CGOs in the brave new era of geoeconomics

Jorge Costa Oliveira

The global economic order is shifting, and one of the most significant changes lies in the growing relevance of geoeconomics – the field that links economics with geopolitics.

The study of geoeconomics is particularly important in the context of international trade, which is increasingly less a product of laissez-faire globalization and more an instrument in service of the geo-strategic interests of a nation or an economic bloc.

In some countries, economic activity and corporate operations – including those of private companies – have long been subordinated to the state’s [geo]strategic goals; the most obvious example is China’s Party-State model. In other major economies (Japan, South Korea, Germany), economic policy – including the internationalization of leading conglomerates – is coordinated between the government and these groups.

With the new Trump Administration, we entered a new era of geoeconomics, in which the United States’ international economic relations – starting with trade policy – have become one of the main tools for managing both domestic economic and political affairs.

In this new era, there has been a rise in the use of geoeconomic policy instruments such as sanctions, embargoes, tariffs, restrictions on access to natural resources, control over critical raw material supply chains, control over strategic technologies, and control of capital flows – in line with the increase in coercion and fragmentation in the geopolitics of international trade.

In the realm of international financial geopolitics, we are also witnessing the decline of the U.S. dollar’s dominance – and the corresponding rise in relevance of other currencies (euro, yen, yuan) – along with more state intervention in capital flows.

The domestic economic effects of this intervention in trade and capital flows are already significant: the weakening of the US dollar, the growing importance of cryptocurrencies, challenges for European exporters, a sharp decline in FDI in China, and the relocation of many Chinese companies abroad.

Another sector affected by this new geoeconomic era is the war economy – whether in terms of increased arms production, the R&D that supports it, or the comparative allocation of financial resources – with a resulting reduction in capital available for other, particularly social, purposes.

The growing importance of geoeconomics and rising geopolitical tensions is not just a matter for governments. It has led universities (Johns Hopkins, Dartmouth, Kiel, Stanford) to expand their geoeconomics programs, along with international organizations such as the IMF, the Atlantic Council, and the Milken Institute.

As some analysts suggest, the time may have come for companies with significant exposure to international trade to create a new executive position – the Chief Geoeconomics Officer (CGO).

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