COVER STORY • 3Interview with Henry Farrell, SNF Agora Professor of International Affairs at the Johns Hopkins
School of Advanced International Studies

W

eaponized Interdependence– an Inconvenient Truth of
Globalization

By Japan SPOTLIGHT
Interdependence has been a main part of the positive story of globalization told by so many economists.
It results in win-win relations among nations through trade and investment. However, in the globalized
world today, we increasingly notice that big powers tend to coerce smaller powers to obey theirpreferences by using their network advantages over the rest of the world. Small countries are thus
exploited by big powers through interdependence. Prof. Henry Farrell, co-editor of the book The Uses andAbuses of Weaponized Interdependence (2021, Brookings Institution Press) tells us about this other side to
globalization.
(Interviewed on Nov. 2, 2022)

What Is WeaponizedInterdependence?
JS: Some big countries have started

to use interdependence as aweapon in the globalized world. Is
it the case that well-establishedinformation and financial networks
with hub and spokes are the main
factors behind this phenomenon?

extraordinarily valuable for the central state,
and allows it to keep track of communications
among its allies and adversaries. The second
is what we call the choke point effect which iswhere we see the hub being used effectively
to cut off a business or an individual or
perhaps even an entire country from key
networks that run the global economy. When
you are talking about networks such as thedollar clearing system or such as SWIFT, thiscan have some very serious consequences
indeed as we’ve seen most recently withrespect to Russia.

Farrell: Yes, that is correct and that is ourargument in the book on The Uses andAbuses of Weaponized Interdependence andother work. Abraham Newman and I have a
JS: Even before this hub and spoke
network emerged, some sort ofnew book, Underground Empire: Howasymmetric dependence such as
America Weaponized the World Economy,Prof. Henry Farrell
Japanese dependence uponcoming out next year. It will be translated into
Chinese natural resources seems to be one element
Japanese and published by Nikkei. That will explain our arguments inbehind this weaponized statecraft. Would you concur
much greater detail, and also talk about the history behind this –that this is the background to weaponizedwhich we don’t talk about as much in The Uses and Abuses ofinterdependence or not?
Weaponized Interdependence. Our argument is that we see
weaponized interdependence happening when we see these networks
Farrell: It’s something that we try to distinguish from weaponized
emerging with hub and spoke characteristics and when we see ainterdependence proper. In general, we try to restrict weaponized
great power noticing that more than one of these hubs of theinterdependence to situations where a great power has control over a
network are within their power and within their influence. Then theychoke point – that is something that you simply cannot get anywhere
can use it to exert influence on the global economy more generally
else very easily – and not apply it in situations where a great power
and on everybody who depends upon these networks.
does not have that kind of control. And looking at Japan and China,
We argue in our initial work that this has resulted in two different
although I’m not an expert on the Japanese economy, across manykinds of power. One we call the panopticon effect, which is theareas it would be highly inconvenient for Japan to try and find certain
power of the central state, the state that has the control of the hub,kinds of resources elsewhere – but it would be possible for it to do
to see what everybody is saying to each other. This can behttps://www.jef.or.jp/journal/

