IPE and The Security Dilemma

The other day Stephen Walt wrote this about the U.S./Saudi arms deal (that Alex blogged about here):

But my real question is this: if our primary goal is to discourage Iran from developing nuclear weapons, then might this new initiative be counter-productive? Doesn't it just give Iran an even bigger incentive to get a nuclear deterrent of its own? Think about it: if you had a bad relationship with the world's most powerful country, if you knew (or just suspected) that it was still backing anti-government forces in your country, if its president kept telling people that "all options were still on the table," and if that same powerful country were now about to sell billions of dollars of weapons to your neighbors, wouldn't you think seriously about obtaining some way to enhance your own security? And that's hard to do with purely conventional means, because your economy is a lot smaller and is already constrained by economic sanctions. Hmmm....so what are your other options.

This is pretty standard IR security analysis, and probably true as far as it goes. (For those interested, there's a very deep body of research on the security dilemma.) But it got me thinking about applications for IPE. A lot of folks are wringing their hands over Sino-American economic brinksmanship along of number of dimensions including trade protections, exchange rate policy, macroeconomic imbalances, sovereign wealth funds, etc. In the news this week is the Sino-Japanese brinksmanship that is partially about economics, and partially about security. See here for one summary of the situation, here for a discussion of how China's perceived belligerence is helping the U.S. make stronger ties with other Asian states, and here for Drezner marveling over how inept the Chinese appear to be.

(Drezner is surprised by this; I'm not, because Thomas Friedman has recently been writing about how wise and capable the Chinese are. Since Friedman is always wrong about everything, I just assumed the Chinese government would make some blunders in short order. Betting against Friedman: Safest play in town.)

Does any of this conform to the logic of the security dilemma? I think it might. Krugman, for example, has encouraged the U.S. to retaliate against China's exchange rate management by threatening to raise tariffs. He's also suggested that the U.S. threaten similar actions if Germany does not pursue looser monetary policy. He suggests that this is necessary for the U.S. to protect itself against negative externalities being generated by those countries. In other words, Krugman is suggesting using tariffs in self-defense. We wrote a series of posts here discussing why Krugman's "get tough with Chermany" attitude was unlikely to benefit the U.S. in any way. We didn't touch on the logic of the security dilemma, so I'll illustrate it briefly here.

Suppose we do make those threats, and suppose those threats are perceived as credible*. Even further, suppose we get multilateral support from Japan, the U.K., and other leading states in an attempt to pressure China from all sides. Krugman believes that this would lead to major concessions from China. If those threats were issued, had multilateral backing, and were somehow made credible, that might be enough to extract concessions from China. But it might not be. If China feels threatened, it might escalate the situation by further manipulating the RMB, adding new protections for domestic firms, or pursuing preferential trade arrangements with other states. In other words, China may try to preemptively shield themselves from the U.S.'s threat. After all, China might think, the U.S. faces stronger domestic political constraints that we do, so they'll be forced to back down first.

Now it's the U.S.'s turn. Rather than drawing down as we had hoped, China has re-upped. Do we respond in kind? Politicians are not very good at letting sunk costs go, so perhaps we'd respond to China's new policies by doubling down on our own. Rinse, lather repeat. There's a reason these things are called trade "wars", and the reason why we've spent so much time constructing and strengthening multilateral institutions like the WTO is to prevent this type of spiraling from occurring.

The logic of the security dilemma also applies to the China-Japan squabble, as China has responded to Japan's detention of a Chinese national by restricting exports of rare earth materials to Japan. This is already having the effect of moving other Asian nations closer to the U.S. as a means of defense, and may prompt Japan to retaliate in other ways.

This is all pretty basic, but I don't often see the security dilemma applied to IPE subjects. Are there other extensions of the logic that I'm missing?

*Two exceedingly unlikely ifs, I know, but just go with it.