Globalisation and Weaponisation of Trade: Rising Protectionism and National Security Concerns

What’s in today’s article?

• Why in News?
• What is Weaponisation of trade?
• Key highlights of the speech delivered by EAM

Why in News?

External Affairs Minister S. Jaishankar, speaking at the Kautilya Economic Conclave, highlighted the social and political backlash against globalisation over the past 25 years. 

He emphasised that trade has not only been globalised but also weaponised, prompting countries to view economic transactions through the lens of national security. This has resulted in many nations, including India, adopting protectionist policies, such as anti-dumping measures, particularly targeting Chinese goods.

What is Weaponisation of trade?

• About the concept
  • Weaponization of trade is when countries use trade tools to pressure other countries to change their trade patterns and support their political or economic goals. 
  • This can include: 
    • Embargoing other countries, 
    • Selectively cutting off imports or exports, 
    • Threatening to use trade tools, and 
    • Exploiting a country's economic reliance on another country. 
  • Basically, weaponisation of trade means using trade as a tool of foreign policy rather than as an economic goal in and of itself.
• Not a new concept
  • This concept isn't new, with trade embargoes and restrictions existing for centuries. 
  • Examples include the U.S. oil embargo on Japan in the 1930s, which some historians argue contributed to the attack on Pearl Harbor, and economic sanctions on South Africa, which many credit with helping end apartheid.
• Shift Towards Targeted Sanctions
  • In recent years, the nature of sanctions has evolved from broad embargoes to more targeted sanctions on specific individuals or companies. 
    • This began in the George W. Bush administration but has escalated rapidly since then.
    • It is more of financial sanctions rather than trade restrictions.
  • This shift has made it easier to impose sanctions by lowering the threshold for action.
• China's Aggressive Use of Trade as a Weapon
  • China has pushed the weaponization of trade to new extremes, exemplified by actions like: 
    • reducing trade with Norway after the Nobel Peace Prize was awarded to Liu Xiaobo (2010) and 
    • limiting trade with Australia after it called for an investigation into COVID-19's origins.
  • China has increasingly used trade as a tool for political leverage, imposing economic sanctions on countries that oppose its policies. 
    • In 2021, Lithuania faced sanctions after it announced the hosting of a Taiwanese Representative Office. 
    • Similarly, Mongolia faced punitive fees in 2016 for hosting the Dalai Lama, whose authority over Tibet is not recognized by Beijing. 
    • Taiwan has also faced restrictions, with China blocking imports of citrus, fish, and other foods in 2022 in retaliation for a visit by U.S. House Speaker Nancy Pelosi.
• China’s Control Over Critical Minerals
  • In 2023, China restricted the export of gallium and germanium, minerals essential for semiconductors and military equipment, in response to U.S. efforts to limit China's access to advanced microprocessors. 
  • This highlights China's strategic use of trade to retaliate against opposing nations.
• Push for De-dollarisation and Global Influence
  • China is advancing efforts to move away from the U.S. dollar in trade, pushing for the internationalization of its currency, the renminbi yuan.
  • This would increase its economic influence and ability to weaponize trade further.
• Steps taken by countries
  • Global Pushback Against Coercion
    • The Quad countries—India, Australia, Japan, and the U.S.—have issued a statement rejecting coercive economic practices and advocating for countries' right to determine their own futures. 
    • The G7 nations echoed this sentiment, opposing any unilateral attempts to change the status quo by force or coercion.
  • Economic diversification and supply-chain resilience 
    • Creating alternative supply chains is key to countering the weaponization of trade. 
    • One such initiative is the Mineral Security Partnership (MSP), which includes 13 members such as India, the U.S., and the EU. 
      • The MSP aims to ensure the production, processing, and recycling of critical minerals in a way that maximizes economic benefits for countries with mineral resources.
• Friend-shoring
  • The practice of "friend-shoring," where supply chains are limited to politically and economically allied countries, is becoming more common. 
    • However, experts warns that friend-shoring could harm global trade and undermine institutions like the WTO, reducing the legitimacy of multilateral trade.
• Trade Protectionism
  • Weaponisation of Trade has resulted in many nations, including India, adopting protectionist policies, such as anti-dumping measures, particularly targeting Chinese goods.
  • E.g., India has imposed over 30 anti-dumping duties on Chinese products in 2024 alone.
  • Concerns over job losses and the national security implications of technology have led countries to prioritize domestic industries and supply chains over economic efficiency.

Key highlights of the speech delivered by EAM

• Rising Protectionism and Job Losses Amid Globalisation
  • External Affairs Minister highlighted the social and political backlash against globalisation over the past 25 years. 
  • While globalisation has created deep interdependencies, it has also led to job losses and dissatisfaction with quality of life, influencing political outcomes in several regions. 
  • This has led to a rise in protectionism, with countries imposing defensive measures against foreign imports.
• Weaponisation of Trade
  • Jaishankar emphasised that trade has not only been globalised but also weaponised, prompting countries to view economic transactions through the lens of national security. 
  • The minister pointed out that concerns over job losses and the national security implications of technology have led countries to prioritize domestic industries and supply chains over economic efficiency.
• Shifted Focus in Global Politics: Conflicts Over Reforms
  • He noted that conflicts in Ukraine and West Asia have shifted global attention away from pressing issues such as reforms of Multilateral Development Banks (MDBs), climate change, and the India–Middle East–Europe Economic Corridor (IMEC). 
• India–Middle East–Europe Economic Corridor (IMEC)
  • Despite the diversion of attention, her reassured that the IMEC, which was conceptualised during the G20 meeting, remains a viable project. 
  • India is engaged in ongoing projects with the UAE and feasibility studies with Saudi Arabia. 
  • The minister stated that the need for IMEC has only grown stronger due to rising geopolitical risks, although progress has been slowed by the current focus on global conflicts.

Q.1. What is the weaponisation of trade, and how has it evolved over time?

Weaponisation of trade refers to using trade as a tool of foreign policy, rather than purely economic purposes. It has shifted from broad embargoes to targeted sanctions, with countries like China using economic measures to exert political leverage on nations that oppose its policies.

Q.2. How are countries responding to China’s weaponisation of trade?

Countries are responding by creating alternative supply chains, such as the Mineral Security Partnership, and through practices like friend-shoring. These efforts aim to counter China’s control over critical resources and reduce dependency, promoting trade resilience and economic diversification.

Source: Trade not just globalised but now weaponised; wars diverting focus from IMEC, multilateral banks’ reforms, climate change: Jaishankar | The Print | CSIS