricting imports, implementing "friendly shore outsourcing", "nearshoring outsourcing" and "reshoring of manufacturing" Commodities are the anchor of globalization's stability, and during the Trump era, commodities helped improve the U.S.-China trade imbalance and stabilize U.S.-China relations. However, if commodity trading is weaponized, it will bring heavy economic losses to both sides of the trade and worsen the trend of deglobalization. The source of power for the "weaponization of interdependence" of commodities comes both from the huge production capacity of the major exporters, from the huge demand from the major importers, and from the financial hegemony of the central currency countries. Because importers and exporters and financial hegemons are involved, the ways in which commodities are "weaponized interdependently" are clearly more diverse. The power to "weaponize interdependence" of key raw materials derives from the resource endowment, processing production capacity and environmental carrying capacity of the resource owner countries. Weaponization takes the form of sanctions, embargoes, supply disruptions, export restrictions, and foreign access restrictions. The "weaponization of interdependence" of key raw materials will, on the one hand, accelerate the global restructuring of related supply chains, and on the other hand, it will poison the atmosphere of free trade and inhibit the expansion of globalization.
2 Factors for success in the "weaponization of interdependence" in commodity trade
Despite the "weaponization of interdependence", including sanctions and embargoes, the record of success is lackluster. There are many factors that affect the effect of "weaponization of interdependence" in a country, including the economic and political strength of the target country, the international market environment, etc., but the most important factors are: low commodity substitution, asymmetry of interdependence, strong government-enterprise relations and alliances between countries. Farrell and Newman show how the networking created by economic interdependence can create central hubs of concentrated power, and how the countries that control these hubs can use their centrality to achieve their foreign policy goals. This theory contains two important premises, namely, the asymmetry of network structure or interdependence, and the concerted effort of government and business. The two constitute the success factors of the "weaponization of interdependence". In addition to this, the substitutability of the commodity itself and the solidity of the associated international coalition are two other factors in the success of the weaponization of interdependence. Among them, low commodity substitutability and asymmetry of interdependence are prerequisites for the implementation of "weaponization of interdependence", while solid domestic and international alliances are necessary conditions to ensure their success.
1. Fungibility of goods
The irreplaceability of commodities within a certain time frame is a prerequisite for the "weaponization of interdependence". Fungibility refers to the fact that the value or function of a certain aspect of a commodity can be replaced by other goods, which is divided into complete substitution, complete complementarity and general substitution. The stronger the fungibility, the lower the asset specificity of the commodity and the greater the elasticity of demand. From the supplier's point of view, the weaker the substitutability of a commodity, the higher its asset specificity, and if the number of suppliers of the commodity in the market is small, resulting in the demand side being inseparable from a supplier, the stronger the bargaining power of the supplier. It should be noted, however, that talking about substitution should be placed in a certain time frame, since the substitution of any commodity is subject to technological progress.
In the high-tech field, the substitutability of products is more completely complementary, that is, its substitutability is low in the short to medium term. Taking chips as an example, from the invention of transistors to the rise of 5G technology, the United States has always been at the top of the industrial chain, and the semiconductor industry has become one of the core pillars of its hegemony. The chip hegemony of the United States mainly relies on the advantages of technological innovation and business model innovation. In the former, the United States has created a number of leading enterprises in a monopoly position in the fields of chip design, electronic design automation (EDA), chip design and production integration, wafer foundry, packaging and testing, etc., which have established the world's most complete chip industry chain and the technological and industrial advantages that are difficult for other enterprises to achieve through rapid technological iteration and product innovation, and have mastered the most important elements of global semiconductor production, which is the most important trump card in the hands of the United States. The United States has further consolidated this advantage through property rights and patent barriers, forming an "unattainable" wall for enterprises in other countries. In terms of business model, the United States has made it possible for American semiconductor companies to firmly control the voice of the chip industry through its developed venture capital mechanism, industry standard formulation, Wintel, Apple's software and hardware integration and other innovations. Different from many individual products, the (in)fungible nature of chips does not refer to the specific chip product itself, but more to the difficulty of replacing chip technology and its industrial chain. In other words, before Huawei realized the localization of chip manufacturing, the chip production of any country and region in the world was inseparable from the technology and patents of the United States, and the technology patents of the United States have also become a mantra that restricts and restricts the development of other countries. This irreplaceability clearly gives the United States an asymmetrical structural power, allowing the US government to initiate or threaten sanctions against any potential challenger at will.
