Is Economic Statecraft the New Language of Great Power Politics?

March 17, 2022

Is Economic Statecraft the New Language of Great Power Politics?

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Jonathan Hackenbroich

What happens when trade rules can’t keep up with the consequences of global economic integration? Jonathan Hackenbroich of the European Council on Foreign Relations explains how countries leverage economic interdependence to apply political pressure in pursuit of a range of policy goals and why the World Trade Organization was not designed to reign in this behavior. He also shares insights on the European Union’s proposed Anti-Coercion Instrument--the bloc’s unprecedented response to rising instances of economic coercion.

Opinions expressed on Trade Matters are solely those of the guest or host and not the Yeutter Institute or the University of Nebraska-Lincoln.

Show Notes

Tough trade: The hidden costs of economic coercion by Jonathan Hackenbroich, Filip Medunic and Pawel Zerka, February 2022. 

Measured response: How to design a European instrument against economic coercion by Jonathan Hackenbroich and Pawel Zerka, June 2021.

Anti-coercion instrument explainer

What Jonathan's been reading lately: 
The Economic Weapon: The Rise of Sanctions as a Tool of Modern War by Nicholas Mulder (Yale University Press, 2022)


Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the audio before quoting in print and write to report any errors. Transcripts will be posted within one week of the show.

Jill O'Donnell: Jonathan, thanks so much for joining us today on Trade Matters.

Jonathan Hackenbroich: Thanks very much for having me. It’s a pleasure.

Jill O’Donnell: So I'd like to start by defining economic coercion, what we're talking about in the heart of this episode today. You've written about this quite a lot for the European Council on Foreign Relations, along with your co-authors Pawel Zerka and Filip Medunic. And you've written that economic coercion is "when third countries use economic means in pursuit of a geopolitical goal". What else would you say in defining or explaining what economic coercion is and why it may be happening more frequently now?

Jonathan Hackenbroich: Right. And that's of course an incredibly important question because if we talk about responses to economic coercion, the question always immediately is, what is it that we're talking about? What do we want to respond to? When do we trigger, for example, counter measures or similar? And it is tricky to define it because, as you said, it's mainly defined by the use of an economic link, or mean economic pressure to get a government of a different state to act in a certain way or not act in a certain way. And what we're seeing is that we've entered this new great power competition that sometimes people refer to as the new Cold War. But in fact, it's very different than the old Cold War. And even after what's now happened here in Europe, in Ukraine, we are not looking at a completely divided into separate blocks. We may get there eventually, but that's not where we are at the moment, still not. But rather at a world where this geopolitical competition, mainly between... Sometimes framed as the competition between the US and China. Now, maybe more and more as the West and democracies against autocratic regimes. It's taking place in a situation of fairly close economic interdependence and high levels of economic integration. In which you can use these economic links to put pressure on the other side or on a third country. But also where this becomes the least bad option and your number one foreign policy tool, because all other options like outright war are difficult. For one reason, because there's nuclear weapons and we don't want to get into nuclear war certainly. But also because it would come with such great economic damage as well, because as I said, we're highly integrated economies still.

Jill O'Donnell: Maybe we could just walk through one example of an instance of economic coercion and how that plays out. I know the example with respect to China's pressure on the country of Lithuania is one that has gotten some attention. So could you just walk through briefly what's happened there for our listeners?

Jonathan Hackenbroich: So what originally happened was political tensions. Lithuania pulled out of the 17+1 format, which was a format of eastern and central European nations with China to enhance cooperation with China and just gradually toughened its position towards China. All the way until accepting the establishment of a Taiwan representative office in Vilnius, the Lithuania capital, which is significant because China views this as a breach of the one China principle and as a recognition or as partial recognition of Taiwan as a country, as an independent country. And what then happened was you saw increasing economic fallout that went all the way to a full trade embargo of Lithuanian trade with China. Lithuania fell off... The Customs Clearance System is a clearance system of China, so that just makes it impossible to import Lithuanian goods into China all together. But China didn't just stop there. It went further and it pressured German, Swedish, Dutch, other companies reportedly. And this is all based on reports, emails that companies have gotten. But there's mostly even no paper trail what so ever. Pressured these companies to stop trading with Lithuania. So used unrelated third country companies as weapons against Lithuania to shield, to cut Lithuania off international trade and European trade. All as a punishment for a political choice, not because China was concerned about trade or economic practices in Lithuania, but out of national security concerns if you will.

