A new era has arrived, one made more precarious as China increasingly attempts to reorder the world to its interests while the United States struggles to adapt. In recent years, U.S. conventional statecraft failed to prevent Russia’s 2014 annexation of Crimea; nor did it stem China’s 2015 militarization of the South China Sea or its 2019 abrogation of the 1984 Sino-British Joint Declaration—a pledge to leave Hong Kong’s democratic and capitalist way of life intact until 2047. This does not bode well for keeping the peace.
A new approach is needed. Simply locking China out of a global marketplace into which it was welcomed then integrated is not feasible, making economics an unavoidable and critical element of U.S. statecraft. Indeed, integrating economics into a new naval statecraft could effectively and peacefully contest China’s theory of victory, which aims to supplant the United States and the current rules-based order.
The Navy’s role in warfighting is well known, but less appreciated is its ability to shape the environment in which security, diplomacy, and economics interact. Given comments by Admiral John Aquilino and Vice Admiral William Merz, the Navy may be returning to a more active role in diplomacy.1 It is a role the Navy has performed throughout its history, and it should be applied in a deliberate fashion against China.
For example, Navy disaster response operations in the 2000s produced favorable political changes ashore. Tsunami relief efforts in Indonesia in 2004 began a rapprochement that greatly improved relations and military engagement. Similarly, the Navy and Marine Corps’ response to the 2008 Cyclone Nargis disaster began a chain of events that led to normalized relations with Myanmar. And the much ballyhooed Quad (India-U.S.-Japan-Australia) has origins in naval exercise Malabar.
Another example of what is possible occurred in Djibouti. On the heels of the 9/11 attacks, special forces arrived in Djibouti to support operations in Afghanistan, eventually expanding into a regional counterterror and antipiracy operation. That presence set conditions that kick-started economic growth. By 2019, Djibouti was attracting $200 million annually in foreign direct investment, a 15-fold increase over the 1995–2005 average, and its gross domestic product had grown by 580 percent.2 As U.S. military presence grew, so did trade with the United States, which by 2010 had increased sixfold compared with the average of the nine years preceding the 9/11 attacks. In 2022, Djibouti is a regional hub for shipping, enabled by regional rail and banking connections. Its success underscores how military and economic instruments of national power can support one another.
Southeast Asian nations have been leery of welcoming a more active U.S. presence that might force them to choose between security assurances and lucrative Chinese economic ties. The 2019 U.S. Free and Open Indo-Pacific strategy struck a balance between the two; however, much remains to be done in the economic arena, and the Navy can be the impetus for it.3
An underutilized mechanism for economic statecraft is the Development Finance Corporation (DFC), established in 2018 by the BUILD Act.4 A glimpse of its potential in naval matters occurred with the 2017 bankruptcy of the South Korean company Hanjin. Hanjin’s strategically important Subic Bay shipyard was at risk of a Chinese takeover—until DFC’s predecessor, the Overseas Private Investment Corporation, brokered an alternate deal.5 Unfortunately, this has proven to be a one-off event.
To increase and focus U.S. efforts in economic statecraft, the Navy should assist DFC and the U.S. Agency for International Development in prioritizing resources and investments toward important coastal communities. The Navy also could kick-start a virtuous cycle by structuring port visits and supporting contracting services that foster local economic development, which in turn sustains access to key ports and services.
Such naval statecraft provides an attractive counter to China’s approach, which seeks to create reliance to gain political leverage. Consider its recent efforts to acquire a naval base in Equatorial Guinea. Missing from China’s development model are small and medium enterprises (SMEs), which a World Bank study found create seven out of ten jobs in developing economies.6 Trade diversification and enhanced maritime security at the local level could confound China’s efforts.
Prosper Africa is a U.S. government initiative established in 2018 to match U.S. investors with African businesses and increase trade. Through 2021, it had facilitated 800 deals valued at $50 billion with 45 African countries.7 Thirty-six of these deals were in the aerospace and defense sectors, but neither the U.S. Coast Guard nor Department of Defense participates in Prosper Africa. This misses an opportunity to focus investments on pressing regional maritime security needs: illegal fishing, piracy, and maritime robbery. When it comes to illegal fishing, China may not be the best partner for a nation reliant on the sea, opening channels for naval engagement and overall improved relations with the United States.
With news of a yet another country—Solomon Islands—offering to host Chinese security forces, the need for action is urgent. The Navy must provide an attractive value proposition that contests China’s insurgency against a world order that served many well for decades. This will require a blending of diplomacy, economics, and military presence in a new naval statecraft.
1. On 7 May 2020, Admiral John Aquilino, then–Pacific Fleet Commander, commented on increasing Chinese interference in Malaysian oil survey operations: ìWe are committed to a rules-based order in the South China Sea and we will continue to champion freedom of the seas and the rule of law. The Chinese Communist Party must end its pattern of bullying Southeast Asians out of offshore oil, gas, and fisheries.” www.c7f.navy.mil/Media/News/Display/Article/2180645/montgomery-cesar-chavez-operate-near-west-capella/. A week later, then-Seventh Fleet commander Vice Admiral William Merz commented: ìRoutine presence operations . . . reaffirm the U.S. will continue to fly and sail freely, in accordance with international law and maritime norms, regardless of excessive claims or current events. The U.S. supports the efforts of our allies and partners in the lawful pursuit of their economic interests.” www.c7f.navy.mil/Media/News/Display/Article/2184969/us-navy-maintains-persistent-presence-near-west-capella/.
2. The World Bank, "Data: Djibouti;” The World Bank, 'Foreign Direct Investment, Net Inflows (% of GDP)—Djibouti;' and U.S. Department of Commerce, U.S. Census Bureau, 'Foreign Trade: Trade in Goods with Djibouti.'
3. U.S. Department of State, A Free and Open Indo-Pacific: Advancing a Shared Vision (4 November 2019).
4. Shayerah Ilias Akhtar and Marian L. Lawson, 'BUILD Act: Frequently Asked Questions About the New U.S. International Development Finance Corporation,' Congressional Research Service Report for Members and Committees of Congress No. R45461, 15 January 2019, https://fas.org/sgp/crs/misc/R45461.pdf.
5. Karen Lema, ìPhilippines: Duterte Tells U.S. ‘You Have to Pay’ If It Wants to Keep Troop Deal,' Reuters, 12 February 2021.
6. Daniel F. Runde, Conor M. Savoy, and Janina Staguhn, China and SMEs in Sub-Saharan Africa: A Window of Opportunity for the United States (Washington, DC: Center for Strategic and International Studies, October 2021), 1–3, ; and The World Bank, “Small and Medium Enterprises (SMEs) Finance,” https://www.worldbank.org/en/topic/smefinance.
7. Prosper Africa, https://www.prosperafrica.gov.