Memo on an "Economic Article 5" to Counter Authoritarian Coercion
The world's democracies need a way to fight back against coercive economic actions by authoritarian governments, argue Ivo Daalder and Anders Fogh Rasmussen.
Increasingly, authoritarian countries are using economic coercion against democracies. In recent years, China’s economic coercion of Lithuania and Australia stands out as a prominent example. Russia uses economic levers to achieve geopolitical aims, notably by weaponizing its natural resources. The aim of such coercion is to bend the will of democratic countries. This is a test for the free world.
In response, we propose an Economic Article 5 among democracies to counter authoritarian coercion.
Our proposal is inspired by NATO’s Article 5, which states that a military attack on one ally is considered an attack on all. The aim is to produce the same deterrence and solidarity in the economic realm among democracies that NATO produces in the security realm.
How would such an economic mechanism work? One solution: An international grouping, or “alliance of democracies,” could come together and agree on such a framework, possibly through the Summit for Democracy that US President Joe Biden is convening. Other configurations are possible, as discussed below.
Once enacted, a democracy subjected to economic coercion by an autocracy could invoke the Economic Article 5 to secure unified support from fellow democracies. In effect, this would act first as a deterrent, second as a retaliatory coercive step, 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 percent of the world’s economic power. Indeed, the symbolism of such solidarity would be a potent deterrent. Bullies respond to strength and exploit weakness. The possibility of a coordinated response would make them think twice before acting. This is the overall goal of the instrument: preventing economic coercion from happening.
Secondly, the joint response must have bite if deterrence fails. It would move beyond statements of support to proportional, retaliatory measures. Not only governments but also individual companies have been subjected to authoritarian coercion; acquiescence has often been the result. Yet the extraordinary private-sector withdrawal from Russia in response to the invasion of Ukraine shows the increased willingness of businesses to stand up. Regardless, as mitigating steps, lines of credit and alternative (democratic) supply lines should be included in an Economic Article 5 to help businesses adapt their supply chains if necessary.
Finally, such an Economic Article 5 is a longer-term opportunity to strengthen trade bonds among democracies. The longer-term response to authoritarian economic coercion could be a move toward a common market of democracies, which could include supply lines for sensitive and critical infrastructure among members of such an alliance of democracies. That would also lead to long-term inoculation from authoritarian economic coercion.
In conclusion, the democratic world needs a way of dealing with authoritarian actors from a position of strength—economic strength it inherently possesses. It’s time to tell the bullies that if they poke one of us in the eye, we’ll all poke back.