[Japan’s Voices No.15] Managing the Challenges of the Global Economy Without Breaking It: The Opportunities and Limits of Collective Resilience

In the first five years of the 2020s, we experienced supply chain disruptions caused by various sources, from the pandemic and regional wars to intentional export controls. These are the consequences not only of the world becoming highly interdependent and vulnerable to shocks, but also of the sourcing of certain materials and production capacity becoming more concentrated. The latter creates supply choke points, and these choke point effects and the power of large markets have been leveraged recently for purposes of economic coercion through sanctions, export controls, and tariffs. This “weaponized interdependence” (Farrell and Newman 2019) has become prevalent, with the great-power economic tit-for-tat between the United States and China having grown particularly intense over the past decade. 

In the United States, we see rising concerns over China’s economic weaponization and its drive for technological dominance, and US leaders are facing domestic dissatisfaction from a lack of “good jobs” for the American middle class. The three most recent US administrations under two presidents – Donald Trump (2017-21, 2025-present) and Joe Biden (2021-25) – have opted to target (mostly) China in multiple ways to protect America’s national security through technological dominance and supply chain resilience. To counter China’s supply chain domination and economic coercion, US policy experts have called for “collective resilience.” The term is defined by Victor Cha (2023, 93) as “a peer competition strategy that promises a multilateral response in the trade space to the prospect of economic bullying by the Chinese government.” The US government during this period has applied this general concept to form “counter-coercion” coalitions against China, from the Chip-4 alliance proposal in 2022 and the G7 anti-coercion declaration in 2023 to the Pax Silica in late 2025.

The application of collective security logic to deterrence against an aggressor through retaliatory threats for the sake of maintaining peace in the economic realm, however, can lead to misguided policy prescriptions for the current global challenges on multiple grounds. First, it requires an aggressor to be clearly identified. Although China’s numerous acts of economic coercion are troubling, most Asian economies with dense regional production networks in and around China are reluctant to designate China as their enemy. Moreover, since China’s economic coercion is rarely announced explicitly, it is also hard to decide on the trigger. Second, such government-to-government collaboration, even if it is agreed upon, will fall short without the full engagement of businesses, whose allegiance to nationality is far more ambiguous than that of military units. Furthermore, once sanction measures are applied, businesses with extensive global networks find multiple ways to adjust and circumvent barriers. Hence, these measures will not work without complete cooperation from businesses. Third, such collective resilience could be construed as “weaponization of counter-weaponization.” Not only will such dynamics escalate towards an “arms race,” but these hegemonic conflicts could also lead to massive fragmentation of the global economy. In sum, the risks of these policies range from inefficacy at the minimum to broader economic destruction at worst.  These prospects make most of the global economic community wary.

So then, how can economies around the world strategize against economic weaponization without destroying the prosperity arising from economic interdependence? The answer resides in part in the rules-based economic order.  With the US currently uninterested in leading this cause, small and middle powers are stepping up.  As the country hailed as having “saved the liberal economic order” when it resurrected the Trans-Pacific Partnership Agreement (in the form of the CPTPP) in 2017-18, Japan was the first in line to work actively on this front. CPTPP now constitutes the core of its efforts, attracting numerous new applicants and creating a collaborative scheme with the European Union.

On the other hand, it is vital that businesses and governments pursue economic resilience both collectively and individually. Here, too, Japan’s own efforts after experiencing China's export controls on rare earth elements in 2010 provide a good example. Through source diversification, industrial recycling and many other measures, Japan reduced its reliance on China’s rare earths from over 90% to 50~60% in four years. Ongoing collaboration on critical minerals is another case in point. From the US-led Forum on Reserve Geostrategic Engagement (FORGE) to numerous bilateral agreements crisscrossing around the world, diversification efforts are well underway.

The globalized world economy has long provided a foundation for prosperity as trade and investment through comparative advantage allowed efficient specialization through global value chains. This global regime is now showing signs of fatigue. Economic interdependence creates vulnerability, where lopsided dependence leads to abuse. However, collective resilience in the form of retaliation and countermeasures is not the cure for such malaise. To the contrary, such resilience should come from adopting positive-sum diversification practices and expanding, not shrinking, networks and collaboration to ensure the continued dominance of a rules-based economic order.

References:
Cha, Victor. 2023. “How to Stop Chinese Coercion: The Case for Collective Resilience.” Foreign Affairs. 102: 89–101.

Farrell, Henry, and Abraham L. Newman. 2019. “Weaponized Interdependence: How Global Economic Networks Shape State Coercion.” International Security 44 (1): 42–79.

Saori N. Katada is Professor at the Louis G. Lancaster Chair of International Relations, the University of California, Santa Barbara. She served as the vice president of the International Studies Association and on the editorial team of Review of International Political Economy and an Adjunct Fellow of The Japan Institute of International Affairs

The views expressed in this article are the author's and do not reflect those of JIIA CGO.