Japan SPOTLIGHT • January / February 2023

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that. Similarly you could think about China’s dependence uponoutside energy sources such as coal from Australia. If Australia
denied it access to coal this would be something that would causesome unhappiness in China but it would be able to find the coalelsewhere on world markets. Businesses would become very angry
because they have to pay more for their resources but they would
adapt.
So we restrict the term weaponized interdependence to situations
where you really are being cut off, because you have no very goodalternatives to what is being denied to you. Here I think the dollar
clearing system, which is the foundation of US financial sanctions
power, is a very good example. If you are a global bank that is cut off
from the dollar clearing system then you are no longer a global bank.
By definition you are not in the business of global banking. So, weare talking about networks where a power has control over hubs
which allow it to make threats and when there is no other plausible
supplier.
There are intermediate situations and one of these is the Chinese
dominance of so-called rare earth minerals. China used to dominate
the production of these rare earth minerals and while that is not somuch the case anymore it still dominates the processing of theserare earth minerals and this gives China a certain amount of power tomake some threats in the global economy. But equally, it is not
impossible for other actors to find their own ways of processing rareearth minerals; China has a near monopoly, not because it is superdifficult to process rare earths, but because it is really messy,
environmentally hazardous and dangerous.
If we were in a world where China sought to deliver too strongly
on that threat you would see other actors moving very quickly to findother ways to process these rare earths. One other example here thatis relevant is the relationship between Japan and South Korea overcertain chemicals which are necessary for the production of high-end
electronics. When there was a fight a couple of years ago concerning
litigation in South Korea over “comfort women”, we saw Japan
responding by threatening effectively to withhold supply of thechemicals that were necessary to South Korea’s electronics industry.
That certainly got South Korea’s attention. But equally it was clearthat South Korea would be able to find or create an alternative sourceof supply if it really wanted to. So weaponized interdependence isreally about situations where you have no other real choices but tobe part of this network if you want to be part of the global economy,
and where some other actors have control of the hub. When those
things go together then you get weaponized interdependence, andwhen they don’t, you are probably talking about more traditional
forms of hard-edged bargaining and coercion.
JS: The second type of weaponized interdependence

that would seem to have happened in the global
pandemic is the issue of the WTO addressing export
restrictions on personal protective equipment (PPE).

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Farrell: I think it’s a very interesting and complicated story. The
story of masks is not a story of simple coercion. So we did not see
China saying, “If you do not provide us with this or that concession,
we will not give you masks, we will cut you off from this criticalsupply.” Instead what we saw was China hoarding masks for itself.
China decided that its domestic interests trumped the interests ofother countries.
This was a huge problem for other countries but I equally suspectthat if they had been producers of the masks then we would haveseen a very similar pattern. Because we saw that happening in theEuropean Union where for a brief period of time early in the
pandemic, different member states of the EU were fighting eachother over masks and other kinds of key equipment such as
ventilators. They were blocking and restricting exports to each other.
In the end the EU decided it would handle it at the EU level, but stillreserving the right to place restrictions on exports to the rest of theworld.
If China had said to other countries, “You need to stop recognizing
Taiwan or we will deny you access to these masks”, then perhaps
that would have been weaponized interdependence. Equally it would
have been a difficult strategy for China to have pulled off because it’sa very short-term thing. Once you have the equipment for blowing
out the masks and the “melt” that makes the masks, you canprobably make masks for yourself. So withholding masks would be athreat in the short term but in the longer term others could have
easily outmaneuvered it. So even if China had tried to weaponize
interdependence in this way it would have been a tactic that would
have had a very short shelf life.

Big Nations Have Choke Points
JS: Your book also mentions that the US has somechoke points, in particular information
infrastructures, to cause its allies to obey theirpreferences. Would you agree that big countries suchas China and Russia also have some unique chokepoints?

Farrell: I would put it even more strongly than that. I would say thatchoke points are not unique to the US but that the US has control
over far more of them than anywhere else. And this is a product ofhistory. China globalized very recently in historical terms; its
internationally oriented economy got going in Shenzhen Province
during the 1990s and things really took off after China joined theWTO. So by the time that China had become part of the game, really
all of the important networks of globalization had been created andwere in place. So China managed to move up the supply chain very
quickly in many areas and then it found that when it comes to, forexample, global finance and global information networks, it was in a
disadvantaged position. China started to seek to make its own
information network and to cut itself off from the Internet throughthe great firewall of China, which was somewhat successful. But
China is not yet creating its own separate network of the Internet totry and share with other countries.
Similarly, you see that China is not capable so far in getting othercountries to really adopt its equivalent to SWIFT. China does nothave any equivalent to the dollar clearing system, so at the moment
it is very disadvantaged when it comes to these networks. If you lookat China in raw economic terms as a market it is very definitely aworld power, but when you look at it in terms of these networks it is
not a particularly big contender.
It could be that China is able to improve its position in the futureby changing the way the world economy works – certainly one of thereasons why the US went after Huawei so hard was its belief that thiswas an effort to try and create a global network that China would
have control over. As we move towards digital currencies and green
technology, it may be that China can create new global networks withitself at the center. Equally I think it’s going to be much harder for
China to do this, as one of the reasons why it happened so easily
back in the 2000s was that nobody was really thinking about thestrategic and security implications of these networks. Now, however,people are paying attention to how these networks can give theircreators global power control and coercive power, and so I thinkachieving this kind of dominance will be to be much harder to do in
future. China may probably need to settle for regional power andregional networks rather than global networks.
JS: In that sense, if China invades Taiwan and all

countries impose economic sanctions as in the caseof Ukraine, they would not suffer so much because,
as you said, the US network is more robust than the
Chinese network and so financial sanctions could bemuch more detrimental to China and might work wellin such an instance.

