Memo on an “economic article 5” to counter authoritarian coercion

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The world’s democracies need a way to counter the coercive economic actions of authoritarian governments, say Ivo Daalder and Anders Fogh Rasmussen.

Increasingly, authoritarian countries are using economic coercion against democracies. In recent years, the economic coercion exerted by China on Lithuania and Australia is a striking example. Russia uses economic leverage to achieve geopolitical goals, including militarizing its natural resources. The purpose of such coercion is to bend the will of democratic countries. It is a test for the free world.

In response, we offer an economic article 5 between democracies to counter authoritarian coercion.

Our proposal is inspired by Article 5 of NATO, which stipulates that a military attack against one ally is considered an attack against all. The objective is to produce the same deterrence and solidarity in the economic field between democracies that NATO produces in the security field.

How would such an economic mechanism work? One solution: an international grouping, or “alliance of democracies”, could meet and agree on such a framework, possibly through the Democracy Summit that US President Joe Biden is convening. Other configurations are possible, as discussed below.

Once enacted, a democracy subject to economic coercion by an autocracy could invoke Economic Article 5 to gain unified support from other democracies. Indeed, it would act first as a deterrent, then as a coercive retaliatory measure and finally as a longer-term proactive element.

The deterrence would be immediate. Autocracies would face the unified economic strength of the democratic world, a grouping of economies representing well over 60% of global economic power. Indeed, the symbolism of such solidarity would be a powerful deterrent. Bullies react to strength and exploit weakness. The possibility of a coordinated response would make them think twice before acting. This is the general objective of the instrument: to prevent economic coercion from occurring.

Second, the joint response must have teeth if deterrence fails. This would move beyond statements of support to commensurate retaliation. Not only governments, but also individual businesses have been subjected to authoritarian coercion; acquiescence has often been the result. Yet the extraordinary withdrawal of the private sector from Russia in response to the invasion of Ukraine shows the increased willingness of businesses to rise up. Anyway, as mitigation measures, lines of credit and alternative (democratic) supply lines should be included in an economic article 5 to help companies adapt their supply chains if necessary .

Finally, such an economic article 5 is a longer-term opportunity to strengthen commercial ties between democracies. The longer-term answer to authoritarian economic coercion could be a move towards a common market of democracies, which could include supply lines for sensitive and critical infrastructure between members of such an alliance of democracies. It would also lead to a long-term inoculation of authoritarian economic coercion.

In conclusion, the democratic world needs a way to deal with authoritarian actors in a position of strength – the economic strength it inherently possesses. It’s time to tell bullies that if they poke one of us in the eye, we’ll all poke back.

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