Generally speaking, the substitutability of general manufacturing products mainly depends on the characteristics, quality, price, service and other factors of the product. Under the condition that the technical threshold is not high, the production cost is low, and the market supply is sufficient, many manufacturing products are vulnerable to competition and substitution of similar products. For example, some low value-added, labor-intensive products, such as textiles, plastics, etc., are susceptible to competition and substitution of similar products at home and abroad due to the relatively simple production process and low technical requirements. While products with high brand recognition and reliable quality may also be highly irreplaceable, a country can still take a back seat after being subjected to the "weaponization of interdependence" strategy of another country.
There are two dimensions to explore the substitutability of commodities, one is the competition and substitution between different producing countries on the supply side, or the competition and substitution between different consumer countries on the demand side, and the other dimension is product substitution within commodities. The three categories of energy, minerals and agricultural products contained in bulk commodities have strong substitutability, but they also vary according to factors such as commodity type, use and market demand. In some cases, there may be fungibility between different goods, while in others, they may not be substitutable. For example, there is often some substitutability between different metals and minerals, but only specific metals or minerals can be used for certain purposes. On the whole, because of the two aspects of commodity substitutability, the substitutability of commodities is generally high, but because of its huge supply or demand, the substitutability of products or countries does not mean that they can be fully satisfied in terms of quantity.
Subject to the scarcity of related resources, uneven distribution and the indispensability of the production of specific products, the substitutability of key raw materials is low, and its proven reserves are concentrated in a few countries, and other countries can only import this raw material from a few countries to use, and the production of some key raw materials also needs to rely on high technical inputs. However, compared with high-tech products, their substitution is still relatively higher, because on the one hand, the export restrictions of one country will encourage the importing countries to seek imports from other countries, accelerate the reserve of the resource, carry out the secondary recycling of the resource, and increase the investment in exploration and development in other countries; Of course, because of the different resource reserves and exploration and development difficulties of different countries, the substitutability of key raw materials actually evolves into the extent to which an importing country of the resource is willing to accept imports from higher-cost countries, or to support the development of other countries' related resources in order to avoid over-dependence on one country, resulting in substitution costs (including economic, technological and environmental costs) and time costs. Therefore, the irreplaceability of key raw materials is essentially a question of the affordability of substitution costs and time costs in other countries. Regardless of the cost, the substitutability of key raw materials will increase rapidly.
Overall, high-tech products and key raw materials are more irreplaceable than general manufacturing products and bulk commodities, which is an important reason why many countries tend to choose to use the latter to carry out "weaponization of interdependence".
2. Asymmetry of interdependence
This is divided into two aspects: one is the asymmetry of the interdependence of the two countries in terms of security, which helps the dependent party to implement the strategy of "weaponization of interdependence" of commodities against the dependent party. Second, in terms of trade, if country A can only import a certain commodity from country B, and country A cannot replace it through other means, and is unable to change the restrictive measures of country B, country A has a high vulnerability. Thus, some scholars view vulnerability as a function of diversification, such as the concentration of trading partners, which implies the logic that countries with fewer trading partners may be more susceptible to trade disruptions than those with many partners, and the index of concentration of export goods, which calibrates the extent to which a country's economic health depends on the export of a few commodities. Regardless of the situation of the League of Nations and the State of the Union of Nations, assuming that country A is too dependent on country B for imports of a commodity, country B is less likely to choose the strategy of "weaponization of interdependence" in the case of general manufactured goods, and even if it is implemented, it is less likely to succeed, and in the case of bulk commodities, country B is more likely to choose "weaponization of interdependence" when the commodity is in a seller's market strategy, conversely, if the commodity is in a buyer's market, it has a lower probability of success, if it is a high-tech product, country B has a higher probability of successfully "weaponizing interdependence" against country A, in other words, country A has a greater risk exposure to country B's "weaponization of interdependence" strategy, and if it is a key raw material, country B has a higher probability of successfully "weaponizing interdependence" against country A.
Taking chips as an example, the asymmetry of the chip market network is manifested in the fact that the United States controls the upstream of the chip value chain and masters the key technology patents (core nodes) of chip design and manufacturing, resulting in this asymmetry not only in China, but also between the United States and its allies. Taking the Dutch lithography machine as an example, in 2019, the Netherlands banned the sale of EUV EUV lithography machines that can make chips below 14 nanometers to China under pressure from the Trump administration. The Dutch government did not disobey, because 55% of the components of ASML's EUV lithography machine need to be imported from the United States and subject to regular review by the United States; although it is called a Dutch company, ASML's first two largest shareholders are American Capital International Group and BlackRock Group, which are actually controlled by American capital; it needs to rely on Cymer to manufacture EUV's core extreme ultraviolet light source, if the United States cuts off the light source, ASML will not be able to manufacture EUV lithography machine; in addition, because of its chip design, electronic design automation (EDA), Manufacturing and other technological leadership, the United States actually controls the semiconductor industry chain. With these advantages, as long as the United States implements relevant product and technology blockades on other countries, it is almost impossible for other countries to purchase other alternatives in the global chip market. To break the blockade of the United States, China can only follow the path of independent research and development.