Farrell: I think there is something to that. And certainly you see after
Russia that China is worried about how the US and the EU were able
to effectively freeze Russia’s control of central bank assets. This hascaused huge consternation in China. There have been reports in the
Financial Times and elsewhere of conferences where the Chinese
government has got together with experts who basically told them
there is not much that they can do about this and that China
currently does not have any protections against this. So I think this isabsolutely right.
Meanwhile, during the Russia crisis, the US discovered that thesetools which it used to think were costless can actually be pretty
costly. For example, if you look at the current rise in oil prices, it has
a lot to do with the fact that Russia has been cut off from the global
economy. Clearly not completely but partly, and that has led to anincrease in oil prices and that is something that the US doesn’t likebecause US voters look to the price of petrol when they are filling up
their car in order to decide who to vote for.

It’s very clear that the administration of President Joe Biden has
looked at that and decided it doesn’t like it and so is trying to figureout whether it can impose this kind of oil cap on oil from Russia as
an alternative, which would be less economically harmful. So I thinkthe lesson for China is there are many ways in which China remains
fundamentally vulnerable to the global economy and clearly it istrying to protect itself through the policy of dual circulation. Equally,
the US is discovering that these measures are not necessarily aseasy and costless as it thought and the bigger the country that it
looks to target, then the more likely it is that unexpected things will
happen.

Sectors or Technologies Vulnerable to
Weaponized Interdependence
JS: What sectors of the economy or what kind oftechnologies are more vulnerable to weaponizedinterdependence by taking advantage of chokepoints? Maybe you would say financial information
networks?

Farrell: I would say those are the easiest and most obvious because
we are able to see how they scale and how they become centralized.
If we look at supply chains which are a major topic of concern rightnow, they have become incredibly complex over the last 20 or 30
years and so this may be resulting in hidden vulnerabilities where
there are perhaps choke points in supply chains that nobody isparticularly paying attention to. But if someone stumbles upon thevulnerabilities and uses them, they could have significant
consequences for sectors or even an entire country. We probably
aren’t going to see other sectors that are as centralized as financebut we don’t know for certain. We simply do not have a map of the
global networks that hold the world economy together and thatmeans there may be other potential dangers lurking in there that we
simply have not discovered yet and we may only discover in very
unpleasant ways when it is too late.
JS: You mentioned that the energy sector andtransportation sector may not be ones so vulnerable
to choke points right.

Farrell: That’s right and we’re seeing some interesting testing of that
proposition thanks to Russia. Russian gas supplies to Europe look
like a very clear choke point. We’re talking about a very substantial
economic change happening as Europe suddenly realizes that
Russian control of gas is a threat to it. But equally, it’s more possible
for Europe to find alternative supplies by procuring liquid natural gas
in tankers and so on.
Of course there are all these secondary negative consequences
because Europe starts buying up the excess capacity on global
markets. Prices skyrocket so that other countries aren’t able to buy
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anymore and they have energy problems as a result. The simple gas
pipeline choke point story about weaponized interdependence iscertainly not as clear as it seems. President Vladimir Putin believed
Europe would be forced very quickly to come to the bargaining table
but that has not been the case. This is something that people inenergy markets have been saying for a long while; for example,
Llewellyn Hughes at the Australian National University has argued
that it’s hard to target oil because oil is a fungible resource. That is, if
you get blocked by one supplier there are probably other suppliers
out there. It is a relatively liquid market even if some people were alittle optimistic when they forecast no disruption. It’s clear that there
is more that can be done with oil than people expected, such as
using secondary features such as insurance shipping markets –which is what the US and Europe have tried to do to Russia. Equallyit’s also clear that it’s much harder to use these as a source ofpressure. The oil weapon is much more unwieldy than the financial
weapon when it is used as a means of coercion against global
adversaries.

