Clausewitz famously observed that war is the continuation of politics by other means. Today, trade is becoming the continuation of war by other means.
You and your business are likely to be conscripted, if you haven’t been already, so understanding how to play this modern version of the great game is fast becoming essential for every business leader.
“The weaponization of trade is effectively 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 who co-authored the book The Weaponization of Trade: The Great Unbalancing of Policy and Economics.
MOSCOW, RUSSIA - JUNE 12: People visit a newly opened fast food restaurant in a former McDonald's ... [+]
The use of trade as coercive tool for achieving policy aims is nothing 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 becoming integrated into the military strategies of great powers such as the United States, China, and Russia.
You’re in the army now
The Western response to Russia’s invasion of Ukraine offers a poignant example.
In the six months since the war began, the United States, United Kingdom, European Union, and their allies not only imposed what they hoped would be crippling sanctions on Moscow (they were not), but also used soft power to pressure companies into pulling out of the Russian market.
“Social media has allowed nations to mobilize the rhetoric of economic warfare rapidly and in a coordinated way,” Harding says. “You can start to incorporate trade and trade rhetoric into a national strategy. That turns trade itself into a matter of public discourse, and therefore politicizes and weaponizes it.”
Within weeks of the invasion, large U.S. and European corporations suspended their Russian operations or pulled out of the country altogether. Brands from Apple to Zara closed their stores, leaving Russian malls looking like something out of Flint, Michigan. McDonald’s went ever farther, selling its Russian stores. Popular streaming services such as Netflix blocked Russian users, while Disney suspended the release of new movies in the country. Airlines suspended flights.
Even more was going on behind the scenes.
Credit card companies blocked Russian transactions. International shipping firms cancelled or suspended contracts with Russian customers. And suppliers stopped providing goods and services to Russian companies. Vkusno & Tochka, which purchased McDonald’s 700 eateries, found it couldn’t even get French fries and had to remove them from its menu.
“Being an economic actor now makes you a player in conflicts such as this. All of a sudden, you’re carrying for the flag for your nation,” says Harding. “Corporations are becoming foot soldiers in these conflicts because they are actually implementing the strategy that has been developed and put in place by national security and defense professionals.”
Pawns in the game
National security is another arena in which corporations have been enlisted as combatants – nowhere more so than in the telecommunications sector.
Concerns about the surveillance potential of Chinese 5G equipment prompted the Trump administration to shut Huawei, one of the world’s leading suppliers of such technology, out of the domestic market – and to pressure allied nations to do the same.
“Trade has become a security threat, and that means you can become a national security threat as a company,” Harding cautions, adding that geopolitical competition between the United States and China has affected businesses in other ways as well. “You could be a business that has been successfully operating in China for some time, then suddenly find yourself constrained by domestic political policy. You may be forced to relocate your manufacturing facilities or find new business partners.”
Trump pressured Apple to do both of those things. But policy decisions like these can be reversed or modified with little warning 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’m not thinking about a just-in-time supply chain anymore, I’m thinking about a just-in-case supply chain,” she says. “I have to hold back on risk grounds, so I suddenly become very risk averse.”
Knowing your place
Harding recommends that businesses keep their supply chains as lean and as flexible as possible. Friendshoring – moving production to diplomatically friendly or allied foreign locations – can also provide manufacturers with at least some protection from the varying vicissitudes of both domestic and foreign policy.
But Harding says that, for most businesses with international operations and many without, there is no escaping their role as a foot soldier in today’s conflicts.
As a leader, that will require 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 plans with optionality so that you can respond rapidly to new developments.
Decision-support techniques like red teaming and scenario planning can help you learn to think and plan strategically.
“So can cultivating a working understanding of the role of economics as a domain of warfare,” Harding adds. “You need to understand the geopolitical framework, because it is now an existential threat to the way in which you do business.”
