Friends Without Benefits
By calling for supply chains to be shifted away from strategic rivals, US Secretary of the Treasury Janet Yellen has implicitly rejected the notion that trade with one's adversaries fosters peace and diplomacy. But that old idea still has much to recommend it.
PRINCETON – Russia’s invasion of Ukraine has challenged the international order, but so has the response from large industrial countries. In a striking speech at the Atlantic Council earlier this month, US Secretary of the Treasury Janet Yellen cited China’s ambiguous response to Russian aggression as a reason to “friend-shore” more production. The idea is that the United States and its partners and allies should take more control over critical supply chains by shifting their trade relations away from strategic competitors.
Yellen’s friend-shoring principle contrasts starkly with the long-term Western orthodoxy that emerged during the Cold War. For decades, US and European leaders pursued a globalization strategy, shaping trade relations on the understanding that previously marginalized or adversarial countries could be brought into a single stable international order through commercial and financial ties. Nowhere was the hope that economic growth would smooth the rough edges of ideological and security conflict more influential than in Germany.
With its policy of Wandel durch Handel (“change through commerce”), Germany has long pursued a trade-first approach to managing relations with Russia, and with the Soviet Union before it. This has always been a source of tension among Western powers. Ever since Ronald Reagan’s presidency 40 years ago, the US has voiced concerns about the impact of Russian-German pipeline projects on transatlantic security objectives. Of course, Germany’s economic and diplomatic engagement also may have softened the Soviet Union’s position by the late 1980s, thus bringing an end to the Cold War.