When the Target Fights Back

• In Event: Global Supply Chains

Abstract

When exposed to economic coercion, why do some target states choose to escalate a conflict by retaliating instead of acquiescing or ignoring it altogether? Whereas many scholars examine economic coercion as tools to be used against “rogue” states, economic pressure applied by partners within shared GVCs represents a fast-growing form of conflict in the 21st century as a substitute to military action. Moreover, GVC centered economic interdependence is distinct from that based on traditional trade, making it plausible that these distinctive economic relationships impact actors in distinct ways. In this paper, I use prospect theory to show that decisionmakers are influenced by their perceived position in GVCs, relative to the sender, in formulating their response to economic pressure. When a target’s key industries are more dependent on the sender within their shared GVCs, its leaders are more likely to escalate conflicts. This asymmetry in dependency makes policymakers see themselves as strategically disadvantaged. The prospect of losing the sender’s less replaceable GVC inputs predisposes them towards more risk-seeking behavior. By contrast, when a target holds relative dominance, its leaders are less likely to risk conflict escalation. They perceive themselves as occupying a superior strategic position and will act in a relatively risk- averse manner to avoid potential losses. For them, the opponent’s inputs are easier to replace and, as a consequence, the incentive to retain them is less meaningful relative to the risk of conflict escalation. I use a process-tracing method and within-case congruence tests to conduct in-depth case analysis on two contemporary East Asian cases: the 2018 Japan-South Korea trade conflict and the China-South Korea conflict over THAAD.

Author

• Phoebe W. Moon, Mercer University