In the market network for key raw materials, this asymmetry is largely natural. The "weaponization of interdependence" by the country in possession of the critical raw material will be influenced primarily by the technical capacity or development costs of other countries to exploit the raw material, the concentration of possession of a critical raw material by the exporting country, and the dependence of the exporting country's economy on the export of the raw material. The higher the concentration of an exporting country's possession of a key raw material, the greater the threat of "weaponization of interdependence" to the importing country, and the greater the risk of "weaponization of interdependence" against the importing country if the exporting country's economy is more dependent on the export of the critical raw material.
3. Inter-State Unions
Inter-state alliances are another important factor influencing the effectiveness of the implementation of the "weaponization of interdependence" of commodities. The web of interdependence woven by globalization means that the joint "weaponization of interdependence" of a country through the creation of an international coalition is more effective than that of a single country alone. Such an inter-state alliance is particularly necessary if the invention and production of a commodity involves several different economies. Because high-tech products often involve a large number of international divisions of labor, and the operation of their industrial chains is inseparable from the international trade of a large number of transnational technology patents, raw materials, components, intermediate goods and final products, the establishment of such an international alliance in the "weaponization of interdependence" of high-tech products is crucial to the success of the strategy. Affected by its high substitutability, a country must build an international alliance to implement a strategy of "weaponization of interdependence" against commodities and general manufacturing products, and this alliance must have a strong concerted action. If a country enjoys a monopoly in the production of a key raw material, and can implement the "weaponization of interdependence" of the key raw material on its own, it has less incentive to establish an international producers' alliance.
But once other countries are brought in for common action, it means introducing issues of alliance maintenance, management, coordination, and possible betrayal, adding new uncertainties to the implementation of the "weaponization of interdependence" of commodities. Dong Zhengzhuang, an associate professor at the Zhou Enlai School of Government at Nankai University, believes that the purpose of the state to create a higher-level alliance mechanism is to improve the reliability of the alliance, but because countries share different costs and benefits in the alliance and different efforts to reduce costs, the setting of the alliance mechanism will affect the reliability of the alliance. Some scholars have also proposed that the "power balance" and "intention match" between allies affect the fate of alliances through the core mechanism of mutual constraints. In summary, the effectiveness of an inter-state alliance in implementing the "weaponization of interdependence" depends on a number of factors, including the size of the alliance, the will of the member states concerned, and the ability of the alliance to act.
4. Government-enterprise relations
The relationship between government and enterprises in the implementing country also has an important impact on the "weaponization of interdependence". While it is true that the government can regulate and constrain the behavior of firms, they can also influence and constrain government decision-making, given that the asymmetry of the interdependence of commodity trade between one country and other countries is largely due to the innovation and strategic management of firms. As Jeswick puts it, the government's ability to mobilize companies and the structure of their networks are dynamic and interconnected. The asymmetry of the network may increase the power of the government over the company, or it may be an asymmetry that the government is difficult to exploit. He highlighted four key mechanisms that would greatly affect the ability of States to use corporate resources to achieve their strategic objectives, namely, the power asymmetry between the State and the companies it sought to exploit; This can be illustrated by the relationship between digital enterprises and the government in the United States, and this case was chosen because the United States often resorts to the "weaponization of interdependence" of commodities to other countries, and the impact of the divergence of government and enterprise interests on the use of "weaponization of interdependence" can be seen more clearly in the field of chips.
(1) From the perspective of the power symmetry of the government-enterprise relationship, Richard Wren, a professor at Rutgers University, summarized the academic debate on the model of the government-enterprise relationship in the United States into four types: the corporate domination model, the pluralism model, the market capitalism model and the stakeholder model, but there is no consensus in the academic circles on which model dominates. Traditionally, the U.S. government and enterprises are "divided" and do not subordinate or interfere with each other. As the manager of economic life, the government has the supreme power to "make rules", including supportive, managerial, and regulatory rules. The Biden administration's approach to decoupling and severing the chain with China has hurt the commercial interests of American companies, but it has not stopped. With the intensification of great power competition, the concept of technological sovereignty of countries has become more and more prominent, and the (re)politicization tendency of multinational corporations has become more and more obvious, making it more difficult for these companies to easily "ride the wall" in the complex competition of great powers. In this regard, there is indeed a certain power asymmetry between the U.S. government and big tech.
