The overarching question imparting urgency to this exploration is: Can U.S.-Russian contention in cyberspace cause the two nuclear superpowers to stumble into war? In considering this question we were constantly reminded of recent comments by a prominent U.S. arms control expert: At least as dangerous as the risk of an actual cyberattack, he observed, is cyber operations’ “blurring of the line between peace and war.” Or, as Nye wrote, “in the cyber realm, the difference between a weapon and a non-weapon may come down to a single line of code, or simply the intent of a computer program’s user.”
Robert Belfer (middle right) joins Nicholas Burns (seated to his right) and Aditi Kumar (front left) in a meeting to discuss the strategic focus of the Economic Diplomacy Initiative with the EDI Student Working Group.
The Economic Diplomacy Initiative is not currently active. Stay tuned for Belfer Center updates.
The Economic Diplomacy Initiative aim is to provide analysis and recommendations to policymakers on challenges at the intersection of economic policy and national security. From traditional economic measures, like trade policy, development aid, and economic sanctions, to emerging challenges, like data privacy and competitiveness in artificial intelligence, the project aims to advance our understanding of how national leaders should use economic power to pursue both inclusive growth and national security interests.
The initiative will investigate the challenges that policymakers face in the international economic environment, including:
- Negotiating the rules of the international economic order. As economic power shifts from the US to a broader group of economic leaders, how will policymakers set a clear vision for the international economic order, including the agreements, institutions, and infrastructure that facilitate multinational commerce?
- Deploying economic instruments to promote geopolitical interests. How are states using economic instruments – including trade, investment, sanctions, aid, and monetary policy –to achieve national interests? How should policymakers respond to other nations’ use of these instruments?
- Promoting competitiveness in critical economic sectors. In an era of unprecedented global competition, how can policymakers support competitiveness and innovation in critical sectors, such as energy, finance, artificial intelligence, telecommunications, and next-generation commodities?
There is perhaps no better example of economic statecraft, and its dual mandate to promote growth and security, than US economic policy in the aftermath of WWII. The United States invested billions of dollars through the Marshall Plan to rebuild war-ravaged European countries to not only contain the threat of Soviet communism, but to build a global economic order based on the belief that liberal economic policy and multilateral institutions would be the tide that lifted all boats. The historical record is equally littered with coercive economic measures — as early as the American Civil War, President Lincoln forced the United Kingdom to sever ties with the South by threatening to block trade and seize British assets. During the Cold War, the United States experimented with various embargos to deter the Soviet Union while using aid and trade to compete with the Soviets throughout the post-colonial world.
The idea of economic policy as an instrument for achieving strategic objectives is thus not new. What is new, and evolving, is the number of nations with the capacity to wield economic power, and the interconnectedness and complexity of global economies that enable a more diverse and potent arsenal of economic tools. China, which barely had a GDP of $1 trillion twenty years ago, today envisions investing $1 trillion in its Belt and Road Initiative. The level of technological sophistication and reach of the global financial system now allows the United States to surgically target the assets of 11 Russian oligarchs in response to the invasion of Crimea, rather than enforce blunt sanctions impacting the average Russian citizen.
In the face of these structural changes, policymakers require a new vision for how to effectively deploy economic tools in the foreign policy arena. With more state actors wielding economic power in meaningful ways, how do we resolve competing visions of the future of the global economy, the costs and benefits of open markets, and the role of multilateral institutions? How can nations use economic tools to respond to today’s pressing challenges, like mass migration, terrorism, and climate change? Given globalized networks for trade and investment and the multinational structure of corporations, how can national policy achieve growth and security? What are the disruptive forces that could fundamentally reconfigure the economic system and render current policy tools ineffective? These are just some of the questions that motivate our work on this initiative.
Principals
Student Working Group
The Economic Diplomacy Initiative aims to investigate the critical role that economic relationships play in enhancing global security. Today, as nations seek to limit the human and economic costs of the transnational COVID-19 pandemic, global policy coordination is more important than ever. Synchronized monetary, fiscal, and trade policy across major economies will be key to stabilizing the global economic outlook. At the same time, policymakers must reconsider coercive economic measures like sanctions and trade barriers, which may have sound geopolitical aims in normal times but risk exacerbating the crisis.
Our weekly COVID-19 and Economic Diplomacy tracker looks at policies that impact the coordination of international governments and central banks, ongoing commentary and analysis, and asks what these turbulent times mean for economic diplomacy.
Read the COVID-19 and Economic Diplomacy Trackers
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Oct 22: ‘Eurozone Fiscal Deficit Nears €1T’
In this week’s update on COVID-19 and Economic Diplomacy: Eurozone governments fiscal deficit nears €1T. The Chinese economy will be the only major economy to grow this year as the U.S. struggles to negotiate a fiscal stimulus bill.
