The militarization of trade makes you a foot soldier in the geopolitical chess game

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Clausewitz pointed out that war is the continuation of politics by other means. Today, trade becomes the continuation of war by other means.

You and your business are likely to be conscripted, if you haven’t already, so understanding how to play this modern version of the great game is quickly becoming essential for every business leader.

“The militarization of trade is actually the use of trade as a strategic tool to gain advantage around the world,” says Dr Rebecca Harding, an international economist specializing in trade and supply chains and co-author of the book. The Militarization of Trade: The Great Imbalance of Politics and Economics.

The use of trade as a coercive tool to achieve political goals is not new: governments have long used tariffs and sanctions to achieve their geopolitical ambitions. What is different, Harding explains, is the degree to which trade is integrated into the military strategies of major powers such as the United States, China and Russia.

You’re in the army now

The Western response to Russia’s invasion of Ukraine provides a poignant example.

In the six months since the start of the war, the United States, United Kingdom, European Union and their allies have not only imposed what they hoped will be crippling sanctions on Moscow (not was not the case), but also used soft power to pressure companies to pull out of the Russian market.

“Social media has enabled nations to mobilize the rhetoric of economic warfare quickly and in a coordinated fashion,” Harding said. “You can start integrating trade and trade rhetoric into a national strategy. This makes trade itself a matter of public discourse, and therefore politicizes and militarizes it.

Within weeks of the invasion, major American and European companies suspended their Russian operations or pulled out of the country altogether. Brands from Apple to Zara have closed their stores, leaving Russian malls to look like something out of Flint, Michigan. McDonald’s went even further by selling its Russian stores. Popular streaming services such as Netflix blocked Russian users, while Disney suspended the release of new films in the country. Airlines have suspended flights.

There was even more happening behind the scenes.

Credit card companies blocked Russian transactions. International shipping companies have canceled or suspended contracts with Russian customers. And suppliers stopped supplying goods and services to Russian companies. Vkusno & Tochka, which bought all 700 restaurants from McDonald’s, found it couldn’t even get fries and had to remove them from its menu.

“Being an economic actor now makes you an actor in conflicts like this. All of a sudden, you’re carrying your nation’s flag,” Harding says. “Companies become foot soldiers in these conflicts because they implement the strategy that has been developed and put in place by national security and defense professionals.”

pawns in the game

National security is another area where companies have been drafted in as combatants – nowhere more so than in the telecommunications sector.

Concerns over the potential surveillance of Chinese 5G equipment prompted the Trump administration to bar Huawei, one of the world’s leading providers of the technology, from the domestic market – and to pressure allied countries to do so. same.

“Trade has become a security threat, and that means you can become a national security threat as a business,” Harding warns, adding that geopolitical competition between the United States and China has also affected businesses in other ways. “You could be a company that has been operating successfully in China for a while and then suddenly find itself constrained by domestic political politics. You may need to relocate your manufacturing facilities or find new business partners.

Trump pressured Apple to do both of these things. But political decisions like these can be reversed or changed without notice and can be difficult to anticipate, given the unpredictable nature of electoral politics — and Harding says that forces companies to hedge their bets.

“As a business leader, I don’t think about a just-in-time supply chain anymore, I think about a just-in-case supply chain,” she says. “I have to hold back for risk reasons, so I suddenly become very risk averse.”

Know your place

Harding recommends companies keep their supply chains as lean and flexible as possible. Friendhoring – the movement of production to diplomatically friendly or allied foreign sites – can also provide manufacturers with at least some protection against the various vicissitudes of domestic and foreign policy.

But Harding says that, for most companies with international operations and many without, there’s no escaping their role as foot soldiers in today’s conflicts.

As a leader, this will force you to think more carefully about the potential threats posed by global and regional conflicts to your business strategy. You will also need to create optional plans so that you can react quickly to new developments.

Decision support techniques such as red teaming and scenario planning can help you learn to think and plan strategically.

“The same goes for cultivating a practical understanding of the role of economics as a domain of warfare,” adds Harding. “You have to understand the geopolitical framework because it’s now an existential threat to the way you do business.”

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