Australia and the United States should aim to capitalise on the concerns China’s use of geoeconomic statecraft raises for countries in the Indo-Pacific region. A number of Australia’s regional and extra-regional partners have recently identified economic coercion as an issue of concern, implicitly raising the threat of a collective response should China’s economic coercion continue or escalate.Geoeconomics may serve as an excuse to substitute geopolitics for economics rather than balancing or reconciling the two perspectives. One potential source of policy error is for policymakers to allow security concerns to trump or dominate economic considerations.The key analytical issue raised by geoeconomics is how to reconcile the positive-sum logic of the gains from international trade and the cross-border flow of goods, services, capital, people and ideas with the often zero-sum logic of strategic competition between nation states.Like Canberra, Washington has struggled to recalibrate its economic engagement with Beijing to reflect changes in Chinese domestic politics and geopolitical realities and to reintegrate international economic, foreign and defence policymaking.The new enhanced trilateral security partnership between Australia, the United Kingdom and the United States (AUKUS) indicates that Washington recognises the importance of cooperation with allies in security as well as defence industry and technology.Australia and the United States have increased cooperation in some geoeconomic policy areas - most notably in relation to defence industry, technology and critical minerals - but geoeconomics remains an underdeveloped element of the alliance relationship, reflecting its foundations in a security treaty that is silent on economic issues.However, its use of economic statecraft has mostly been counter-productive in advancing its geopolitical interests. China’s use of geoeconomic policy instruments has become a major concern for Australian policymakers.A shift in alliance strategy towards China, from engagement to strategic rivalry and competition, has reframed international and domestic economic policy settings in light of the security concerns presented by China’s growing power and influence.This report examines the potential and limits of geoeconomic statecraft in the context of the Australia-US alliance.It is also often defined more narrowly in terms of the application of specific economic policy instruments to achieve geopolitical aims. Geoeconomics is a way of conceptualising the relationship between geopolitics and framing the policy issues that arise at the intersection of international economics and international security.

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