Jill O'Donnell: So quite remarkable to go after companies in third countries in this case. That kind of extends the coercion quite far beyond just the country that is the object of the problematic behavior, at least in the eyes of China in this case. So it seems to be a sign of integration resulting in some vulnerabilities that can be exploited by these third countries. In defining economic coercion, you have listed four features of what successful economic coercion against the European Union can look like, which are: trade as a weapon, the swiftness with which this coercion can take place, especially as measured against the slowness generally of a response to it because of the EU's need to act in concert and the time that it takes to respond to these measures, the use of gray zone tools that can be kind of hard to pin down, as well as the power of division. So those four features of successful economic coercion that you've pointed out. And I want to start with the last one, the power of division to help our listeners understand the European Union a little bit better. You've noted before that the EU single market is not complete and that quote, "Smart economic coercion is what successfully divides the European Union." So again, especially for our non-European listeners, tell us why the single market is not complete, and then how economic coercion can divide EU member states.

Jonathan Hackenbroich: And this goes back to the fact that, in contrast to the US, over here in Europe, we're dealing with 27 fully, I mean, member states that are countries, independent countries, if you will, held together in the European union, but not the United States of Europe. And that means that we don't have a fully unified central government in Brussels just like there is a federal government in Washington that will take decisions on foreign policy. And in fact, foreign policy is still with the member states; so as we all know, Germany conducts its foreign policy, France its own foreign policy and so forth. Of course, they coordinate really closely, but you can still see differences. And on foreign policy matters, which economic coercion, at least the geopolitical competition, lots of competencies are with member states and all 27 have to unanimously agree if they want to take a consequential decision like imposing sanctions against Russia. Now, Russia's actions were so flagrantly aggressive, and just put in speech about Nazis and drug addicts in Ukraine and questioning the right of Ukraine to exist, and aiming to eradicate this country from the world's map, basically. That fosters great unity in Europe obviously because it's just so outrageous and such a big crisis. I would argue that in many other instances when Europeans are attacked economically or through other means, but on the economic coercion, the third country will not make the mistake of unifying them because it suffices that one or two of them oppose tough countermeasures, for instance. And so that's why, particularly with the EU...I mean, this happens with regards to the US as well. Ideally, you want to try to divide Congress, which is already highly polarized, but still you have a highly effective centralized federal government that can take decisions. And that's why there's a particular vulnerability that Europe has, given it's still a union of 27 countries.

Jill O'Donnell: Okay. So shifting to a couple of other factors there: trade as a weapon and the gray zone tool specifically. So it seems that in the case that you've described already with Lithuania and other cases, a country might use trade policy instruments like a tariff to pressure another country into making certain policy choices. And you've written about another example, the one regarding the Chinese ambassador in Berlin who threatened to impose tariffs on German car exports if Germany banned the Chinese company Huawei from building its 5G network. So this is a case of using tariffs to coerce rather than to protect. So the tool is the same on the surface, but the reason it might be utilized is different. And this example with Germany that I just mentioned, the coercion seems very overt, easy to identify, but are there cases where it might be harder to see or prove the why behind a country's behavior behind why they might be imposing a tariff? And so, really the question is how can you distinguish between protectionism and coercion when that involves judging another country's motives or intentions with these tools?