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Oct 16: ‘Pandemic wreaks lasting damage on living standards’
In this week’s update on COVID-19 and Economic Diplomacy: The IMF states that austerity isn’t needed and that the pandemic will wreak lasting damage on living standards. Eight million Americans have fallen into poverty as Cares Act aid runs out. Zambia is likely to be the first African country to default due to the pandemic.
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Oct 9: 'Pandemic’s Impact Far From Complete’
In this week’s update on COVID-19 and Economic Diplomacy: Fed Chair Jerome Powell states the need for more fiscal stimulus. Spain announces plans on how it will use the EU recovery fund. Foreign investor demand for Chinese assets raises prospects of the renminbi becoming a currency reserve.
-
Oct 2: ‘Poverty in Asia will Rise for First Time in 20 Years’
In this week’s update on COVID-19 and Economic Diplomacy: Eurozone’s economic rebound shows signs of slowing. Poverty in Asia will rise for the first time in 20 years. A Federal Reserve survey found inequality increased during 2016-2019.
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Sept 25: 'Global Worker Income Fell by 10%'
In this week’s update on COVID-19 and Economic Diplomacy: Global worker income fell by 10% equating to a $3.5 trillion loss. Without fiscal support, the U.S. economic recovery is at risk while the ECB argues to make the recovery fund permanent.
-
Sept 10: ‘Slowing Eurozone Recovery’
In this week’s update on COVID-19 and Economic Diplomacy: Eurozone recovery is beginning to slow. China announces its “dual circulation” policy, and major emerging economies struggle to respond to the pandemic.
-
Sept 3: 'Shrinking Emerging Economies’
In this week’s update on COVID-19 and Economic Diplomacy: The eurozone slides into deflation with a headline consumer price inflation of -0.2% and emerging economies' GDP shrinks significantly.
-
Aug 27: ‘A Half-Finished Bridge'
In this week’s update on COVID-19 and Economic Diplomacy: The Fed announces changes to its policy framework. The UK exceeded £2 trillion in public debt and GDP is expected to increase; however, labor market weaknesses threaten mass unemployment. The pandemic has only worsened Latin America's economy.
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Aug 20: ‘Pandemic Will Have Uneven Impact’
In this week’s update on COVID-19 and Economic Diplomacy: Experts are concerned that the U.S. economy could struggle to recover as states face a $555 billion budget shortfall. EU employment fell a record 2.6% in the second quarter.
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Aug 13: ‘U.S. and UK Face Job Crisis’
In this week’s update on COVID-19 and Economic Diplomacy: The U.S. unemployment rate fell to 10.2% while the UK is in a recession and sheds 750,000 jobs. Africa is vastly undercounting the number of Covid-19 cases throughout the continent.
-
Aug 6: 'An Economic Sinkhole, Not Pothole'
In this week’s update on COVID-19 and Economic Diplomacy: U.S. GDP fell 9.5 percent in the second quarter, and Congress has yet to negotiate a relief bill before August recess begins next week. Argentina reaches a deal with creditors while Europe shows signs of economic recovery.
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July 30: ‘GOP Unveils Pandemic Response Plan’
In this week’s update on COVID-19 and Economic Diplomacy: The GOP unveils its pandemic response plan while Europe show signs of slowly recovering from the economic fallout of Covid-19.
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July 23: ‘A Deal for Europe but not for the U.S.’
In this week’s update on COVID-19 and Economic Diplomacy: Europe reaches a deal on a recovery fund while the U.S. continues to struggle to devise a budget plan.
-
July 16: ‘Uneven Economic Response’
In this week’s update on COVID-19 and Economic Diplomacy: China returns to growth while Europe begins negotiations over a recovery fund. The effects of the pandemic are disproportionate based on gender, race, and education with experts arguing to tie unemployment benefits to the unemployment rate.
-
July 10: ‘Worsening Global Projections’
In this week’s update on COVID-19 and Economic Diplomacy: The U.S. debates the most effective stimulus policies as the country surpasses 3 million coronavirus cases. The EU slashed expectations of growth to 8.3 percent. Developing economies may ow less debt to China than previously thought.
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July 2, 2020: ‘Not So Fast’
In this week’s update on COVID-19 and Economic Diplomacy: Unemployment decreased again, but doesn't yet capture renewed shutdowns across the U.S. The Federal Reserve considers forward guidance and yield curve control. Germany makes a concession on the European recovery fund.
-
June 26, 2020: ‘Going It Alone?’
In this week’s update on COVID-19 and Economic Diplomacy: Multilateralism is in short supply in the world's response to COVID-19, compared to the financial crisis. The Federal Reserve, the world's reluctant central bank. Europe asks how to pay for its stimulus measures. The IMF revises down its forecast for global growth.
