The past calculations that underpinned the World Order are undergoing a rapid change and some of these fundamental changes are going to be driven for long term geostrategic shifts globally. The shift from unipolarity to multipolarity, multilateralism to unilateralism, free trade to protectionism and globalization to hyper nationalism and fragmentation are amongst the many unfolding in the backdrop of a geopolitical landscape in a flux. With these seismic changes being spurred on by rapid strides in technological advances the world is witnessing an enhanced prominence of geo-economics, especially in contemporary global power play.
These changes have significant implications for geo-economics a term first coined in 1990 by Edward N. Luttwak In his influential article “From Geopolitics to Geo-economics: The Logic of Conflict, the Grammar of Commerce,” Edward Luttwak argued that after the end of the Cold War, competition among states would increasingly shift away from military confrontation toward economic rivalry. He suggested that the behavior of states would undergo a significant transformation as geo-economics emerged as a guiding framework. Luttwak used the term geo-economics to describe the blending of strategic conflict with economic tools—essentially applying the strategic logic traditionally associated with warfare to the mechanisms of trade and commerce. This perspective is further discussed by Robert D. Blackwill and Jennifer M. Harris in their book War by Other Means: Geoeconomics and Statecraft, where they explore how economic instruments have become central to modern statecraft. “War by Other Means” Robert D. Blackwill and Jennifer M. Harris describe geo-economics as the strategic use of economic tools by states to advance and safeguard their national interests while also achieving favorable geopolitical outcomes. Their definition also highlights how the economic policies and actions of other countries can influence a state’s broader geopolitical objectives. Today, the concept of geo-economics is widely used and sits at the intersection of global geopolitics and the field of International Economics.
Geoeconomics is conducted through a plethora of economic and commercial instruments like tariffs, non-tariff barriers(like quotas), technical barriers(regulations and standards imposed to create obstacles to free multilateral trade like labor laws and environmental standards), loans and grants(countries resorting to predatory debt trap diplomacy), state trading(government a direct participant in trade, facilitates application of economic and political pressures at opportune moments) and economic sanctions. Countries based on their relative economic power and geopolitical standing, economic geography, political systems of governance and historical experiences decide on the instruments best suited to meet the ends sought by them. The two diverse notions that ‘trade follows the flag’ (that the projection of national power in its wake has economic connotations) and that ‘the flag follows trade’ (that there are geopolitical consequences of power projection in the economic domain) is evidence of both power and wealth creation being in a mutually beneficial relationship.
With the tariff wars unleashed by Trump towards rivals and allies alike the use of instruments of geo-economics has come to the fore, being practiced by all who have the leverages available to upend geopolitics with the instruments of geo-economics. This is amply evident from the temporary halt to the tariff wars between the US and China as China brandished its domination of critical rear earth elements, magnets, etc, that are so crucial for the cutting edge technologies of today. This appears to resemble the “Mercantilism” practiced by European Powers in the 16th to the 18th centuries where trade was seen as a zero sum game and national power was viewed in terms of accumulation of bullion. The present day “Neomercantilism” can be seen as a contest being waged in the arena of access to and development of computing technology and the securing of critical and rare earth minerals. This is not to discount the role being played by the active intervention of governments in the economy to strengthen national power, protect domestic industries, and improve their respective country’s position in global trade.
The rise to prominence of geo-economics at the cost of geopolitics or rather as a major mode of leverage for geopolitical gains is evident from the US China détente couched in the language of G2 Group of countries and is indicative of the geopolitical space the US has conceded in this rivalry. This is a major climb down from the initial imperious position adopted by Trump in the face of the formidable counter options displayed by China, honed over a period of time probably to cater for such a contingency. Though it also needs to be acknowledged that this truce appears as a temporary respite only in the sharp competition between the two powers. In a stark divergence the imposition of 50% tariffs on India is demonstrative of the use of geo-economic leverage in an attempt to bring about a change in India’s policy, ostensibly, pertaining to the purchase of Russian oil and is also indicative of the lack of options India has to counter, much at variance from the multiple pain point options wielded by the Chinese.
The talk of being “natural allies”, the highlighting of the friendship between the world’s oldest democracy and the world’s largest democracy and the relationship being termed as a Comprehensive Strategic one seems to be dented by the blistering heat of the abnormally high and totally unjustified unilateral sanctions imposed on India. These though may appear to target India’s strategic autonomy, we have done well to hold our ground and appear to be unfazed though there appears to be a subtle shift away from Russian oils supplies, especially post the sanctioning of Russian oil entities. Overcoming the “hesitations of history” as was alluded to in the Indo-US emerging strategic partnership and the bonhomie has definitely hit a kink with these tariffs and hopefully the strategic convergence on other issues may prevent a rupture, while we negotiate this transactional phase of the relationship.
With geo-economics emerging in the forefront of relations between states it is important that the Indian policy makers adapt to this era of “neomercantalism” with alacrity. Diversification of our trade especially with greater attention to the Western hemisphere and resilient supply chains, giving a fillip to our indigenous manufacturing especially so in the strategic sectors like energy, defence and emerging critical technologies etc are must DO’s amongst a host of measures. Securing supplies of rare earth minerals especially at the upper end of their extraction chain by deals with countries endowed with them and developing the necessary wherewithal for their extraction are of utmost importance. Transfer of technology being insisted upon where we lack the expertise must be pursued vigorously as a policy option as then only can “Atmanirbhar Bharat” come to fruition. The ease of doing business is another area where reforms in labour (some progress seems to be in the offing here), land laws and lowering of tariff and non- tariff barriers without falling in the predatory liberalism trap are mandatory. Our ability to monitor our strategic sectors and avoiding the pitfalls of weaponistion of dependencies should be closely monitored and which should form the fulcrum of our “Atmanirbharta” endeavors.
Where the dialogue with our strategic partners have a 2 plus 2 convergences we must explore the possibility of adding on a third chapter premised on commercial dealings and harness the wholesomeness of a 3 plus 3 approach so commercial dealings becomes endemic to our diplomacy. The present trade representatives/expertise we have in our diplomatic missions can be upgraded to Sherpas status so that our geo-economic dealings get as much attention as our geopolitical ones, this being the new currency of power in the world. For this lateral entry into the Indian Foreign Service of suitable talent and experience must be definitely explored. While some of these measures are underfoot they could be fast tracked with a synergestic application of our public and private sectors as our future in the comity of nations is going to be greatly influenced by our ability to ride the geo-economic wave to achieve geopolitical ends and retain our strategic autonomy. The finalisation of the India EU free trade agreement is indicative of the importance being accorded by the government to geo-economics while simultaneously using this opportunity for some geopolitical signaling to the US of the options to negotiate the tariff predicament we have been placed in. While doing all this we can definitely tone down our rhetoric on our imminent greatness till the time we are actually at the threshold of it.
