Economic diplomacy is concerned with economic policy issues, e.g. work of delegations at standard setting organizations such as World Trade Organization (WTO). Economic diplomats also monitor and report on economic policies in foreign countries and give the home government advice on how to best influence 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”.
Economic diplomacy is traditionally defined as the decision-making, policy-making and advocating of the sending state-business interests. Economic diplomacy requires application of technical expertise that analyzes the effects of a country’s (Receiving State) 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.
a. Scope: International and Domestic economic issues – this includes the “rules for economic relations between states” that has been pursued since the 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 (including official development assistance), money information and their regulation” (Bayne and Woolcock (eds) 2007)
b. Players: State and non-state actors – As all government agencies that have economic mandates operate internationally and are players in economic diplomacy though they do not describe them as such. Further, non-state actors such as NGOs that are engaged in economic activities internationally are also players in economic diplomacy (Bayne and Woolcock (eds) 2007). Businesses and investors are also actors in the process of economic diplomacy, especially when contacts between them and governments are initiated or facilitated by diplomats.
Berridge and James (2003) state that “economic diplomacy is concerned with economic policy questions, including the work of delegations to conferences sponsored by bodies such as the WTO” and include “diplomacy which employs economic resources, either as rewards or sanctions, in pursuit of a particular foreign policy objective” also as a part of the definition.
Rana (2007) 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.
This newer form of economic diplomacy would then develop a strategy for marketing of a nation, based upon the analysis of the state of its economy. The marketers of the nation would likely be its diplomats assigned both abroad and at home. The process is subjective. Again using Kosovo as an example, for trade promotion purposes, the nation’s high unemployment rate becomes less of a detriment than it is an asset providing a ready and willing work force to new investors. That strategy then becomes the core of a marketing effort conducted by a nation’s diplomats. They would attend trade shows, visit potential investors, conduct trade events and seminars, and otherwise be proactive in marketing the attributes of their nation. Successful implementation of marketing an entire nation requires knowledge of the business process, of the home nation’s economy, and of salesmanship.
In contrast to more traditional forms of international economic assistance, this new form of economic diplomacy doesn’t devote its attention to issuing dead-ended reports that accomplish little besides providing full employment for the report writers. Economic diplomacy, really a variation of public diplomacy, promotes investment, shepherds deals from inception to signing of contracts, and markets a nation as if it were a business itself.
Among the leading advocates of modern economic diplomacy are American economists and international law experts Ivan S. Abrams and Robert E. McDaniel. Their firm, The Center for Commercial Diplomacy, advises client nations and companies throughout the world. Abrams and McDaniel are demonstrating that sustainable international development should provide tools and techniques, easily learned and taught, that can be used to showcase a nation’s strengths in various types of venues. With proper training and follow-through, diplomats can become an essential link in the strengthening of their economies by private investors, involving governments to facilitate rather than to obstruct the process.