But in the face of the U.S. government's directives, tech companies don't just do what they do, they enjoy almost extraordinary power. First, in terms of activism, the U.S. political system gives companies a legal channel to influence government decisions. Professor Colin Crouch, former vice-president of social sciences at the British Academy, has even used the term "post-democracy" to describe how corporations exercise excessive political power to influence government policy. Over the past 20 years, Silicon Valley's tech giants have grown in power in American politics as huge funders of think tanks and lobbies, with Google, Facebook, Amazon, Apple, and Microsoft spending millions of dollars a year to exert political influence. Second, the power of the American tech giants lies in their ability to collect, control, possess and use the information resources needed by individuals and society. These big data are not only valuable resources for scientific and technological innovation, but also the cornerstone of government digital governance. "We have every reason to say that data is not just crude oil and gunpowder in the new era, data is power. "Tech giants not only own and dominate big data, but also master the core essence of big data use - algorithms. While algorithms have become the basic rules for guiding human production and life activities in the information society, they have also reconstructed the power relations of human society. With the information and computing power at their disposal, large enterprises can influence public opinion, guide social trends, suppress potential competitors, and even influence policy preferences. It is precisely because of the "information filtering mechanism (including algorithmic recommendation) that allows us to only see what we want to see, only hear our own opinions, and only make friends with people with the same ideas, and those opinions are repeated and deepened, and finally become a 'secret room' where we can only hear our own voice, that is, the echo chamber effect of information". Through the "information cocoon" effect, these big corporations have greatly strengthened their control over society. Third, the power of big business in the United States also derives strategically from its economic and technological influence, because the US government also needs to rely on them to improve the economic and defense capabilities of the United States. Although some scholars have called on the state to establish appropriate norms to strengthen the supervision of digital enterprises, due to the constraints of professionalism and information asymmetry, the government's supervision of digital enterprises not only lags behind the innovation of enterprises, but also worries that excessive regulation will damage the competitiveness of enterprises or affect their innovation. Therefore, the power asymmetry between the U.S. government and digital companies is a two-way street, with both the strong side of government rule-making and regulation, and the possibility that companies will capture government decisions. In other words, companies may not be willing to fully cooperate with the government's politically motivated strategy of "weaponizing interdependence" on other countries.
(2) The consistency of values and interests between the government and enterprises. If the two coincide, the goals are similar, and then the question of power is not important. However, for this factor to be established, the following conditions must be met: the behavior pattern of the actor is determined solely by its values and interests. However, there are still opposing views on the relationship between the two. Weber's "switchmen" argues that it is not values that govern people's behavior, but material and spiritual interests. The American sociologist Ann Svidler, however, has reservations about this view, pointing out that the idea that action is governed by "interests" or culture (values) is inadequate, and that the influence of culture (values) on action is through the formation of a set of "toolboxes" of habits, skills and styles, and only plays a strategic role as a guide in the course of the actor's action. In other words, consistency in values does not necessarily lead to consistency in behavior, and actors with inconsistent values may also act in the same way. Is it true that Silicon Valley's tech giants are implementing the principle of values dominating everything in their foreign economic activities, as the Biden administration hopes? It is undeniable that there are precedents for companies such as Nike to refuse to use Xinjiang cotton under the pretext of "forced labor" in Xinjiang. However, for most U.S. companies, they still prefer politics to politics and business to business, and profit maximization rather than value maximization is still their highest code of conduct. Because of this, U.S. tech companies have been accused of undermining democracy, stability, and sustainable development. Importantly, when the pursuit of values is at odds with the pursuit of interests, how the government and businesses choose will greatly affect the effectiveness of the government's use of the "weaponization of interdependence". Studies have shown that the relationship between government and business will affect a country's ability to implement economic national policies, and when corporate profits are threatened by government policies, low-value firms are more willing to cooperate with government policies, while high-value firms tend to oppose such policies.
and (3) the legitimacy of the State's attempt to exercise its powers. Whether the state's exploitation of interdependent asymmetry is perceived as legitimate is another important factor affecting the development of government-enterprise relations and even the success of "weaponization of interdependence". However, the importance of this factor varies from country to country, and legitimacy itself has different connotations in different countries. Moreover, the hubs of power created by interdependent networks may be in the hands of the "advanced industrial economies" that Farrell and Newman emphasize, or they may be concentrated at the corporate or technological level. Different actors who control the power hub will directly affect the way power is exercised and the effect of its use.