Where Weaponized Interdependence Is
Adopted for Allies & Not Adversaries
JS: In the case of 5G, the US uses a coercive strategy

not only toward its adversaries but also its allies. Its
allies could react negatively to that kind of coercion
statecraft which would then complicate the political
picture.

Farrell: I would begin by saying I know much less about US
relations with Japan over issues such as 5G than I know about US
issues with Europe over 5G. When it comes to Huawei I think the US
uses coercion against its allies, but in a somewhat less immediately
effective way than it does with other issues that are more directly
financial. For example, we saw the US threatening the United
Kingdom’s access to intelligence under the so-called Five Eyes
agreement. We also saw a lot of political pressure being applied, but
it was not as easy for the US to get countries to comply because it
didn’t have a toolkit developed until it started developing export
controls and what could be done with those.
So I think the export control story is a haphazard one where
weirdly weaponized independence seems to play an important role.
The US starts going after Huawei but the US administration is notclear exactly why it is doing it. There are some people in the US
administration, such as John Bolton, who are very convinced that
China is a threat and they want to destroy it. There are other people,
including probably Donald Trump himself, who just want to make adeal with China over trade and view this as a bargaining chip. They
are thinking about giving back Huawei its role in the world in
exchange for a trade deal, which Trump can bring home and use tosupport his boast that he is the best deal maker of all time. But thenthey start to think about what they want to do with Huawei and they
20 Japan SPOTLIGHT • January / February 2023

start using export controls against Huawei which are these rules
effectively saying that if you have stuff which has more than 25% of
US intellectual property in it you can’t export this to Huawei without
a specific license – and they use this to target the export of advanced
semiconductors to Huawei.
But that isn’t very effective because it punishes the US firms andsome other businesses that have strong links to the US. Meanwhile,
it doesn’t prevent other firms from providing advanced
semiconductor technology to Huawei and so they come up with thisnew version of the so-called Foreign-Produced Direct Product (FDP)
Rule, and then extend this much further. We think that the US needs
to constrain its use of weaponized interdependence, but Trumppeople considered it “a beautiful thing”. So if you are a business that
relies on semiconductor equipment in some way or materials thatare made in the US, you have little choice but to implement theserules. We have seen effective controls being applied against Huawei
which were adapted and used against Russia. Most recently the FDP
Rule was the basis of the most recent measures that the US hastaken against China’s technology industry. This effectively mandates
that you are not allowed to export high-end semiconductors to China
as a general rule unless you have a special license, and good luck ingetting that license.

Avoiding Increased Economic Inefficiency
JS: As you said, private businesses have to be

involved in these cases and that can mean abuses ofcore coercive statecraft, which could then increase
economic costs and perhaps result in a loss ineconomic welfare. Do you see this as a trend in ahigh-risk geopolitical world?

Farrell: I think these are really important questions. For several
decades we saw that private business was effectively the agenda
setter for global economic policy. It established the general sensethat we’re moving towards a world in which private business would
have much more control over more sectors of policymaking. Now weare seeing a very different world in which the story of today is not
one of globalization, it is a story of national security. For example,
Martin Wolf in the Financial Times this morning has a piece where hemore or less says this is possibly going to result in a disaster.
Some private businesses are looking to take advantage of this newworld. One interesting story here is Intel which is very clearly
enthusiastic for the US government to support semiconductor
production, building hubs at home that advantage Intel at theexpense of foreign competitors such as TSMC. So we are seeing
more and more businesses rushing to their home governments anddemanding that they introduce subsidies, protecting security but inways that are advantageous to them rather than to foreigncompetitors. So I think we’re going to see more and more of thatkind of world developing and this is clearly going to result in someeconomic inefficiencies. But the question is – and I think it’s still avery open question – to what extent will this create a race to thebottom where everybody congeals their economy around their own
national champions? To what extent is it possible for governments tocome together to figure out how to deal with some of the risks inways that don’t completely damage and harm their national
economies?
JS: Coercive statecraft can be used increasingly fromnow on as geopolitical risks increase. But we needrules to constrain coercive measures. Would you
agree that without such rules we cannot achieve abalance between economic security and economic
efficiency.