Jonathan Hackenbroich: That's a really good and tricky question because the nature of... And going back to what I said earlier, if we accept that this world is one where economic logics and trade logics are not separate anymore. To an extent that was always true, but they're much more intertwined now with geopolitics and not separate from geopolitics. The economics offers the prime geopolitical tools for states to pursue their power objectives. Then you're in a situation where the logics, whereas an action that in from a trade perspective would be protectionist, and from a geopolitical perspective is actually a deterrent, or is actually something that makes things less grave and ultimately protects free markets in a way. Because by taking a counter measure, you're making sure that other countries are deterred from doing something similar and from infringing upon liberal trade and open and rules-based trade. But the question concretely is very difficult in a concrete case when it's not so overt, as you're saying. To give one more example, when China decided to hit about 10% of overall Australian exports in punishment of Canberra's decision to exclude Huawei of its 5G network building, and to criticize, or actually to call for an independent investigation into the Wuhan pandemic outbreak back in 2020. China used anti-dumping measures and which used trade defense tools basically. But they came at a point where it seemed fairly clear that they were meant for coercive purposes, not to protect Chinese industries or Chinese economy from Australians. But still Australia had more anti-dumping measures in place against China than the other way around. And so these things are very tricky. Ultimately, they're political. And what you need to do is, in each instance, collect evidence, make clear by your sensing that this could not just be protectionist but actually coercive, and you need a very good understanding of the geopolitical goals of other countries like China.

Jill O'Donnell: Okay. That brings us into the European Union's new proposed anti-coercion instrument, a proposed way of responding to these types of situations. This would be an unprecedented tool for the EU. And from what I can tell, discussions about economic coercion in the EU in particular often seem to describe it as a China problem and a Russia problem. But this tool would not be aimed, as far as I can understand, at any one actor on the global stage. So tell us a little bit about the genesis for this tool, what brought about the proposal to create it, and how it would work.

Jonathan Hackenbroich: So, I mean, very openly, I think it was mostly Donald Trump in the beginning that triggered Europeans to think about whether they might not need better defenses. Now, many of them had a longer term strategic view, of course. And knew that China, and possibly they were even thinking of Russia, but mostly China would become a much bigger problem and were hoping that transatlantic relations would always be in such a good place as they are now, or at least very close still. But Donald Trump used a range of threats and tools, from sanctions to punitive tariffs. At one point, France and other countries wanted to establish a digital service tax. And Trump threatened them with the imposition of punitive tariffs under Section 301. And that's where the original thinking came from where, where the EU was sort of waking up to the fact that even from your close friend and ally you may not always expect rules-based behavior on trade, at least under such a government like the Trump government. And you may need tools to deal with that situation; ideally tools that will deescalate the situation, certainly when it comes to transatlantic relations. And that's sort of where it started this idea of a collective defense instrument, where one member state's sovereignty is violated that the entire EU, on the basis of the full weight of the European market, can respond with tough countermeasures if needed. And ideally of course, the very existence of the tool would deter such moves in the first place. It comes also from the experience... I'll just add that still... from the experience that while Trump did slap some tariffs on European products like aluminum and steel exports toward the US, he stopped short of imposing car tariffs on the German car industries. And that was in part from the European view, thanks to the EU's very tough counter reaction that targeted products like Jack Daniels and Harley Davidson. And where the sense here was that was being seen in the White House and that not necessarily expected that Europe could retaliate and reciprocate those measures. And that sort of made it more confident that it could be helpful to have a tool in the back of their hands just in case.

Jill O'Donnell: Okay. So, how would this tool sort of work in practice? I know it's still under discussion so not in its final form at the moment, but you've written and thought a lot about what it could or should look like. So tell us a little bit more about how it would work and who could initiate a case of alleged economic coercion within the EU. Would it have to be a government source, or could a private actor bring a case under this tool?