In the digital age, the hub of power is often concentrated in the digital giants. They can extend their power in the collection and application of big data, the establishment of technical standards, and the application of algorithm computing power. The Biden administration needs to rely on the support and cooperation of large American companies when implementing the "weaponization of interdependence" of economic networks such as chips and 5G against China, so it has to consider the impact of this approach on its own enterprises. To this end, on the one hand, the Biden administration has raised the banner of national security in an attempt to enhance the legitimacy of this move, making it difficult for US companies to question and limit their autonomy of action, and on the other hand, Biden has introduced the CHIPS and Science Act to appease large US companies through financial subsidies and R&D grants. Even so, the "weaponization of interdependence" by the United States has had a counterproductive effect, because it has seriously disrupted the original industrial chain and caused huge losses to those American chip companies that are highly dependent on the Chinese market.
3 Weaponization and counter-weaponization practices: two cases
Under the pretext of safeguarding national security, protecting human rights or intellectual property rights, a country often takes advantage of the vulnerability of the target country in the import and export of specific commodities to pull the "weaponization of interdependence" in order to deal a heavy blow to the target country's macroeconomy or specific industries. As a developing country, in the process of integrating into the global economic system in the past, China has gradually deepened its dependence on Western countries for technology and markets, as well as its dependence on other countries' raw materials. At a time when the strategic competition between China and the United States is intensifying, China is also facing the "weaponization of interdependence" that is being carried out more and more frequently by other countries. How to effectively break the situation is a topic that needs to be studied urgently in China. Based on the principle that stones from other mountains can be used to attack jade, this article will select two cases for analysis, one is South Korea's response to Japan's export restrictions on some semiconductors and OLED materials, and the other is Japan's counter-weaponization response to the United States' technological attack on its semiconductor industry. The two cases were chosen because, first, South Korea's response was relatively successful, while Japan's response was widely seen as a failure, second, the two cases were counterweaponized under different types of goods, and third, the U.S., Japan, and South Korea were highly interdependent in their economies but had differences in their trilateral relations.
Case 1: Since July 4, 2019, Japan has tightened controls on three semiconductor materials exported to South Korea, including fluoropolyimide used in the production of smartphones and displays, high-purity hydrogen fluoride and photoresists required in the semiconductor manufacturing process, and advanced semiconductors and display panels happen to be South Korea's main exports. These three materials produced in Japan account for 90%, 70% and 70% of the world's production capacity respectively, and among the world's top five photoresist companies, Japanese companies occupy four seats, and the proportion in some segments is even higher. At that time, South Korea was highly dependent on Japanese semiconductor raw materials, with more than 80% of its total imports coming from Japan, and Samsung, LG and SK hynix all needed to import more than 90% of the fluoropolyimide and photoresist they needed from Japan. In 2019, South Korea imported 44% of its total hydrogen fluoride imports from Japan. After Japan imposed export restrictions, it was difficult for South Korea to find enough alternatives that met its quality requirements. Japan's restrictive measures have had a big impact on South Korea's semiconductor industry. At the end of 2019, 269 small and medium-sized semiconductor companies in South Korea jointly spoke out, claiming that if Japan's sanctions against South Korea are prolonged, then more than 60% of South Korean companies will be unable to survive for half a year. But at that time, South Korea did not bow to Japan. In response, the Moon Jae-in administration filed a lawsuit against Japan at the WTO, kicking Japan out of the "white list" of countries with minimum trade restrictions, and increasing import substitution from China, Europe and the United States. On the other hand, the Korean government has proposed plans to localize the products and technologies of these three materials. To this end, the South Korean government has decided to increase its fiscal budget at an annual growth rate of 9% to its industrial development, and will invest about 510 trillion won in the next ten years to support the development of domestic semiconductors. As of June 2021, South Korea's government funds investing in suppliers of materials, components, and equipment reached 1 trillion won, about 200% of the size of the funds in the 20 years before the restrictions were imposed. Large companies led by Samsung Group have also invested more than 380 billion won (as of November 2021) in dozens of local Korean companies, covering chemical, ceramic and precursor material suppliers, after the Japanese ban was issued, in an effort to break the monopoly of Japanese companies in the field of semiconductor materials. In July 2021, South Korea's Ministry of Trade, Industry and Energy announced that South Korea's dependence on hydrogen fluoride imports from Japan would be reduced from 50% to 10%, fluorinated polyimide would be close to zero, and photoresist dependence on Japan would be halved. By 2023, South Korea has basically achieved the goal of localizing the semiconductor material supply chain, taking high-purity hydrogen fluoride as an example, South Korea no longer needs to rely on Japanese imports.
Case 2: From the 80s of the 20th century to 1996, the United States used the strategy of "market compression" to continuously attack Japan's semiconductor industry. The first is to suppress Japan's semiconductor exports. In the face of the rapid rise of Japan's semiconductor industry, in 1985, the American Semiconductor Industry Association (SIA) filed a lawsuit with the U.S. government, accusing Japanese semiconductor companies that had received government subsidies and market protection of dumping products in the United States, and asking the U.S. government to impose import restrictions on them. The U.S. government launched the "Super 301" investigation, followed by sanctions. In order to ease trade tensions, Japan signed a semiconductor agreement with the United States in 1986, agreeing to restrict semiconductor exports to the United States and setting a price floor for Japanese semiconductor products in overseas markets. In 1991, the two countries signed a semiconductor agreement, requiring Japan to reduce tariffs and ensure that the market share of American semiconductor products in Japan will not be less than 20% within five years. Third, limit the Japanese government's support for semiconductor technology research projects. On the contrary, the United States has copied the Japanese model, launched its own industrial policy, and continuously promoted enterprise cooperation and funded the research and development of dual-use technologies between government and enterprises. In 1987, the U.S. Department of Defense led 14 semiconductor companies to establish the Semiconductor Manufacturing Technology Strategic Alliance (SEMATECH), and in 1992, the U.S. government, together with relevant semiconductor associations, national laboratories, industrial enterprises and academic institutions, jointly formulated a national semiconductor technology development roadmap and jointly researched EUV lithography technology. Fourth, in the name of protecting intellectual property rights, the cost of using U.S. technology and patents for Japanese companies has been greatly increased, and technological exchanges with Japan have been restricted. In the 80s, Japanese companies such as Panasonic, Fujitsu, Toshiba, Mitsubishi, and Sharp were all sued for patent infringement by their semiconductor counterparts in the United States, and all of them lost the lawsuits, and had to pay high patent royalties to the United States every year. Fifth, Japanese companies are restricted from acquiring U.S. technology through cross-border acquisitions. Under pressure from the United States, Tokyo not only accepted the agreement imposed by the United States, but also abandoned the industrial policy of organizing support for the development of semiconductors, and abandoned research aimed at improving the competitiveness of Japanese semiconductors, including not participating in any silicon-related projects.
The reason why the Japanese government accepted the request of the United States to sign a semiconductor agreement with it is mainly due to the following considerations: First, political considerations. At that time, the relationship between Japan and the United States was tense, and the two sides had differences in trade, military, security, and other fields. Tokyo hopes to sign a semiconductor agreement with the United States to ease bilateral tensions and maintain the security system between Japan and the United States. The second is the impact of domestic economic pressures. The Japanese economy entered a bubble in the 1980s, with slowing economic growth and sluggish domestic demand. Given that the U.S. is Japan's largest export market, Tokyo is worried that a trade war will happen and exports will be suppressed by the U.S., and it hopes to stabilize and expand the U.S. market by signing an agreement.
Regarding the Japan-US semiconductor agreement, Japanese semiconductor companies have mixed attitudes. On the one hand, Japan's semiconductor industry had already achieved a dominant position in the global market at that time, and the agreement would obviously hit its exports to the United States, and they were also worried that the agreement would limit the development and innovation of Japan's semiconductor industry; on the other hand, Japanese companies hoped to stabilize their exports to the United States by reaching an agreement with the United States. Therefore, before the agreement was signed, these companies actively lobbied to try to obtain more favorable terms in the agreement, but in the end they had to accept the US demand and reach an agreement with the US in exchange for the opening of the US market. With the signing and implementation of the agreement, Japanese companies are facing greater competitive pressure, and they have to adjust their strategies and business methods to try to maintain and improve their competitiveness by improving production efficiency, reducing costs, and strengthening R&D and innovation. In addition, they are also starting to expand into new markets, especially in Asia and other regions.
Under the pressure of the United States, Japan has not only struggled to obtain American technology, but has also been squeezed out of the global technology innovation club led by the United States. In 1986, Japanese semiconductor products accounted for 45% of the global market, becoming the world's largest semiconductor producer at that time, but by 1992, American companies had regained the top spot in the global semiconductor market, grabbing 20% of Japan's market share. Since then, with the rise of South Korea's semiconductor industry, it has become more difficult for Japan to reproduce its glory in the 80s. Although it is difficult to blame the weakening of Japan's semiconductor industry entirely on the US crackdown, the latter did have an important impact on the loss of Japan's semiconductor throne.
