Sifting through Interdependence

If there is one idea that has consistently influenced western foreign policy since the Cold War, it is the notion that extending interdependence and tightening economic integration among nations is a positive development that advances peace, stability, and prosperity. As a post-Cold War idea guiding U.S. and European foreign policy, there is much to be said for it. The absorption of Eastern Europe in both the European Union and NATO helped consolidate market democracy. Globalization led to unprecedented growth in western economies, and facilitated the ascent of China and India, among others, taking billions of people out of poverty. Access to the international financial institutions also offered emerging powers the strategic option of exerting influence through existing institutions rather than trying to overturn them. Some policymakers and experts believe that this process holds the key to continuing great power peace and stability.

Until recently, countries have acted as if increasing and freewheeling economic interdependence is a force for good in itself. Yet over the past five years it has become increasingly apparent that interdependence and integration carries strategic risks and challenges with it. These include a much greater level of volatility in the global economy, potentially destabilizing vulnerabilities in the U.S.–China bilateral relationship, tensions in Asia that stem in part from the reliance of small economies upon China, and an existential crisis in the European Union. Nations have begun to hedge against some of these risks by reining in some types of economic interdependence and by adopting national security policies to counterbalance them. For example, South East Asian nations have deepened their strategic ties to the United States to offset the effects of economic interdependence with China, and Western countries are placing restrictions on the activities of Chinese technology companies.

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