Jonathan Hackenbroich: It would not be a private actor. Though they could furnish information and that could lead to government or the European Commission precisely that would trigger it. And the director general for trade in Brussels would do so. How would it work? The key difference is that you're creating an instrument where you can respond very directly. It's an autonomous instrument so that you can react directly, if you will, unilaterally, but only in response to a unilateral breach of its sovereignty, of the sovereignty of a member state, where it's really about, as we were saying, changing the behavior of a member state, or several member states through direct economic pressure, or indirect economic pressure. But, in a grave way, interfere with the sovereign choices of a member state. And in that case, the EU would trigger a procedure to determine whether this is economic coercion. It would seek dialogue with the third country. There are lots of off ramps actually in the proposal. So you can definitely see a great effort and great emphasis to try to find ways of using the prospect of tough economic counter measures as a way to trigger dialogue, and as a way to resolve the issue differently. But if the measures persist, if the threats persists, eventually the EU could then enact a counter tariff of reciprocal... that would impose proportional damage on the third country economy. So let's say Russia or China. It could impose investment restrictions, could put companies or individuals on lists. So those companies or individuals that contribute to the implementation of economic coercion, it could impose export controls, very similar the export controls as we've seen against Russia and so forth. So a wide menu of measures that the EU could impose, which is also meant to give it the possibility to flexibly react to whatever situation is at hand and what it actually deems as an effective counter measure, depending on which country we're talking about, depending on what the situation is.

Jill O'Donnell: Okay. So a large range of counter measures that could be possible there, going well beyond just tariffs, which we often think of as the main tool of trade policy, but this goes far beyond in terms of what might be possible to impose. So talk a little bit too, if you would, about the swiftness with which this process could happen under this tool. So going back to your definition of economic coercion, and again, the four factors of successful economic coercion, swiftness is one of them on the part of the country applying the pressure, as juxtaposed against how it can be slow. It can take time for the European Union or other countries to respond to something like that. It takes time to build the case, to build out the evidence and then exercise the tools. So how would this tool be built in such a way that it could be used to respond in a timely fashion to instances of economic coercion?

Jonathan Hackenbroich: And you're absolutely right. I mean, there would be a procedure. And to determine whether this is coercion, that there will be attempts solve this by dialogue and so forth. So we wouldn't say necessarily, even though in certain situations under an emergency or urgency procedure the EU could even impose, it could even do that. We wouldn't, in most cases, see a counter measure taking the next day. Still though, even if it takes a week or so, that's really swift if you compare it, not just to sanctions making and where you need unanimity and you need full negotiations between also 27 member states, and so forth. In this case, you could move fairly quickly. And depending on which decision making procedure they choose... Because the instrument hasn't been established yet it's only been proposed. But under the current proposal, it would be the commission that could act fairly fast, where the EU "government", if you will, in quotes, the commission in the centralized body in Brussels, could move ahead, go towards imposing a counter measure and member states could stop it if they disagreed by a qualified majority, which is something like the super majority in the EU system. But it may well be that member states disagree and that that's a fast for them and that they would like to actually have to approve them actively by qualified majority. But still, even that would still be a fairly fast procedure compared unanimity or sanctions making under the Common Foreign Security Policy in the EU.

Jill O'Donnell: Okay. So then let's look at the type of outcome that this tool is supposed to generate. So the very existence of the tool, at such time that it becomes approved, is supposed to deter behavior from happening in the first instance. But if the tool is utilized and the off ramps do not work, and counter measures are imposed, the ideal is that induces the third country to stop the bad behavior, to stop the coercion. I want to ask you this though, you've pointed this out, and many others have, that in the US case, where the US imposed the Section 301 tariffs on China, that you mentioned a few minutes ago, on Chinese goods entering the US. Those tariffs are still in place, and they have not changed the underlying behavior that they were aimed at targeting, that they targeted. So I want to ask you if there's a risk that any trade measures or other counter measures that might be imposed under the anti-coercion instrument, would not in fact change the behavior and instead prove risk for their trade conflicts.