From the perspective of the four elements required for the successful implementation of the weaponization of commodity trade, first, whether it is the chip industry selected by the United States or the key raw material industry selected by Japan, the two countries have formed technological advantages in their respective industries that are difficult to replace in the production of related products. In Japan, this advantage mainly refers to the unique process and technology for the production of key raw materials, and in the United States, this advantage is mainly the original technology and patent advantage required for the development of the semiconductor industry. Although Japan had achieved a competitive advantage in the semiconductor industry at the time, it still relied on original U.S. patents and technologies. Second, as discussed below, there are differences in the symmetry of interdependence between the United States, Japan, and South Korea (see below). Thirdly, the inter-state alliance. The United States has succeeded in suppressing the development of Japan's semiconductor industry by supporting the development of South Korea's semiconductor industry and building an international alliance that excludes Japan's technology development and sharing. In the latter case, Japan failed to assemble an international coalition on weaponization. Fourth, domestic government-enterprise relations. In the former case, the U.S. government launched a containment campaign against Japan's semiconductor industry under the active lobbying of the Association of American Business Organizations. Throughout the course of the operation, the US government and enterprises coordinated their actions, and there was a high degree of consensus on the attack on Japan. In the latter case, when Korean companies were forced to "decouple" from Japan under political pressure, some companies managed to circumvent decoupling and maintain economic ties with Japanese companies in the market. This also means that Japan's weaponization strategy is not fully supported by Japanese companies. From the perspective of anti-political instrumentalization, first of all, although the competitive advantage of Japan's semiconductor industry overshadowed that of the United States in the 80s, Japan is highly dependent on the United States for security and exports, which makes it at a disadvantage in the game with the United States. In sharp contrast, although Japan and South Korea have very close economic and trade ties and are highly dependent on Japanese exports, the economic relations between Japan and South Korea are more interdependent, and South Korea is not dependent on Japan for security. On the contrary, because of differences in history, territory, and other issues, South Korea has often been at odds with Japan in the past, and has shown a strong sense of national self-reliance. It can be seen from this that the relative independence and autonomy of a country in terms of military, economy, and even national dignity are the prerequisites for the successful implementation of counter-weaponization.
Second, the government's understanding of the international situation and national trends, as well as enterprises' understanding and choice of technological routes and their own development strategies, determines their will to implement counter-weaponization. Strategic cognition refers to a deep understanding of oneself and the external environment, as well as an understanding of future development directions and goals based on this understanding. Jervis emphasized the importance of cognition on state behavior, and the same is true for business development, which is reflected in clarifying the direction of national development or guiding business decision-making, optimizing resource allocation, responding to external challenges and improving competitiveness. After World War II, Japan became dependent on the United States, and Takeshi Matsuda analyzed why Japan was unconditionally loyal to the United States from a historical perspective. Even after being severely suppressed by the United States in the 80s, Japan still chose to follow the United States. Given the significant impact of the U.S. market and technology on the development of Japanese companies, it is also difficult for Japanese companies to part with the U.S. market. Although Japan's choice is largely constrained by its lack of strategic autonomy, it is the result of the perception of the Japanese government and its own future development. On the other hand, South Korea's suzerainty is not Japan, and although it is necessary to consider the importance of the Japanese market to South Korea's future development, the South Korean government and business circles have recognized the danger of being too dependent on Japan for historical and practical reasons, so they have spared no effort to diversify their export markets and reduce their excessive dependence on Japanese exports.
The impact of Japanese companies' perception and choice of semiconductor development model and technical route on Japan's loss of the semiconductor crown may be more fatal. Liu Rui and Li Motian believe that the reason why Japan lost in the international competition of semiconductors is that first, it failed to see the mainstream of the electronics industry in the personal computer and mobile phone markets, and then gave up the development of the consumer electronics terminal market that has absolute right to speak in the upstream industrial chain, and was obsessed with the traditional mainframe and memory market; The integrated device manufacturing model of packaging and testing has led many industries to fall into the trap of making cars behind closed doors. In contrast, South Korea's Samsung and other companies, with the support of the United States, took advantage of the trend to join the personal computer industry chain and semiconductor "anti-Japanese" actions led by Microsoft and Intel.
