International Economic Policy for Asia in an Era of Great Power Strategic Competition

The United States and China, the world’s two largest economies, are locked into strategic competition and rivalry that complicates international policy choices for the rest of the world, but particularly for their partners in Asia. Economics and security are increasingly entangled in a way that may cause damage to both, creating a dangerous trade-off and a negative feedback loop on both economic and security outcomes. Economic coercion is being deployed to narrow choices for countries. This paper demonstrates the security value of the multilateral trading system and economic interdependence. Economic coercion is blunted by an open multilateral trading system that significantly reduces the cost to targeted countries. Multilateral engagement helps manage important risks that countries face by diffusing power and providing forums for collective action by small and middle powers that provide leverage.