China’s Changing Coercive Diplomacy:
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Reassessing the “Dalai Lama Effect” and Beijing’s
HIGH RESOLUTION LOGO
Use of Punitive Economic Measures
Xianwen Chen, PhD 1,2,3
; Johann Osbakk, MSc ; Bjørnar Sverdrup-Thygeson, MSc
1
Norwegian Institute for Nature Research, 2Norwegian Institute of International Affairs, 3Norwegian University of Life
Sciences, 4London School of Economics and Political Science
Abstract
Economic statecraft is a key tool for China, and its punitive edge an increasing
feature of Beijing’s international relations. The automaticity and magnitude of
China’s punitive measures on affected countries’ trade relations have been
significantly overestimated as a result of not fully recognising and accounting for
the extent and variety of Chinese measures of geoeconomic statecraft over the last
decade. This article reassesses the data on Chinese trade diplomacy, in particular
the so-called “Dalai Lama Effect” that suggest that governments receiving the Dalai
Lama experience an average 16.9% reduction in exports to China in the current and
next year. Our analysis based on updated trade numbers finds this to be of
questionable statistical validity, and finds no significant “Dalai Lama Effect” for the
2002-2008 nor the 2002-2014 periods. Employing the framework of coercive
diplomacy, we argue that China’s punitive diplomacy is more light-weight, flexible
and sophisticated than commonly assumed.
Introduction
The rapid rise of China has brought Beijing from the periphery to the centre of the
international system. As such, the question of this rising power’s key interests, and
the means by which it is willing to act to enforce those interests, takes on added
importance (Reilly 2012). All great powers employ sticks and carrots to achieve
political objectives, but how is this fundamental practice of diplomacy conceived in
Beijing? This article focuses on the stick and China’s use of punitive economic and
political measures (Reilly 2012; Fuchs and Klann 2013; Sverdrup-Thygeson 2015).
We examine China’s trade restrictions against states meeting with the Dalai Lama.
Arguing that the current understanding of both the extent and the mechanism of
Beijing’s use of punitive economic and political measures is inadequate, we expose
how a key assumption underpinning the current policy debate and does not hold
up a reassessment based on updated trade statistics.
A key motif in the global debate on China’s foreign policy, and in the discourse on
China’s new assertiveness, is the “Dalai Lama Effect”. This concept was coined by
Fuchs and Klann (2013), and denotes their finding that countries receiving the
Dalai Lama on a high political level are punished economically by Beijing with an
average 16.9 per cent reduction in China-bound exports in the current and next
year. This widely quoted result has been integral to both the academic and public
debate over China’s use of its growing economic power. In particular, this statistical
conclusion has gathered key relevance as country after country has faced the
dilemma of either accommodating official Chinese policies on Tibet and human
rights issues, or else risk to pay a high price in terms of loss of trade.
Figure 1. Reception of Dalai Lama by State Heads: 2002-2008 vs 2009-2014
Methods and Materials
Contact
Xianwen Chen, PhD
Norwegian Institute for Nature Research
Email: Xianwen.chen@nina.no
Website: http://xchen.cf
Phone: +47 984 21 622; +1 307 223 2032
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2,4 2,4
Results
There is no statistically significant “Dalai Lama Effect” between 2002-2008 and
between 2002-2014, when examining a country’s total exports to China. Moreover,
we do not find significant “Dalai Lama Effect” on total exports to China when only
European countries are included.
We have also examined the “Dalai Lama Effect” by commodity category, after
dividing the total exports into ten categories following the Standard International
Trade Classification (SITC). Among the 240 econometric models that have
investigated sectorial exports, majority have returned statistically insignificant
results on the ‘Dalai Lama Effect’. We find negative ‘Dalai Lama Effect’ on some
sectorial exports during 2002-2008 period, and a couple of negative ‘Dalai Lama
Effect’ on two sectorial exports during 2002-2014 period. The negative effects are
not strong enough to drive a statistically significant ‘Dalai Lama Effect’ on total
exports to China for the 2002-2008 period nor the 2002-2014 period.
Discussion
It is now natural to ask: “Is there a ‘Dalai Lama Effect’?” The answer is yes and no.
First, we have found a robust, significant, and negative effect on sectorial exports in
some periods. This demonstrates that there has been indeed an economic sanction
on some countries on some sectors and during certain periods. From that
perspective, the answer is yes.
However, we have not found a significant and negative 'Dalai Lama Effect' on total
exports to China or majorities of the sectorial exports for 2002-2008 or 2002-2014
periods. Moreover, we have found significant and positive ‘Dalai Lama Effect’ on
total exports and sectorial exports for some model specifications. This suggests that
China is not exercising its economic power when a country meets with the Dalai
Lama to the degree that was predicted. From this perspective, the answer is no.
The lack of a consistent ‘Dalai Lama Effect’ underlines the necessity of a more adapt
explanation of China's use of economic sanctions. The insignificant results suggest
that China’s sanctioning regime is more complex and without any clear observable
automaticity, at least in terms of economic sanctions.
We argue that the theoretical framework of coercive diplomacy (Schelling 1966) is a
suitable theoretical optic that enables further analytic explanatory power on the
operational logic of China’s sanctioning regime. Coercive diplomacy can be
separated into two distinctive approaches: deterrence and compellence. Here,
deterrence is the strategy where one seeks to use the threat of force to dissuade an
adversary in taking a certain undesired action. On the other end, compellence is
when one employs the threat of force, or the limited application of force, to stop an
adversary from continuing something they are already doing.
China’s punitive measures appear to be more flexible and smarter than the current
literature would suggest. The divergent experiences of various targeted countries
illustrates that there is no apparent automaticity in punitive mechanism, and that it
instead appears as tailored to the targeted state. In this, we argue that this
mechanism operates by a chosen mixture of political and economic measures,
seeking to maximize the impact on a targeted state while minimizing the negative
effect for its own interests. This makes China’s coercive diplomacy more effective at
targeting states interest calculation, and thus alter their behaviour. Moreover, it
also does so at reduced costs for Chinese interests.
Conclusions
The issue of China’s coercive economic diplomacy is likely to become increasingly
prevalent in the international public debate. Our analysis has shown that the often
asserted ‘Dalai Lama Effect’ is of questionable statistic validity when observed with
updated and more accurate trade statistics. This suggests that the scholarly debate
on Beijing’s use of punitive economic and political measures is in need of
considerable reassessment.
References
Fuchs, Andreas, and Nils-Hendrik Klann. 2013. “Paying a visit: The Dalai Lama effect on
international trade.” Journal of International Economics 91(1), 164-177.
Reilly, James. 2012. “China’s unilateral sanctions.” Washington Quarterly 35(4), 121-133.
Schelling, Thomas. 1966. Arms and Influence. New Haven, CT: Yale University Press.
Sverdrup-Thygeson, Bjørnar. 2015. “The flexible cost of insulting China: Trade politics and the
‘Dalai Lama Effect’.” Asian Perspective 39(1), 101-123.