Third, the solidarity and mutual support of the government and business, as well as the whole society, are crucial to achieving technological breakthroughs and the success of counter-weaponization. In the two cases, whether it is the development of Japan's semiconductor industry or South Korea's semiconductor raw material development, the "government-industry-academia" model of government + enterprise + scientific research institutions has played a very important role. The example of the Republic of Korea will not be repeated here. In Japan, the Ministry of International Trade and Industry coordinated in 1976 and organized Hitachi, Mitsubishi and other enterprises and research institutes to participate in the "VLSI Joint R&D Program", which contributed greatly to the rise of Japan's semiconductor industry. By the end of the 90s, in the face of the challenge of American and South Korean companies, in 1999, Japan's Ministry of International Trade and Industry once again took the lead in the integration of NEC, Hitachi and Mitsubishi, which led to the birth of the national teams "Elpida" and "Renesas". But the difference is that in the 90s, Japan's "government-industry-academia" model ultimately failed, and in 2012 Elpida went bankrupt, while Renesas survived, but it was also gone. The different outcomes of the "government-industry-academia" model in Japan and South Korea in these two cases also have profound lessons behind them.
The most effective way to counter weaponization is to prevent it in advance, identify possible risk points, and carry out-for-tat "de-risking" management. Possible risk points include a high dependence on a single or a small number of countries for high-tech products, key raw materials and commodities. In the face of other countries' "stuckness", the only way for a country to effectively fight back is to strive to reduce its own vulnerability. Historically, short-term counter-weaponization measures that a country can take include: appealing to the WTO, finding alternatives or alternative markets, deconstructing the domestic and international alliances of implementing countries, and stockpiling large quantities of relevant commodities before the implementation of the "weaponization of interdependence", and saving and recovering relevant commodities. Medium- and long-term measures include accelerating technological innovation, diversifying exports or imports, de-dollarizing, and expanding domestic markets.
4 Conclusion
The existing literature on the weaponization of interdependence focuses on intangible assets and critical infrastructure, and there is a relative lack of analysis of tangible assets. This paper attempts to advance this research by analyzing the characteristics of the "interdependent weaponization" of trade in different types of commodities and the factors that lead to its success, and using two case studies to analyze the key to the success or failure of counterweaponization. Studies have shown that:
First, there are certain differences in the actors, sources of power, ways/channels, mechanisms of action, and their impact on globalization in the "interdependent weaponization" of different categories of commodities. The main body of high-tech products and key raw materials is the owner or producer of goods, while the main body of general manufacturing products is mainly from the consumer side, and bulk commodities may come from the production side or the consumer side. The source of power for the "weaponization of interdependence" of different types of commodities is different, but its essence is control, and the difference is only the object of control, through the control of technology, production capacity, bulk commodities, etc., to achieve the purpose of attacking the opponent. In addition to the weaponization of commodity trade through the "panoramic surveillance" and "blocking" effects, the "weaponization of interdependence" of the other three types of commodities is mainly through the blocking effect. If the panoramic peep effect of the weaponization of intangible assets is a combination of goals and means, more attention is paid to process management. In contrast, the weaponization of trade in tangible goods places more emphasis on the destructive effects of sudden interdiction and is results-oriented.
Second, for the "weaponization of interdependence" to succeed, the following conditions must be met: low commodity substitutability, asymmetry of interdependence, domestic government-enterprise cooperation, and a solid international alliance for the "weaponization of interdependence". The first two are prerequisites for the "weaponization of interdependence", while the latter are necessary to ensure its success. Because of these characteristics, high-tech products and key raw materials are the most likely targets of "weaponization of interdependence", with a higher probability of success, followed by commodities, and less common general manufacturing products.
Thirdly, the implementation of counter-weaponization needs to address the above four elements. Start with prevention, identify risk points and take corresponding measures to manage risks. Successful counterweaponization requires efforts to find alternatives, reduce dependence on adversary countries, increase their relative security and economic independence and autonomy, and use political and business coherence and diplomacy to break down adversary international alliances. However, the key to achieving a breakthrough lies in a country's ability to innovate in science and technology.
The consequence of the "weaponization of interdependence" is a departure from the logic of the market. The weaponization of international economic transactions in an era of geopolitical competition inevitably exacerbates the crisis of confidence between countries and accelerates the fragmentation and deglobalization of the world. Pierre-Oliver Gourinchas, chief economist at the International Monetary Fund, warned that "the global economy will be fragmented into different economic blocs with different ideologies, political systems, technical standards, cross-border payments, trading systems and reserve currencies". Hopefully, this warning is just unfounded.
*This article was originally published in Journal of International Politics, No. 6, 2023.
Author: Chen Shaofeng
He is a tenured associate professor in the Department of International Political Economy at Peking University, with research interests in energy policy and security, Asian regional integration, China-ASEAN relations, and global economic governance.
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