Farrell: I think that’s right and there are different ways in which we
can think about this. One is building up state capacity, and even
before you get to the question of setting rules you need to havesome better understanding of the economy and of how the economy
works. In some ways Japan has been ahead of the US in thinking
clearly about this and in building economic security into its decisionmaking at the national governmental level. This is something that the
US has difficulty with for a variety of internal reasons – the biggest
one being this is not how the US government has been organized in
the past. It has largely separated security and commerce and not hadmuch intersection between the two because of worries aboutprotectionism.
Today the US is less worried about protectionism than it used to
be but it does not have the traditions in the civil service or the
institutions in the civil service that allow it to do this well. So it istrying as best as it can to come up with this. Adam Tooze has beentalking about the “Polycrisis” which is the word he uses for a worldin which there are multiple different crises happening that intersect
in complicated ways which no one can understand. I also like the
British TV series called “The Thick of It” which coined the word
“omnishambles”, which is a description of a situation in which
nobody knows what they’re doing in government and everybody is
pursuing these short-term shortsighted goals and creating a colossal
mess. So I think that you could combine the Polycrisis and theomnishambles to say that we live in a world of “polyshambles”: aworld in which there are incredibly complicated things going on in
the economy but nobody can completely understand them.
There are two different places you could start to build internationalrules. First, I think we’re seeing some movement in making rules
among allies. There is some recognition in the US that it needs toconsult more with allies about this need to create a modus vivendi.
The US still often expects its allies to take whatever nasty medicine
the US provides and to shut up. So, for example, the somewhat
protectionist way in which the US introduced measures under the
CHIPS and Science Act or when we talk about green technology
under the new Inflation Reduction Act – these clearly are not goodfor US allies and the US has not been nearly as sympathetic towards
its allies as it ought to be.
Nonetheless, the US is trying to create forums in which allies cantalk and coordinate and perhaps create some common rules about
export technologies and so on. This could be a forum in whichcountries such as Japan can express its interests and push harderfor them, and perhaps the EU as well. Finally, I see no publicly visible
discussion between the US and adversaries such as China. During
the Cold War the US and the Soviet Union had talked about nuclear
weapons and they figured out rules of the road for how to deal withthem – they figured out all of these mutual arms reduction treaties
and so on. I think the US and China need to start talking about what
are the rules of the road when it comes to these new forms of
economic coercion because if they don’t have some sort ofconversation then bad things can begin to happen and spirals of
distrust can start to develop. I think this is something that the US
has yet to accept in public – perhaps there are conversations
happening in private that I am not aware of.

Rules on Security
JS: So you think that in a post-Ukraine crisis world

there would be such discussions and conversations
to explore some sort of regime or rules on security
between authoritarian countries and democratic
countries?

Farrell: As far as I know we have not got to the point of discussions
about creating those kind of rules. One of the big problems is that
there is no precedent for this. We have pure security organizations
such as NATO, and in a different way the US created bilateralarrangements with Japan and South Korea and its Asian allies. We
have security arrangements among adversaries such as the treaties
between the US and the Soviet Union and we have multilateral
economic organizations such as the WTO. These new issues areright in the middle of all of these spaces. There’s got to be someroom for alliance politics, but also room for conversations between
adversaries and states with different political systems on areas ofmutual interest. There has to be some room for everyone to think
about the economic and security consequences of this new world
but we don’t have any very obvious settings or forums that can beadapted to be the place where these rules are created. That again is
another big challenge – how do you start creating some sort of
informal set of discussions? Do you try to do this in the United
Nations system or elsewhere? I just don’t know and I’ve not seen
any discussion or speculation about this so far but I think it’s a very
important set of questions that we need to start engaging with.
JS: Would China’s Belt and Road Initiative be anothertype of weaponized interdependence encouraged bythis initiative?
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Farrell: I’m not a China expert but the China experts I have talked toseemed very divided about Belt and Road. Some of them think it’s
been a grand master plan to create infrastructure and to lockcountries into relationships that are going to have long-term
consequences, while others see it as being an opportunity for the
Chinese government to hand out money to well-connected
construction companies which are running out of stuff to do inChina. Big construction is linked to the state sector in China and it’san opportunity to hand out goodies to well-connected companies.
Of course, the truth is probably a mixture but I would think there’s
a bigger question that lurks behind this which is the following one. If
you look at US policy back in the late 1990s and early 2000s, clearly
it was trying to create a world economy which was built upon US
values. If you think about the way the Internet was governed, the way
the US pushes the interests of the financial sector globally, it istrying to make a world that is safe for American business. It was nottrying to make this into an instrument of great power projection. The
US simply wasn’t thinking about weaponized interdependence when
it started putting globalization in place. Much of the globalization was
led by business rather than by the US policy infrastructure or by the
US government.
But then it turns out all of these networks have security
consequences suddenly, once you get into a different political age.
Post-September 11 the US government is able to use all these
networks because they are centered on the US. So when I look atthese questions I am probably less worried or less concerned about
whether the Chinese government is planning it this way or not. I
think that may be relevant to specifics but equally we know that the
Chinese government can be really terribly wasteful and inept when ittries to plan the economy. For example, look at the huge amounts ofmoney it has wasted on trying to get advanced semiconductor
production up and running and the con artists who have managed tomake off with billions by persuading this or that provincial
government that they were the people who would set up the thingthat would bring fame, fortune and prosperity, etc.
So I’m less worried about government intent. The question I thinkpeople ought to be looking at is what the practical consequences ofthese networks are being built out and will they become long-termsources of influence. If you think about Chinese companies that areexporting surveillance technologies to other parts of the world now –they may be doing this because the Chinese government is tellingthem to do it, but they may equally just be doing it to make money.
The question is what kind of network results from that, and that iswhere we want to pay attention to much more than intent andcentralized government effort. As I said, I think it’s going to be far
harder to do this on a global scale than it was for the US because
people are thinking about these networks in a different way –everybody is paying attention to whether or not the networks can beweaponized.

Human Rights & Coercive Statecraft
JS: Finally, human rights play a critical role in supply

chains today. Could this be used as weaponizedinterdependence or a source of coercive statecraft?

Farrell: I think we’re going to see an increased focus on this and I
think we could see human rights issues being used as a justification
for weaponized interdependence-type measures. For example,
perhaps when you look at the production of advanced photovoltaics
in the Xinjiang region of China, it’s a focus for both human rights
fears but also security worries by US policymakers who areconcerned that the US may not be able to catch up if China gets too
far out in the lead on producing solar panels and similar types oftechnologies. So I think we’re going to see increased use of humanrights as a justification for measures that also have security andeconomic consequences. Will we see weaponized interdependence
used as a tool for human rights more generally? I’m less certain
about that. I think we’re probably instead going to see a continuationof something which is a little like weaponized interdependence but
also quite different – which is activists and others looking to see
where the choke points are. The choke points very often are big
companies such as Nike and so activists are going to target themalong with consumers if they don’t change the labor practices of
their suppliers. That’s not weaponized independence but it’ssomewhat similar – here it is private activists looking to target thechoke points. I think the limits to this are clear; very often thesecompanies like Nike may not even know how their supply chainswork. There is also a lot of whitewashing of supply chains throughvarious forms of dubious certifications.
I don’t know if this will happen over the longer term but we may
see people trying to use weaponized interdependence to target the
aspects of the global financial system that enable and facilitate
corruption. Governments may to go after the international andfinancial institutions which facilitate corruption much more strongly
and also start to think about green climate change and so on. For
example, when the EU introduced these cross-border carbon tariffs,
they were telling companies in other countries if you produce yoursteel in high carbon intensity ways you will have a hard time
exporting into the EU. The US did not treat this as protectionism, butinstead saw it as something that it could get on board with. So you
could see a combination of more traditional trade tools such as what
the EU is doing and weaponized interdependence perhaps in the
future. But that depends, of course, on a lot of political factors in theUS, such as who wins in 2024 and what the relationship between thepresident and Congress is going to be – all of those questions which
I don’t know the answers to and which keep me up late at night
worrying!
Written with the cooperation of Joel Challender who is a translator, interpreter,
researcher and writer specializing in Japanese disaster preparedness.

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