Economic Coercion and Grey Zone Competition: Reassessing the China-Australia Case

Abstract

Economic coercion is recognized as a political and policy challenge for global leaders. Yet a recent important case, Beijing’s use of coercion against Australia in response to bilateral political tensions, has resulted in a ‘consensus view’ that China’s coercion efforts failed in two ways: total costs to Australia’s economy were small, and Canberra did not change any pre-existing policies that triggered the coercion. This claimed failure was largely attributed to the ability of markets to adjust to coercion. While accurate in significant ways, the current consensus view of the Australia-China coercion case contains important gaps that underplay both the economic costs and political destabilization effects that coercion had on Australia’s economy and politics. Using a novel geoeconomic and hybrid warfare framework, this article offers new analysis that offers a more complete understanding of this seminal contemporary case of coercion. We draw out policy lessons concerning the sub-national effects of coercion on liberal democratic politics, and argue that weaponization of trade is a key contemporary geoeconomic strategy for grey zone/hybrid warfare, one that requires policy responses at both domestic and multilateral levels.

Keywords: economic coercion, economic security, geoeconomics, hybrid warfare, international trade

JEL Classification: F13, F51, F52, F55