Economic diplomacy deals with the nexus between power and wealth in international affairs.
Economic diplomacy not only promotes the state’s prosperity but also, as occasion demands and opportunity permits, manipulates its foreign commercial and financial relations in support of its foreign policy – as in the case of sanctions against Iran. Accordingly, economic diplomacy is a major theme of the external relations of virtually all countries. At home, economic ministries, trade and investment promotion bodies, chambers of commerce, and of course foreign ministries, are all participants in economic work. Current trends include increasing collaboration between state and non-official agencies, and increased importance given to WTO issues, the negotiation of free trade and preferential trade agreements, and accords covering investments, double taxation avoidance, financial services and the like. Abroad, embassies, consulates, and trade offices handle economic diplomacy. The main focus is on promotion, to attract foreign business, investments, technology and tourists. Economic diplomacy connects closely with political, public and other segments of diplomatic work. This online course is practice-oriented, and aims at capacity development.
By the end of this course, participants should be able to:
- Describe how economic diplomacy has evolved, and how it plays a key role in international affairs, connecting closely with domestic priorities and development objectives in states.
- Explain the role played by different actors, state and non-states, in the development of ‘whole of country’ policies, and how a good diplomatic system works with all the key stakeholders.
- Apply the learning to the running of a commercial or economic section, and to the manner in which commerce chambers of individual enterprises can work with the foreign ministry and with diplomatic missions in the commercial and economic arena.
- Apply the learning also to the promotion of exchanges of business delegations, and participation in trade exhibitions.
- Assess current trends in the framework conditions of international trade and other economic exchanges.
Excerpt from course materials
Most countries would say today that a top priority of their diplomatic system, especially of their missions abroad, is the promotion of their country's external economic interests. Many embassies spend the bulk of their time on economic work. For example, the David Cameron UK government, within weeks of taking office in mid-2010, summoned all ambassadors to tell them that helping British business was their topmost priority. In 2012, the Dutch Foreign Ministry implemented reforms aiming 'to promote Dutch interests, with special focus on economic diplomacy’ (Government of the Netherlands, 2012).
Economic diplomacy differs from political diplomacy in one key aspect. Almost always, the direct beneficiaries or ‘end-users’ are business enterprises, not governments per se. This means that the government – the foreign ministry and embassies, the other economic agencies and promotional bodies – are facilitators, catalysts, and agents.
- The evolution of economic diplomacy: Diplomacy starts with trade: consulates precede ‘embassies’; the Levant Company sets up the English embassy in Constantinople, 1583; the subsequent advance of high politics; the age of imperialism and the slow recovery of economic diplomacy. Diplomacy ends with trade: growth of importance of international trade and capital flows (even to USA); new political need of diplomatic services to respond to business lobbies at home; Britain: near bankruptcy in 1945; a succession of official reports insists on overriding priority of commerce.
- Economic diplomacy today: the definitions of economic diplomacy; principal content; the stages traversed by countries in practice of economic diplomacy; public diplomacy, image management and economic diplomacy; how economic diplomacy connects with other branches of diplomatic work; working with home actors, learning from them.
- The regulatory environment and the domestic context: extent and consequences of ‘managed trade’; dumping and complaints procedures; trade negotiations; role of chambers of commerce and industry associations; special role of embassies in such domestic outreach; role of think tanks and NGOs; public diplomacy dimension of trade.
- The embassy economic section: the staff of the economic section, including the importance of locally engaged staff; the position of the section within the embassy and comparisons between diplomatic services; how many ambassadors have had significant experience of economic diplomacy? Does this suggest that economic diplomacy has the real priority that the usual rhetoric suggests? If not, why not?
- Trade and investment promotion: importance of trade, focus on exports, pursuit of new markets and new products; dispute settlement and role of official agencies; value and domestic role of foreign direct investment (FDI), portfolio, private equity and other forms of investment; broad and targeted promotion; role of specialised agencies; two-way FDI flows.
- Craft skills: Business delegations and trade exhibitions: country promotion exhibitions and specialised trade fairs; selection, observation and participation; exhibition techniques and best practices; organisation of business delegations; role of missions in both outbound and homebound groups; planning, preparation and follow-up; delegations accompanying summit and other official visits.
- Economic sanctions: why economic sanctions became popular in the 20th century; the variety of purposes they are designed to serve; the different kinds of sanctions; the role of embassies; how states defend themselves against sanctions, including cultivation of business lobbies (e.g. South Africa under apartheid; Iraq under Saddam; Iran today); smart sanctions versus stupid sanctions.
- WTO and Free Trade Areas (FTAs): basic features of the multilateral trading system; WTO process and its future; likely outcomes of current, convoluted negotiations; preferential trade agreements (PTAs), including commonalities and differences; are FTAs and PTAs building or stumbling blocks to a multilateral trading system?
7 Oct 2019