Jonathan Hackenbroich: I think the short answer is yes. Yeah, absolutely. There is that risk. And that's why it's a very important question. As you've mentioned the case of the Trump administration's tariffs against China, which some parts of it are still in place, but the behavior hasn't changed still. And it's also something we're seeing with our sanctions from broader sanctions that as the West, as the US, as Europe, as the UK, and others have imposed on Russia currently. They haven't stopped put than immediately from invading or continuing his war in Ukraine. So on one hand, that's always going to be a risk with economic measures. Economic measures take time to take effect in almost all cases, or to take at least politically. They may might hit economically verify, but politically that's a different story. So absolutely there's also a risk of retaliation then, and even a tit for tat escalation. That's all true. That's why it's so important that there are a lot of off ramps and good dialogue. That's why this, this can't be the only tool. You need good diplomacy. You need strong partnerships with friends and allies to accompany this. And that's why it's a last resort tool for grave instances. But sometimes just like in the current situation, even though there's little hope that our sanctions are going to immediately change Putin's calculus to a point where he just withdraws from Ukraine, you need to be able to act and you need to be able to use such measures. But again, this is why the tool has to be last resort and only for grave cases and only when everything else is failed.

Jill O'Donnell: Okay. Another question on this front then; in such a case that the tool is used and some kind of economic pressures imposed back on the third country, is there a risk that European Union businesses might get kind of caught in the middle here where perhaps tariffs are imposed on that are important in their supply chain and so it raises their costs? In the US case with the 301 tariffs, the tariff exclusion process was developed for the first time ever so companies could apply for relief from paying tariffs on parts that they needed to source in this case from China. So do you foresee that this tool, the anti-coercion instrument would need to include some kind of similar exclusion process?

Jonathan Hackenbroich: Yeah. That's very interesting. I think, to respond to your first part there as well, yes. I think clearly there is that risk. And any measures have to be devised very clear carefully, cautiously, which of course is almost in contradiction to the swiftness we need under such a tool. So, there is a risk of unintended consequences, things that decision makers just haven't thought about, didn't think about when they imposed the measures. So what's key is from the start is close... And that's foreseen under this... is very close dialogue with the private sector to understand some of the consequences some matters might have. And I wouldn't rule out this a similar tariff exclusion process. For now, I think the thinking could more go into a direction though... This is me and my personal analysis if you will... into having a sort of a compensation mechanism of sorts where.... Because almost by definition, any counter measure will hit a certain sector, a certain country of the European Union, a certain region, much more than others. Portuguese producers of X may not be hit while Estonian producers of Y will heavily be hit. Exporting countries could be hit much more. Or the big trading countries in Europe might be hit much more than others. So having at least some kind of balancing out of these effects would go a long way, even if it doesn't... It's impossible to compensate for some of the losses because in a dire situation, the losses might be huge, like the one we're in right now with Russia. But balancing out some of the effects already can bring a big political effect in shoring up support for them when they are really necessary. And otherwise they have to be devised really well, and thought through in detail.

Jill O'Donnell: Okay. Let me ask you then how those factors might translate into consensus within the European Union when it comes to approving this tool. So really what's next in the process of formalizing the anti-coercion instrument? My understanding is that some EU member states have expressed some concerns that the ACI has currently proposed could lead to more protectionism and trade wars. You mentioned Estonia. That's one where I've seen some concerns express there. But others like France, for example, support that tool. So how easy or difficult will it be to establish enough consensus across the EU for the anti-coercion instrument to become reality?

Jonathan Hackenbroich: Yeah. I think the Ukraine war is certainly having an impact on these discussions. As I mentioned earlier, this is obviously a very exceptional situation where Putin talks about eradicating a country, a European country off the map of the world. And in such a situation you find consensus. But I think there's a growing realization among many members states that's not to be taken for granted and that many situations are going to be more gray zone and less clear, less flagrant violations of international law and so forth and you still need to be capable of acting. So I think a lot of them are at least contemplating this and considering this very actively, and that this might be very helpful. And some of them, I think certainly in eastern Europe are also... I mean, Russia's invasion in Ukraine is a strong reminder of how geopolitical the world has become and how difficult and much less rules-based but much more power based international relations are becoming. Having said this. I mean, and we've seen this in our conversation here, there are important things to consider on this instrument and important risks involved. And so it'll be a discussion. I think my sense is that it could go more quickly than we think in European Union terms of law making at least, so that we still this year, well this year, I mean, maybe even by the summer, there could be a first position by the council of member states. That's where the member states sit and the European Parliament as well. And those are the two co-legislators that now have to decide basically. So I think by the end of the year, maybe early 2023, this instrument could be in place, but of course, subject to discussions between the member states.