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June 18, 2020: ‘Infrastructure Week?’
In this week’s update on COVID-19 and Economic Diplomacy: The Trump administration considers infrastructure spending, and the Federal Reserve starts buying corporate bonds. Negotiations on the European recovery fund continue. Concern about challenges facing emerging markets continue to grow.
-
June 11, 2020: ‘Surprise! Jobs.'
In this week’s update on COVID-19 and Economic Diplomacy: Unemployment numbers were surprisingly positive, and the Federal Reserve continues its accommodative stance in response to the crisis. Germany unveils a fiscal stimulus to start the recovery with “a boom.” Challenges for emerging markets are growing, but turmoil in lending markets has abated for some countries.
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June 4, 2020: ‘Buy Buy Baby’
The Economic Diplomacy Initiative is launching a weekly tracker featuring major developments in the global economic response to the COVID-19 crisis. This week: The U.S. withdraws from the WHO. What’s next for asset purchases at the world’s central banks? European fiscal policy emerges. And poverty and hunger crises join financial turbulence on the list of emerging market risks.
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How is the U.S. Federal Reserve Responding?
The Fed’s response is directed toward achieving three goals: preventing financial markets from breaking down and magnifying the crisis; supporting domestic businesses through economic turbulence which could result in wide-spread bankruptcies; and ensuring that foreign central banks in major economies have access to dollar liquidity.
-
How Have European Central Banks Responded?
As European nations react to the spread of the novel coronavirus, leaders across Europe, from the European Central Bank, European Commission, and national governments, are deploying a host of policy tools to contain the economic fallout.
-
Oct 22: ‘Eurozone Fiscal Deficit Nears €1T’
In this week’s update on COVID-19 and Economic Diplomacy: Eurozone governments fiscal deficit nears €1T. The Chinese economy will be the only major economy to grow this year as the U.S. struggles to negotiate a fiscal stimulus bill.
-
Oct 16: ‘Pandemic wreaks lasting damage on living standards’
In this week’s update on COVID-19 and Economic Diplomacy: The IMF states that austerity isn’t needed and that the pandemic will wreak lasting damage on living standards. Eight million Americans have fallen into poverty as Cares Act aid runs out. Zambia is likely to be the first African country to default due to the pandemic.
-
Oct 9: 'Pandemic’s Impact Far From Complete’
In this week’s update on COVID-19 and Economic Diplomacy: Fed Chair Jerome Powell states the need for more fiscal stimulus. Spain announces plans on how it will use the EU recovery fund. Foreign investor demand for Chinese assets raises prospects of the renminbi becoming a currency reserve.
-
Oct 2: ‘Poverty in Asia will Rise for First Time in 20 Years’
In this week’s update on COVID-19 and Economic Diplomacy: Eurozone’s economic rebound shows signs of slowing. Poverty in Asia will rise for the first time in 20 years. A Federal Reserve survey found inequality increased during 2016-2019.
-
Sept 25: 'Global Worker Income Fell by 10%'
In this week’s update on COVID-19 and Economic Diplomacy: Global worker income fell by 10% equating to a $3.5 trillion loss. Without fiscal support, the U.S. economic recovery is at risk while the ECB argues to make the recovery fund permanent.
-
Sept 10: ‘Slowing Eurozone Recovery’
In this week’s update on COVID-19 and Economic Diplomacy: Eurozone recovery is beginning to slow. China announces its “dual circulation” policy, and major emerging economies struggle to respond to the pandemic.
-
Sept 3: 'Shrinking Emerging Economies’
In this week’s update on COVID-19 and Economic Diplomacy: The eurozone slides into deflation with a headline consumer price inflation of -0.2% and emerging economies' GDP shrinks significantly.
-
Aug 27: ‘A Half-Finished Bridge'
In this week’s update on COVID-19 and Economic Diplomacy: The Fed announces changes to its policy framework. The UK exceeded £2 trillion in public debt and GDP is expected to increase; however, labor market weaknesses threaten mass unemployment. The pandemic has only worsened Latin America's economy.
-
Aug 20: ‘Pandemic Will Have Uneven Impact’
In this week’s update on COVID-19 and Economic Diplomacy: Experts are concerned that the U.S. economy could struggle to recover as states face a $555 billion budget shortfall. EU employment fell a record 2.6% in the second quarter.
-
Aug 13: ‘U.S. and UK Face Job Crisis’
In this week’s update on COVID-19 and Economic Diplomacy: The U.S. unemployment rate fell to 10.2% while the UK is in a recession and sheds 750,000 jobs. Africa is vastly undercounting the number of Covid-19 cases throughout the continent.
