Glossary
Plain-language definitions for terms you'll encounter in geopolitics and international economics.
Bilateral Investment Treaty (BIT)
A treaty between two states that protects investments made by nationals of one state in the territory of the other. BITs typically guarantee fair and equitable treatment, protection against unlawful expropriation, and the right to international arbitration of investor-state disputes (through ICSID, UNCITRAL, or ad-hoc tribunals). Approximately 3,000 BITs exist worldwide. The investor-state dispute settlement (ISDS) mechanism is controversial — supporters argue it provides necessary legal certainty for cross-border investment; critics argue it creates a parallel legal regime that favours capital over states' regulatory discretion. Recent treaty reforms (the new generation of EU agreements with the Investment Court System) attempt to address the ISDS critiques.
Current account
The broadest measure of a country's trade with the rest of the world — covering goods, services, primary income (e.g. investment returns), and secondary income (e.g. remittances). A current account surplus means a country exports more value than it imports.
Current account surplus
A positive balance on the broadest measure of a country's external transactions — exports of goods, services, and net investment income exceeding imports plus net transfers. China, Germany, Norway, and the Gulf petrostates have historically run large current account surpluses, accumulating foreign assets. The mirror image is the current account deficit, which the United States has run continuously since the late 1970s. Persistent surpluses imply persistent capital outflows; persistent deficits imply persistent capital inflows. The macroeconomic identity is mechanical — the savings-investment balance and the current account balance are two views of the same accounting.
Decoupling vs derisking
Two different policy framings for the same underlying problem: how to reduce strategic exposure to China without breaking the trade relationship that funds much of European industry. 'Decoupling' implies a broad commercial separation — fewer supply-chain ties, less investment in either direction, parallel technology stacks. 'Derisking' implies selective diversification in narrowly defined critical sectors (semiconductors, critical minerals, batteries, pharmaceutical inputs) while keeping the wider trade relationship intact. The European Commission, under Ursula von der Leyen, formally adopted 'derisking' in March 2023; Mark Leonard at the European Council on Foreign Relations and Sander Tordoir at the Centre for European Reform have written the clearest analyses of the gap between the EU and US positions. Washington tends to use 'derisking' rhetorically while pursuing policies — chip controls, FDI screening, outbound-investment restrictions — that look closer to decoupling in the technology perimeter. The distinction matters because the two framings imply very different industrial policy commitments and very different diplomatic costs. See the decoupling-vs-derisking and EU anti-coercion-instrument analyses on this site for the working definitions actually in use.
Geoeconomics
Using economic tools — tariffs, sanctions, investment screening, subsidies, export controls — to pursue what used to be considered purely strategic goals. Edward Luttwak coined the term in a 1990 *National Interest* essay arguing that after the Cold War, economic instruments would replace military ones as the main currency of great-power competition. Robert Blackwill and Jennifer Harris developed the framework into a full doctrine in *War by Other Means* (2016), cataloguing how China, Russia, and the United States each use trade and finance for coercion. The post-2018 tariff wars, the post-2022 Russia sanctions architecture, the October 2022 US semiconductor export controls, and the EU's anti-coercion instrument are all geoeconomic moves. The category is broader than 'economic statecraft' because it includes defensive industrial policy — onshoring, friend-shoring, supply-chain diversification — alongside offensive measures. Critics, including Henry Farrell and Abraham Newman in their later work on 'weaponised interdependence', argue that Luttwak's original frame underweighted the structural choke-points — dollar-clearing, the SWIFT messaging layer, ASML lithography — that determine who can actually coerce whom. See the export-controls and sanctions analyses on this site for case studies.
MFN (Most-favored-nation) status
A WTO core principle requiring that any trade advantage one member grants to another (lower tariff, easier customs procedures, market access) must be extended to all other WTO members automatically. Permitted exceptions include free-trade areas and customs unions (GATT Article XXIV), preferential treatment for developing countries (the Enabling Clause), and national-security carve-outs (Article XXI). The 2022 US-EU coordination withdrawing MFN status from Russia in response to the Ukraine invasion was an unprecedented use of the Article XXI national-security exception applied multilaterally. The legal questions around what counts as a national-security justification under Article XXI are unresolved and likely to be tested further as state-on-state economic conflict intensifies.
Most-favored-nation (MFN)
A WTO principle requiring members to extend any trade advantage given to one country (e.g. a tariff reduction) to all other members. Exceptions exist for free-trade areas, customs unions, and developing-country preferences.
Neo-mercantilism
A new version of an old idea: that a country should run trade surpluses, build its own factories in important sectors, and back national champion firms. The updated version is shaped for global supply chains and high-tech rivalry. Dani Rodrik, in a series of papers from 2020 onwards, argues that the post-2008 retreat from hyperglobalisation has produced a new policy menu that includes explicit industrial policy, sectoral subsidies, local-content rules, public investment in research and development, and screening of foreign investment for security risk. Visible indicators include the US CHIPS Act and Inflation Reduction Act, the EU Chips Act and Green Deal Industrial Plan, Japan's Rapidus consortium, China's *Made in China 2025* and dual-circulation doctrine, and the post-2022 critical-minerals scrambles in Australia, Canada, and Indonesia. Rodrik separates 'productivist' industrial policy — investing in capabilities and good jobs — from 'mercantilist' policy aimed at trade surpluses or beggar-thy-neighbour gains. In practice, current policies blend the two. The CHIPS Act mid-term audit and the industrial-policy reshoring analyses on this site walk through which side of that line specific programmes sit on.