Morgan Bazilian & Jahara Matisek
On January 7, the White House issued a memorandum directing U.S. agencies to take immediate steps to withdraw from, cease participation in, or end support for a wide range of international organizations, conventions, and treaties deemed contrary to U.S. interests. The announcement was sweeping and appears deliberately blunt.
Some may dismiss this as another example of disdain for multilateralism, and a preference for shock over process. But that dismissal misses the more important story. President Trump’s decision did not create a new paradigm; rather, it largely reflects what has already taken shape.
The international system has now hit its institutional design limit.
Global economic governance was built to manage disputes over tariffs, market access, and rules and standards in a world where interdependence was assumed to be broadly stabilizing and, on balance, beneficial for all participants. It was not built to adjudicate competition over industrial leverage, midstream chokepoints, or the strategic weaponization of supply chains. As those dynamics have become normalized, states have increasingly acted outside existing institutions or reshaped cooperation into narrower coalitions capable of moving faster and imposing costs.
This does not signal the end of globalization, nor does it imply a return to autarky. It simply means interdependence is becoming conditional and contested, as strategic competition across energy, technology, and industrial systems moves beyond what existing institutions were designed to handle. In this environment, access to resources is only the opening move; the decisive advantage lies is increasingly with countries that control physical and material chokepoints, routes, and industrial geographies that turn inputs into power.
From commodities to systems
For much of the post–Cold War era, competition over energy and technology was framed primarily as a question of access. Advantage was determined by control over oil fields, gas pipelines, rare earth deposits, or semiconductor fabrication plants. Securing supply was the central objective of foreign policy.
Control of commodities is no longer sufficient for securing advantage in global resource competition. Instead, control over the industrial systems that convert inputs into usable economic and military power and a more sophisticated approach to demand are essential foundations for state power. Extraction feeds processing; processing feeds manufacturing; manufacturing feeds deployment. Each layer contains chokepoints, specialized labor, infrastructure, and regulatory constraints that determine whether production can scale, shift, or be denied under stress.
China’s rare earth dominance illustrates the shift from controlling commodities to systems. While China produces roughly 60 percent of global rare earth output, it executes close to 90 percent of global processing capacity. Rare earth dominance is not about owning mines; it is about controlling the midstream step that turns raw ore into the high-purity materials required for magnets, batteries, and advanced motors and electronics. In strategic terms advanced manufacturing -- not extraction -- is where leverage resides to weaponize supply chain inputs by turning off the flow to other nations.
The same dynamic is unfolding across the energy system. The International Energy Agency projects that global demand for lithium could increase four- to six-fold by 2030, driven largely by electric vehicles and battery storage requirements, with similar growth trajectories for nickel and cobalt. These are not forecasts of scarcity so much as indicators of where competition will concentrate: processing-intensive minerals, capital-heavy midstream facilities, and the manufacturing ecosystems that translate materials into deployable systems.
Decarbonization and digitization have actually heightened aspects of geopolitical competition by shifting power toward those who can control complex, capital-intensive systems rather than extracting raw resources. There will be international tension as winners and losers are crowned even under the most “green” futures.
Why institutions struggle to respond
International economic institutions were designed to bring some order and rules to financial interactions between states. They were not designed to manage a world in which states can distort outcomes without clearly violating those rules, or by exploiting lengthy adjudication timelines to lock in strategic advantage before enforcement arrives.
Subsidy regimes provide a clear example of how states can manipulate outcomes while operating within the rulesets of international institutions. The World Trade Organization (WTO) has long adjudicated disputes over prohibited subsidies and unfair industrial support, including high-profile cases involving Chinese state backing of key sectors. But even when the process works procedurally, it often fails strategically. Disputes take years to resolve. By the time rulings are issued, market structures may already have shifted, competitors may have exited, and industrial capacity may have relocated. This is precisely why President Trump was technically correct when accusing China and other countries of “cheating” on trade and deals with the United States via currency manipulation and other tactics.
With enforcement being absent since 2019, uncertainty surrounding the WTO’s appellate mechanism has reduced the practical bite of rulings and encouraged states to seek leverage outside formal channels. The result is a system that can still manage routine trade disputes but struggles to discipline strategic industrial behavior conducted in legal gray zones.
This is not institutional collapse so much as institutional misalignment. Rules built to facilitate exchange are poorly suited to handle great power competition in which exchange itself becomes a tool of coercion, as seen with Lithuania being economically punished in 2021 by China for violating China’s policy on Taiwan.
Markets as contested terrain
As institutional misalignment grows, governments treat markets more as contested terrain. Export controls, industrial subsidies, and investment screening have shifted from exceptional measures to routine instruments of statecraft.
The U.S. semiconductor export controls introduced in October 2022 illustrate this shift. Designed to restrict China’s access to advanced computing capabilities and manufacturing equipment, the measures reshaped global technology flows without relying on multilateral adjudication. Subsequent updates and allied alignment reinforced the trend toward conditional access in a domain where existing trade rules were never designed to arbitrate national security-driven restrictions at scale.
Recent episodes suggest that the effectiveness of economic statecraft depends less on who can impose sudden disruptions than on who controls chokepoints that are costly to unwind. Leverage embedded in capital-intensive ecosystems, technical standards, and specialized know-how tends to endure longer than measures that rely on episodic restrictions or licensing pressure.
The global economy is fragmenting, but not splintering into isolated blocs. Integration is occurring where trade persists, investment persists, and technology diffuses, but the terms of participation increasingly depend on alignment and resilience rather than a universal promise of openness.
Energy and technology as accelerants
Energy and technology sit at the center of this recalibration because they bind economic performance directly to national security. When supply is abundant and cheap, their strategic dimension fades. When supply becomes constrained or weaponized, that dimension reasserts itself with force.
Russia’s 87% cut of pipeline gas supplies to Europe following its 2022 invasion of Ukraine demonstrated how quickly commercial dependency becomes strategic exposure. Moscow exposed European vulnerabilities in storage, refining, contracting, and grid resilience. Wholesale electricity prices spiked, and governments were forced to adapt in ways that the free-market could not handle.
The crisis was not about global scarcity. Gas was available elsewhere. It was about control under stress and the speed at which industrial and infrastructure systems could adapt once a dominant supplier turned energy into leverage.
Technology competition, such as making drones, follows a similar logic. Advanced manufacturing depends on specialized equipment, skilled labor, trusted components, and stable industrial software and connectivity. Disruption at any point in that chain propagates quickly, transforming economic dependence into cascading failures that can hurt the U.S. economy and military capabilities.
The limits of universalism
The uncomfortable implication of these trends is that universal economic rules are losing exclusive authority in the moments that matter most. As states prioritize resilience, economic policy becomes more selective. Trust and alignment matters, as does shared risk.
Hence, cooperation is not disappearing. Instead, cooperation is migrating toward bounded networks that resemble security arrangements more than universal regimes. Shared standards, shared production, and shared stockpiles matter as much as shared principles.
The limits of universalism are especially visible in energy governance. When interests diverge and power is uneven, cooperation has rarely converged on a single, hierarchical institution. Instead, it has taken the form of overlapping, task-specific arrangements that reflect bargaining, competition, and strategic hedging as much as shared norms. Institutions such as the International Energy Forum and the International Renewable Energy Agency—both backed strongly by Saudi Arabia and the United Arab Emirates—were designed with this reality in mind, emphasizing dialogue and coordination without pretending that energy markets are apolitical. Even the International Energy Agency, often viewed as technocratic, has repeatedly adapted as markets and geopolitics have shifted. What is changing today is not the existence of cooperation, but the expectation that any single institution can manage strategic competition across complex industrial systems.
Western institutions, by contrast, were built to reduce the visible role of power in economic relations. Yet, strategic competitors have openly fused industrial policy, state finance, and strategic objectives. Ignoring that asymmetry does not preserve openness. It erodes it by leaving systems exposed to forms of coercion that existing rules were never designed to deter.
When institutions fail to deliver strategic value under competitive pressure, states will bypass them or operate through alternative institutional arrangements better suited to contested interdependence, which brings the story back to President Trump’s Executive Order to end cooperation with international institutions.
What institutional adaptation now requires
If there is a policy implication Western governments cannot avoid, it is the need to recover a measure of strategic realism without abandoning cooperation altogether. This is not a call for self-sufficiency. It is a long overdue recognition that strategic competition includes production systems and that managing those systems is a core function of realpolitik and statecraft.
That means investing in visibility across critical supply chains, mapping not just trade flows but processing and manufacturing capacity worldwide. It means treating allied production as a strategic asset, with coordinated subsidies and joint stockpiling rather than ad hoc legal exceptions. And it means building institutions capable of imposing reciprocal costs on industrial coercion, which will require the development of rulesets that can be more responsive to manipulation tactics.
The global battle over resources and industrial strength has broken the old system of rules. The question becomes not whether institutions will matter, but which ones can adapt to a world where power runs through industrial systems. Naïveté is no longer an option for protecting the inputs and bases of economic strength and military power for what comes next in global competition.
Morgan D. Bazilian is the director of the Payne Institute and professor at the Colorado School of Mines, with over 20 years of experience in global energy policy and investment. A former World Bank lead energy specialist and senior diplomat at the UN, he has held roles at NREL and in the Irish government, and advisory positions with the World Economic Forum and Oxford. A Fulbright fellow, he has published widely on energy security and international affairs.
Lt. Col. Jahara “Franky” Matisek (PhD) is a US Air Force command pilot, nonresident research fellow at the US Naval War College and senior fellow at the Payne Institute for Public Policy, and a visiting scholar at Northwestern University. He is the most published active-duty officer currently serving, with 2 books and over 150 articles on industrial base issues, strategy, and warfare.
The views expressed are those of Lt Col Matisek and do not reflect the official policy or position of the Department of the Air Force, Department of War, or the U.S. government.