ABSTRACT
Countries form military alliances to deter or defeat a common adversary. The adversary will naturally seek to exploit these divisions to undermine the alliance as a vehicle for collective action. Issues of alliance cohesion are coming into sharp relief as Western allies endeavour to forge a common strategy for dealing with a rising and more aggressive China. Economic disputes over a wide range of issues go back to the beginning of the Western alliance. Inefficient defence spending among allies can also undermine strategic alignment and military capability. Economics matter strategically to military allies for at least three key reasons: their international trade generates security externalities that may bolster enemy capabilities; inefficiencies in weapons procurement lead to wasteful spending; and markets for some goods may generate zero-sum competition that raises costs and threatens strategic alignment. The new transatlantic approach is called ‘de-risking’. It emphasises the separation of commercial and military-related trade and investment.
