It is one of the blessings of old friends, as Ralph Waldo Emerson once wrote, that you can afford to be stupid with them. Stupidity is perhaps a harsh word for the general direction of international economic policy in the age of COVID-19 and the Russian invasion of Ukraine, but it is not wholly inapt, either. The idea — increasingly popular among policymakers, particularly in the West — that international trade and investment should predominantly take place between close geopolitical friends is supposedly a solution to a darkening geopolitical environment, but the economic implications could be as disastrous as the rhetoric is slick.
Since we cannot trust all of our trading partners to have our best interests at heart, the argument goes, we should do our best to concentrate our trade and investment where they are unlikely to be threatened by geopolitical manoeuvring. Superficially, there might seem to be something to this idea: China has tried to leverage its weight in international trade to extract political concessions from countries as far afield as Australia and Lithuania. Surely it would be better for countries to concentrate their interests in places where the geopolitical risk of doing business is minimised?