Jill O'Donnell: Okay. So I want to come back then to something you just mentioned, your view of the world. And you do a lot again of thinking and writing about this at the European Council on Foreign Relations. And so you, a moment ago, described the world as less rules-based, more power-based. And I had seen in a recent Twitter thread that you wrote, quote, "Economic coercion is the new language of great power politics." And we're now in a time where I think a lot of people are looking at globalization with some skepticism and revisiting the assumption that greater economic integration can lead to a more peaceful world because we see the integration of global supply chains. And that perhaps there's a downside because it creates more options for countries to pressure each other, which was what we've been talking about here. But I want to ask you, are there other factors as well that led you to this conclusion right now, that when you look at the world, you see that economic coercion is the new language of great power politics? Just walk us through what has led you to make that assessment.

Jonathan Hackenbroich: I mean, it's empirically, looking at how recent conflicts between countries have played out, almost always it involves a sort of a strong... has a strong economic dimension; one of pressure, one of also positive incentives. I would include that. Maybe my statement would've been slightly more correct if I had said economic statecraft, economic carrots. The way we conduct our trade policies and try to fund new trade agreements, where that still happens, is very much driven... And again, this has always been the case to a degree, but now much more so driven by geopolitical calculations, counterbalancing, diversification of supply chains and not overly being independent on any one supplier, country, market. And, of course... And purely geopolitics, who do you draw into your orbit economically speaking, and into your supply chains? So all of that is part of it. And purely also the assessment that due to the fact that nuclear weapons exist, and many societies including the American one are tired of war, that the next thing... And there aren't that many tools we have in foreign policy. Do we have diplomacy? I mean, very broadly speaking, you have diplomacy, which is the best option, obviously, economic statecraft and military options. But if you need to respond to a country building a nuclear weapon, for instance, like Iran, if you need there's urgency of strong political dynamic. You need to show action. You need to demonstrate that you're acting, that you're punishing, or that you're incentivizing a certain behavior. You almost inevitably turn towards sanctions even to a degree, or towards economic means, at least. And I would even truly argue that way too often. And that these tools get used, too often stay in place, and that yes, globalization is fragmenting. In a way it's... I mean, it's not funny, so that's not the right word. But it's really interesting and curious to see that we've been talking about decoupling from China for so long. And that's certainly happening in some sectors, high tech sectors. And now all of a sudden, we're in a situation where there's a rapid decoupling from Russia happening at the same time of all like G7 economies largely, and certainly for US and European economies. And you're getting more and more to a world where you're wondering, is this going to be a much more fragmented world, or maybe rather much more polarized world with different axes, different ways of cooperating and using asymmetric dependencies, economic dependencies to get to this or that goal? So all of this plays a role in any case and my thinking and our thinking on economic statecraft and economic means being used for political goals.

Jill O'Donnell: Okay. So a few more questions here to round out or discussion on this; one has to do with the world trade organization and how it might view the anti coercion instrument. Should it become reality? This is an organization of rules. And as you've just discussed, kind of the fragmenting of globalization. And I wonder how far rules can go in a world that still consists of sovereign states. And the WTO, as I said, is an organization of rules, as you know. So the WTO, as you've pointed out, is designed to determine whether a particular trade measure violates a certain trade rule, not whether a country is using a particular measure to exert economic pressure to try to get a government to alter its choices in another policy area. So again, it gets to kind of the why behind the usage of a particular, in this case, trade tool. So it's not really set up to deal with necessarily economic coercion, but how do you think the WTO would view the ACI? Would it be consistent with WTO rules, or how does that fit in the WTO context?

