Crafting Payoffs: Strategies and Effectiveness of Economic Statecraft

Economic statecraft -- the use of economic tools to pursue political goals -- is an important foreign policy strategy for many major powers, and has been an increasingly important tool for China. This book provides a theoretical framework to explain the effectiveness of economic statecraft, focusing on positive inducements, which are understudied relative to sanctions. I argue that effectiveness is influenced by two independent variables: (a) the type of inducement strategy; and (b) the level of public accountability in the target country. I distinguish between two types of economic inducements: subversive carrots, which circumvent established political processes and institutions; versus stakeholder cultivation, which engages with key domestic actors within established political processes and institutions. In addition, effectiveness depends on the level of public accountability in the target country. Public accountability ensures transparency -- via the ability to access information; and exercises oversight -- via the ability to impose domestic political costs on elites for policy decisions regarding the sender state. Testing my theory using the important case of China's economic statecraft, I show that subversive carrots succeed in low accountability countries, but backfire in targets with high public accountability, where it leads to public backlash against China. In contrast, stakeholder cultivation is more likely to succeed in high accountability systems, because it creates domestic political coalitions that are more closely aligned with China's policy preferences. I draw on evidence from field interviews, case studies, and a survey experiment. Using a mix of cross-country case comparisons, within-case process tracing, and within-country variation in inducement strategy as well as public accountability, I examine the cases of the Philippines, Malaysia, Cambodia, Myanmar, Australia, and Japan. In addition, I conduct a survey experiment in the Philippines to test the individual-level mechanisms of public accountability. While this book focuses on China as an important case study, the arguments can be similarly applied to other countries seeking to wield economic statecraft. The findings from this book have important theoretical and policy implications for understanding the conditions under which economic capabilities can be translated into geopolitical influence, and for understanding the role of economic instruments in national security policy

ALL POLITICS IS LOCAL: JAPANESE AND SOUTH KOREAN STRATEGIES TOWARD A RISING CHINA

Japan and South Korea are both American allies who are also economically interdependent on China. Yet, their policy strategies toward a constantly rising China have diverged and converged over the years. Existing theories have not adequately addressed these variations. This paper characterizes Japan and South Korea as middle states, caught in between China and the United States. Unlike milieu-oriented great power grand strategies, middle state policy strategies tend to be reactive and situational, responding first to local and imminent threats rather than abstract, structural threats. A dual threat framework explains why Japanese and South Korean behaviors diverge. Foreign policy depends on the interaction between two sources of threat: the potential systemic threat of China as well as the local threat of North Korea. While North Korea was initially the most imminent security threat for both states, Japan’s sense of a China threat grew progressively more direct, shifting from potentiality to present imminence. It was the localization of the Chinese threat over maritime and territorial clashes, rather than China’s structural rise, that prompted major changes in Tokyo’s security policy. In contrast, South Korea has adopted fluctuating strategies toward China, because threat perception of China is first mediated through Chinese policy on North Korea and how well it aligns with South Korean preferences. National identity gaps also contribute to differing threat perceptions of China. Since 2010, both Japan and South Korea have aligned strongly toward the United States and away from China, but such convergence stemmed from different causal paths. Although changes in domestic political leadership has often been cited as the reason for shifting foreign policies, it remains more a moderating than an intervening or determining variable in state alignment toward China