How to be a middle power in a superpower world. With Jenny…

PodcastThe Economics ShowJenny BatesSep 25

Jenny Bates argues that middle powers can respond to economic coercion and competition from larger countries by identifying their leverage, coordinating with partners, and pooling capabilities. She also calls for the UK to build resilience into business reporting, investment policy, and industrial strategy, while weighing the near-term cost of secure supply against future risks. A UK public deliberation exercise showed strong support for resilience over lower prices, though Bates notes that its result differed from the polling evidence she referenced.

Geopolitical Risk Trade Policy Supply Chains

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Key Takeaways

Jenny Bates says the UK’s deep integration with the United States could expose it to significant effects if Washington weaponized economic ties, although she says this has not happened to date. She argues the UK should develop flexible leverage tools with other affected countries and make any anti-coercion instruments interoperable with the EU.

Bates sees China as a challenge to the UK’s economic approach and, over a 15-year horizon, a potential competitor in sectors where the UK is strong today; she also says China’s scale is disrupting partners and the trade system. In cars, she suggests UK pressure could come indirectly through the more exposed EU, given the UK’s smaller manufacturing role, while arguing that rivalry is concentrated in interconnected sectors such as technology, manufacturing, and energy.

Bates argues that middle powers can build lasting capabilities through cooperation rather than matching the United States or China: UK-German-Dutch nuclear technology cooperation dating to the 1960s contributed to UK strategic advantage, including capabilities relevant to small modular reactors. She also points to Eurenco and Airbus as examples of pooled niche technology and economies of scale, while cautioning that they do not show smaller partners can replicate the approach in AI.

GEO-POLITICS

Economic Coercion — Jenny Bates identifies the weaponization of economic ties for foreign-policy ends as a risk, citing US tariffs and the possibility that China could withhold exports. The UK's deep integration with the United States means any US decision to weaponize those ties could have significant effects, though Bates says this has not happened to date. She argues that UK policy has focused more on using economic leverage to advance foreign-policy goals than on preparing for direct coercion, which the UK has not faced as Australia and some other partners have.

“So one, obviously, is the weaponisation of economic levers, the use of economic linkages and the way that they're being used for wider foreign policy ends…”—

China's Competitive Reach — Bates argues that China poses less of an immediate competitive challenge to UK strengths such as financial services, but its scale is disrupting partners and the trade system. She says China could become more competitive over a 15-year horizon in sectors where the UK is strong today.

“I think that's a really good question. What I've come to the conclusion in my work is that it's…”—

UK Leverage — Bates argues that the UK needs to identify where it has leverage and learn how to use it, including by working with other affected countries. She says the approach should offer a flexible range of tools rather than target a particular partner.

“from my background, I was trained in economics, I started in the Treasury, and I'm effectively saying The UK needs to work out where it's got leverage and know how…”—

TECHNOLOGY

Pooled Capabilities — Bates argues that middle powers can pool resources to develop alternatives to capabilities dominated by larger countries. She cites Eurenco and Airbus as examples of niche technology and economies of scale, while cautioning that they do not prove smaller partners can replicate the approach in AI.

“I just point to Eurenco as an example of a niche technology that we developed together, and Airbus as an example of economies of scale, where smaller partners came together…”—

ECONOMY

China's Economic Model — Bates argues that China's distinct economic model, the rise of industrial policy, and a move away from market mechanisms challenge the way the UK has conducted its economic policy.

“But I also think there are some other challenges that if you're The UK trying to navigate this, you've got the rise of China and its economic model, it's a…”—

Resilience Reporting — Bates proposes requiring business leaders to assess how their companies contribute to national resilience and report on it as part of annual reporting. She says the paper would define national resilience and frames the proposal as a way to bring it into boardroom decision-making.

“This is not a completely new idea, but I'm revisiting it because I think that boardroom decision making, there's an argument for it thinking more about the resilience of the…”—

Shared Risk Assessment — Bates says the UK lacks a shared assessment between government and the private sector of the environment the country faces, let alone an agreed response. She describes a round-table exercise that brought business and government participants together to discuss scenarios.

“So we did an exercise where we presented my four scenarios to a round table of business and government folk, and several of them said to me it was the…”—

MARKETS

Minerals Supply Resilience — Bates argues that paying somewhat more for critical minerals in the short run could be worthwhile if it creates a more stable and diverse supply, particularly where prices could rise substantially in the future. She frames the question as whether the resilience benefits justify the near-term cost.

“And it's certainly that's where I think I'm trying to be a little bit provocative in our debate because a traditional British response to that critical, because it's slightly going…”—

UK Economic Threats

Bates rates the risks to the UK as serious but manageable, highlighting economic coercion, China's changing economic model, and uncertainty about the United States.

China And US Leverage

Bates says China's scale disrupts UK partners and trade rules, while US dominance creates potential vulnerabilities; she urges Britain to identify leverage and work with affected countries.

Middle-Power Cooperation

Bates argues middle powers can achieve practical outcomes without matching superpowers, pointing to shared nuclear technology and CPTPP as examples of cooperation.

Trade And Critical Minerals

Bates describes diversification and coordinated purchasing as ways to strengthen supply resilience, arguing that modest near-term costs may be worthwhile for more secure sources.

Business And UK Resilience

Bates proposes resilience reporting for major businesses, stronger government-business planning, and strategic conditions on public investment while acknowledging concerns about deterring investment.

UK Industry And Resilience

Bates says UK policy may differ from manufacturing-heavy economies but should give greater attention to contested sectors such as technology, manufacturing, and energy.

UK Leverage And Closing

Bates says the UK has not focused enough on preparing for economic coercion and should assess its leverage; the host then thanks her and closes the episode.