Jonathan Hackenbroich: Yeah. I mean, definitely also a good question. And this, in my view, goes back to what I've been saying, that what we're seeing is that ever... Well, at least an increasing share of world trade is simply not rules-based anymore, or at least primarily not rules-based, but power-based. And I would argue that a good power of trade relations between the US and China, for that part that's true. Now, we're adding Russia to that for sure. And so the question is... And as you were saying the WTO is, was built at a time when this was conceived for a different purpose, basically, and to avoid precisely that. So I think when it comes to the anti-coercion instrument, at least the philosophy, the use philosophy on this, and also how we thought about it, was that there is WTO law and the EU will continue to respect that 100%. Or if not, we'll submit to the processes in place to correct it and so forth. But WTO law doesn't exist in a limbo and isn't everything there is an international law. There is also a broader public international law, which prohibits the interference with the sovereign choices of countries and states and the exercise of pressure to change policy. So that's the philosophy that where there is such a flagrant violation of international law, the EU still has a right to counteract that, not under WTO law, but under broader international law, which is the less generalists if of broader international law context, in which also WTO law is embedded. And I don't know exactly what the WTO would say of this instrument. But I think if there were cases on economic coercion brought to the WTO and if there were at least panel decisions on that, I think that would be something that would be very good. I think the EU is not the actor most suspected of wanting to erode the WTO. I think this is mostly, or purely actually, a reaction to others not playing by the rules anymore, especially China and Russia.

Jill O'Donnell: That is a perfect segue into my next question for you, which is based on a very interesting comment that you and your co-author Pawel Zerka made in your report that you published last June, June 2021, called Measured response: How to design a European instrument against economic coercion. And we'll put that in our show notes here for our listeners. But I want to quote from that paper, you wrote quote that, "Europeans are facing a dilemma. Should they aim to become as skilled in the art of weaponized interdependence as other great powers? Or should they stick to their commitments to free trade and the rules-based order, trying to establish an international framework instead?" And you went on to suggest that it might be possible for the EU to do both things. So I'd just like to ask you to expand on that and reflect on maybe how that could work in practice.

Jonathan Hackenbroich: Right. And it's a difficult balance to strike or a very fine line to walk, but the idea really is avoiding to be overly protectionist. You need to avoid things like that the SCI could be used for special interest, for instance, very important. But that you say that whenever possible, and wherever still existent, obviously, the EU will follow everything there is under the WTO's system. This will be 100% trade under the rules that we've all jointly, especially with the US and Europe, have put in place, with the establishment of the WTO and so forth. Where there is a grave deviance, or a grave violation of other rules of international law, of fundamental international law, I mean, and precisely the rule of not non interference in the sovereign choices of countries through an economic means, the EU simply has to have something in the back of its hand. And still with lots of offerings, as I described. And still with the hope that most of these situations would still get resolved through dialogue. But in the back of their hands, Europeans I think increasingly feel like they need something just in case. And in those cases, then they need to be able to use countermeasures and to also... But only in response and only reciprocally and in proportionate manner, with a proportional response, be able to also use the economic links that bind them with the third country that's coercing them and be able to punish it for it.

Jill O'Donnell: Okay, Jonathan, thank you. This is the last question I ask every guest on this podcast, and that is, what are you reading? What is something in particular you've read lately about trade or global commerce that's been especially interesting to you?

Jonathan Hackenbroich: I'm really looking forward to reading, as soon as we can actually know what the war in Ukraine is doing to the international trade order and how it might change it. But I think it might be still very early on. But a book that just got published and that I've read enough of to know that it's absolutely recommendable and really good, is Nicholas Mulder, The Economic Weapon: The Rise of Sanctions as a Tool of Modern War. Literally got published about a week ago and it is mostly sold out. But I got myself an E-book and it's just fascinating. It's the history of when did sanctions work, and mostly when they didn't work, and which sanctions, trade sanctions, financial sanctions, and so forth. It's a really great book.

Jill O'Donnell: That sounds incredibly timely. Wow.

Jonathan Hackenbroich: Absolutely. Yeah.

Jill O'Donnell: Jonathan Hackenbroich, again, thank you so much for visiting with us on Trade Matters today and walking us through what this tool looks like, how it's being shaped, and a European perspective on the world. We appreciate it very much.

Jonathan Hackenbroich: Thanks so much for having me and for the invitation. Thank you.