Economic diplomacy
Economic diplomacy is a form of diplomacy that uses the full spectrum of economic tools of a state to achieve its national interests. The scope of economic diplomacy can encompass all of the international economic activities of a state, including, but not limited to, policy decisions designed to influence exports, imports, investments, lending, aid, free trade agreements, among others.
Economic diplomacy is concerned with economic policy issues, e.g. work of delegations at standard setting organizations such as World Trade Organization. Economic diplomats also monitor and report on economic policies in foreign countries and give the home government advice on how to best influence or coerce them. Economic diplomacy employs economic resources, either as rewards or sanctions, in pursuit of a particular foreign policy objective. This is sometimes called "economic statecraft".
Background and definitions
Economic diplomacy is traditionally defined as the decision-making, policy-making and advocating for the sending state's business interests. Economic diplomacy requires application of technical expertise that analyze the effects of a country's economic situation on its political climate and on the sending state's economic interests. The sending state and receiving state, foreign business leaders, as well as government decision-makers, work together on some of the most cutting-edge issues in foreign policy, such as technology, the environment, and HIV/AIDS, as well as in the more traditional areas of trade and finance. Versatility, flexibility, sound judgment and strong business skills are all needed in the execution of economic diplomacy.- Scope: international and domestic economic issues – this includes the "rules for economic relations between states" that has been pursued since World War II. And owing to the increased globalization and the resultant interdependence among state during the 1990s obliges "economic diplomacy to go deep into domestic decision making" as well. This covers "policies relating to production, movement or exchange of goods, services, instruments, money information and their regulation"
- Players: state and non-state actors – All government agencies that are involved in international economic mandates are players in economic diplomacy. Further, non-state actors such as non-government organisations engaged in international economic activities are also players in economic diplomacy. Businesses and investors are also actors in the processes of economic diplomacy, especially when contacts between them and governments are initiated or facilitated by diplomats.
Rana defines economic diplomacy as "the process through which countries tackle the outside world, to maximize their national gain in all the fields of activity including trade, investment and other forms of economically beneficial exchanges, where they enjoy comparative advantage.; it has bilateral, regional and multilateral dimensions, each of which is important".
The broad scope of this latter definition is especially applicable to the practice of economic diplomacy as it is unfolding in emerging economies. This new approach involves an analysis of a nation's economy, taking into account not only its officially reported figures but also its gray, or unreported, economic factors. An example might be the new Republic of Kosovo; in that emerging nation, widely regarded as a candidate for "poorest nation in Europe", an enormous amount of economic activity appears to be unreported or undocumented by a weak and generally ineffectual central government. When all economic factors are considered, the so-called "poorest" nations are demonstrably healthier and thus more attractive to investment than the raw statistics might otherwise show.
Emerging economies have learned that they are not flowers and businesses are not like bees; in other words, a nation that wants to attract business must be proactive rather than passive. They must seek out opportunities and learn to bring them home. Tax and other concessions will likely be necessary and in the short term costly. However, creative support of new business opportunities can generate major chances for success. This sort of activity is also a part of economic diplomacy.
The sort of economic diplomacy that utilizes a nation's already-deployed corps of diplomats to promote the nation and seek business opportunities is not traditional, but its effectiveness is apparent. Emerging nations seeking to conserve scarce personnel and financial resources immediately benefit from multitasking.
Three elements
1. Commercial diplomacy and NGOs: The use of political influence and relationships to promote and/or influence international trade and investment, to improve on functioning of markets and/or to address market failures and to reduce costs and risks of cross border transactions.2. Structural policies and bilateral trade and investment agreements: The use of economic assets and relationships to increase the cost of conflict and to strengthen the mutual benefits of cooperation and politically stable relationships, i.e. to increase economic security.
3. International organizations: Ways to consolidate the right political climate and international political economic environment to facilitate and institute these objectives.