-
Aug 6: 'An Economic Sinkhole, Not Pothole'
In this week’s update on COVID-19 and Economic Diplomacy: U.S. GDP fell 9.5 percent in the second quarter, and Congress has yet to negotiate a relief bill before August recess begins next week. Argentina reaches a deal with creditors while Europe shows signs of economic recovery.
-
July 30: ‘GOP Unveils Pandemic Response Plan’
In this week’s update on COVID-19 and Economic Diplomacy: The GOP unveils its pandemic response plan while Europe show signs of slowly recovering from the economic fallout of Covid-19.
-
July 23: ‘A Deal for Europe but not for the U.S.’
In this week’s update on COVID-19 and Economic Diplomacy: Europe reaches a deal on a recovery fund while the U.S. continues to struggle to devise a budget plan.
-
July 16: ‘Uneven Economic Response’
In this week’s update on COVID-19 and Economic Diplomacy: China returns to growth while Europe begins negotiations over a recovery fund. The effects of the pandemic are disproportionate based on gender, race, and education with experts arguing to tie unemployment benefits to the unemployment rate.
-
July 10: ‘Worsening Global Projections’
In this week’s update on COVID-19 and Economic Diplomacy: The U.S. debates the most effective stimulus policies as the country surpasses 3 million coronavirus cases. The EU slashed expectations of growth to 8.3 percent. Developing economies may ow less debt to China than previously thought.
-
July 2, 2020: ‘Not So Fast’
In this week’s update on COVID-19 and Economic Diplomacy: Unemployment decreased again, but doesn't yet capture renewed shutdowns across the U.S. The Federal Reserve considers forward guidance and yield curve control. Germany makes a concession on the European recovery fund.
-
June 26, 2020: ‘Going It Alone?’
In this week’s update on COVID-19 and Economic Diplomacy: Multilateralism is in short supply in the world's response to COVID-19, compared to the financial crisis. The Federal Reserve, the world's reluctant central bank. Europe asks how to pay for its stimulus measures. The IMF revises down its forecast for global growth.
-
June 18, 2020: ‘Infrastructure Week?’
In this week’s update on COVID-19 and Economic Diplomacy: The Trump administration considers infrastructure spending, and the Federal Reserve starts buying corporate bonds. Negotiations on the European recovery fund continue. Concern about challenges facing emerging markets continue to grow.
-
June 11, 2020: ‘Surprise! Jobs.'
In this week’s update on COVID-19 and Economic Diplomacy: Unemployment numbers were surprisingly positive, and the Federal Reserve continues its accommodative stance in response to the crisis. Germany unveils a fiscal stimulus to start the recovery with “a boom.” Challenges for emerging markets are growing, but turmoil in lending markets has abated for some countries.
-
June 4, 2020: ‘Buy Buy Baby’
The Economic Diplomacy Initiative is launching a weekly tracker featuring major developments in the global economic response to the COVID-19 crisis. This week: The U.S. withdraws from the WHO. What’s next for asset purchases at the world’s central banks? European fiscal policy emerges. And poverty and hunger crises join financial turbulence on the list of emerging market risks.
-
How is the U.S. Federal Reserve Responding?
The Fed’s response is directed toward achieving three goals: preventing financial markets from breaking down and magnifying the crisis; supporting domestic businesses through economic turbulence which could result in wide-spread bankruptcies; and ensuring that foreign central banks in major economies have access to dollar liquidity.
-
How Have European Central Banks Responded?
As European nations react to the spread of the novel coronavirus, leaders across Europe, from the European Central Bank, European Commission, and national governments, are deploying a host of policy tools to contain the economic fallout.
A conversation with Yan Xuetong, Distinguished Professor and Dean of the Institute of International Relations at Tsinghua University, on the evolution of U.S.-China digital and technological competition. The event was moderated by Aditi Kumar, Executive Director of the Belfer Center, and Chris Li, Research Fellow with EDI.
A conversation with Henry Farrell and Abraham Newman on the prospects for decoupling between the American and Chinese economies. The discussion was jointly moderated by Aditi Kumar, Executive Director of the Belfer Center, and Ali Wyne, Non-Resident Senior Fellow at the Atlantic Council.
World Bank Chief Economist Dr. Carmen Reinhart in conversation with Lawrence H. Summers and Nicholas Burns on economic diplomacy in the time of COVID-19.
Dante Disparte, Vice Chair and Head of Policy and Communications at Libra Association, Julia Friedlander, Senior Fellow and Deputy Director of the Global Economics and Business Program at Atlantic Council, and Chuanwei David Zou, Chief Economist of Wanxiang Blockchain speak with Aditi Kumar, Executive Director of the Belfer Center about digital currencies and the new direction of money.
The Economic Diplomacy Initiative hosts a conversation with Martin Mühleisen on the International Monetary Fund’s response to COVID-19 and the key decisions and challenges ahead.