For the past two decades, we have borne witness to a serious democratic recession. One of the main causes is China. In 30 years, China has achieved rapid development under its one-party Communist regime, becoming the world’s second-largest economy and swiftly closing the gap with the United States in the fields of technology and defense. It has significantly expanded its influence on the international stage, appearing to offer the world’s authoritarian states an alternative to liberal democracy as a path to modernity.

At the same time, China has become well-versed in leveraging its economic power to coerce democracies on issues like human rights and Taiwan. We can hope that countries resist this pressure, but every country has its limitations. Thus, the world’s democracies should respond collectively, rather than individually.

The biggest problem for the democratic world is the overdependence of each country’s economy on China. The 2020 figures show that China is the largest, second-largest, or third-largest trading partner of the United States and the vast majority of its democratic allies. So just as security alliances address military threats, the time has come to establish economic alliances to resist coercion arising from values-based conflicts. Think of these alliances as an economic “NATO” for the world’s democracies.

A new economic treaty organization of democracies would aim to engage in collective defense and offensive moves on values-related issues. The alliance would apply the NATO principle of mutual defense to the economic sphere: when China retaliates economically against a member state for standing up for democratic principles, other treaty members would come to its defense to help ease the resulting economic pain by boosting trade, financial aid, or other aid. This would help break the collective-action dilemma that all the democracies—especially smaller ones—have faced so far.

Collective offense would consist of three elements: first, each member state would pass legislation linking human rights to diplomatic ties with dictatorships, conducting regular assessments and issuing executive reports to their respective national legislative bodies. Second, member states would collectively confront countries that violate human rights in appropriate global forums. Third, member states would collectively formulate measures to punish individual cases of human-rights violations.

In response to values-related conflicts with China, mutual economic assistance has emerged in recent years between Japan, Taiwan, Australia, the Czech Republic, Lithuania, and other countries. In April 2022, for instance, the European Union approved 130 million euros in financial aid to Lithuanian companies. China had initiated discriminatory trade restrictions after the Lithuanian government allowed Taiwan to open a representative office that uses the name “Taiwan” rather than “Taipei,” as it does in the U.S. and other countries. But the question remains: How long can these individual acts of mutual assistance last? Will these democracies (including the European Union) be strong enough to maintain their values and mutual support when China adopts a divide-and-conquer strategy?

The world has entered a new kind of cold war. Both President Joe Biden and Chinese General Secretary Xi Jinping have acknowledged as much, even if they have avoided those words. Increasing geopolitical divisions in the wake of Russia’s invasion of Ukraine have brought this conflict into sharper focus. But for the democratic world, the question is not whether to acknowledge this new conflict or what to call it, but rather how to fight and win it. The values-based economic NATO that I propose would represent a fundamental and effective structural response to the challenge that China poses to world democracy.

Photo by Dursun Aydemir/Anadolu Agency via Getty Images


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