Strategies
Brazil
has made a concerted effort to engage in economic diplomacy with the developing world. Brazil has made it a priority to be a leader in sharing technological knowledge in areas such as education and the all important agricultural sector.One example of Brazil's economic diplomacy strategy is the Brazilian Cooperation Agency, which is affiliated with the Brazilian Ministry of External Relations. The ABC has the mandate to negotiate, coordinate, implement and monitor technical cooperation projects and programs with countries, primarily in the developing world, that Brazil has agreements with. As Brazil States:
"Brazil has been investing in agreements with both developed and developing countries to acquire and disseminate knowledge applied to social and economic development. We have practiced the concept of not simply receiving knowledge from developed countries, but also sharing our own experiences with others in effective partnerships towards development.
South-South cooperation contributes to consolidating Brazil’s relations with partner countries as it enhances general interchange; generates, disseminates and applies technical knowledge; builds human resource capacity; and, mainly, strengthens institutions in all nations involved.
Taking these goals into account, ABC has defined focal partners that include African Portuguese-speaking countries, East Timor, Latin America and the Caribbean. In this context, we have started cooperating trilaterally with developed countries as well.
The ultimate goal of technical cooperation – exchanging experiences and knowledge – materializes reciprocal solidarity among peoples and does not only benefit recipient countries, but Brazil as well."
The ABC is a primary example of how Brazil is using economic diplomacy to fit into its larger national strategy of providing leadership in the developing world.
China
Economic diplomacy is a central aspect of Chinese foreign policy. During China's remarkable economic rise, it has used economic diplomacy primarily through trade, and the use of carrots as a means to accumulate or attract soft power. This was a part of the broader strategy formulated by think tanks in the PRC during the 1990s titled the new security concept. It is referred to in the West as the period of "China's Peaceful Rise".Since the 2010s, China has changed its strategic doctrine and has begun to more frequently use economic diplomacy as a coercive tool. After 10 years or so of a policy based primarily on economic carrots, China has begun to show a willingness to use economic diplomacy for coercive means. This is evidenced in the September 2010 incident that blocked shipments of rare earth minerals to Japan. Another incident took place in 2012 in the Philippines, where China sent a gunboat in to enforce trade restricts. US-based think-tank CSIS has stated that China's willingness to use bring in warships during trade disputes is reminiscent to an earlier era of American gunboat diplomacy.
Kazakhstan
has formally identified economic diplomacy as a key function of the country's foreign policy to yield productive economic and trade relations at bilateral and multilateral levels. The Ministry of Trade and Integration of Kazakhstan, or MTI, was created to oversee the country's economic diplomacy. The MTI and the Ministry of Foreign Affairs are key entities responsible for executing economic diplomacy and promoting Kazakhstan's economic goals abroad.Kazakhstan hosted a South-South Development Exchange on Economic Diversification and Industrialization in Africa with 43 African governments.
United States
The United States has a long history of economic diplomacy dating back to the dollar diplomacy of William Howard Taft. The United States was also central to perhaps the most important economic diplomacy event, the Bretton Woods Conference where the International Monetary Fund and International Bank of Reconstruction and Development were created. The United States was involved in one of the more notable acts of economic diplomacy in history with the Marshall Plan.Though it has always played an important role, Economic diplomacy took on increased importance during the first term of President Barack Obama under the leadership of Secretary of State Hillary Clinton. During a major policy speech as Secretary of State, Clinton stated that economic statecraft is at the heart of foreign policy agenda. Clinton saw economic development and democratic development as inextricably linked. In her speech she explained the importance of its success:
Secretary Clinton saw pursuing mutually beneficial trade between the United States and other areas of the world as central to the American diplomatic agenda. She went on to detail the American strategy for several significant regions.
In his best-selling semi-autobiographical book, Confessions of an Economic Hit Man, John Perkins, a US ex-economic diplomat, describes what he calls a system of corporatocracy and greed as the driving forces behind establishing the United States as a global empire, in which he took a role as an economic hit man to expand its influence. In this capacity, Perkins recounts his meetings with some prominent individuals, including Graham Greene and Omar Torrijos. Perkins describes the role of an economic hit man as follows:
Economic hit men are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development, and other foreign "aid" organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet's natural resources. Their tools included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization...