Economic Diplomacy and Foreign Policy-making

Charles Chatterjee

• Publisher: Palgrave Macmillan
• Year: 2020
• Print ISBN:
  9783030490461
• eBook ISBN:
  9783030490478
• Topic: Politica e relazioni internazionali
• Subtopic: Business internazionale

This book aims to identify what components are needed for economic diplomacy in today's rapidly changing world, looking at the nature, focus and tenets of economic diplomacy, and the differences between economic diplomacy and commercial diplomacy.Further, it considers the new kind of diplomacy that will be required for emerging markets, in contrast to maintaining the traditional techniques used for economic diplomacy between states.The author emphasises the negotiating techniques necessary for successfully engaging in economic diplomacy in the current diplomatic atmosphere.Importantly, it also discusses how to pursue economic diplomacy at international fora and with regard to private foreign investments.Lastly, it addresses the role of non-governmental organisations in economic diplomacy.Given its scope, the book will benefit not only practicing diplomats, but also graduate students.

© The Author(s) 2020

C. ChatterjeeEconomic Diplomacy and Foreign Policy-makinghttps://doi.org/10.1007/978-3-030-49047-8_1

Begin Abstract

1. The Nature of Economic Diplomacy and Foreign Policy-Making

Charles Chatterjee¹

(1)

Institute of Advanced Legal Studies, University of London, London, UK

Charles Chatterjee

Keywords

Economic diplomacyCommercial diplomacyNegotiating techniquesEconomic reciprocityCapacity buildingRegional economic diplomacy

End Abstract

The primary objective of economic diplomacy at a national level is to reach mutually beneficial arrangements the spill-over effect of which strengthens the foreign policy relations between the two States concerned. Economic diplomacy at an international level should aim at developing framework regulations whether in the form of international conventions or resolutions or declarations, etc. The tactics and strategies at these two levels of diplomacy are different. Whereas bi-lateral economic diplomacy requires to protect mutually beneficial national economic interest by identifying the bases for reciprocity between the parties concerned, economic diplomacy carried out at an international level is not concerned with deriving any reciprocal benefit for anybody; its main objective is to achieve something for the entire international community.

Whereas the nature of tactics and strategies of bi-lateral economic diplomacy primarily relate to the strengths and weaknesses of the parties, without surrendering one to the other, economic diplomacy at a truly international level should be visionary—it requires a thorough understanding of the needs for framework regulations; it is not concerned with the objective of protecting the national interest of any kind. Diplomats must be able to justify why a new framework convention or regulation would be necessary. It is not based on any selfish ideas. Whereas “tactics” stands for the “plans and means adopted in carrying out a scheme or achieving some end” or a skilful device or devices,¹ a “strategy” stands for a “plan of action or policy in business”.² Both tactics and strategies require a thorough understanding of the issues and problems relating to the subject matter of diplomacy.

In so far as economic diplomacy at a domestic level is concerned, all negotiations should centre around the national interest, but combining it with the other party’s beneficial interest too. In other words, reciprocity between the two parties must be highlighted; however reciprocal interests may not be exactly balanced if both the parties are not of similar standing. In other words, in such circumstances “reciprocity” may not be perceived in its absolute form. This issue assumes particular importance when one of the parties to an economic diplomacy manoeuvre is a developing country. The objective of economic diplomacy is not only to create and maintain economic and commercial relationship between the two parties but also to develop “capacity building” with a view to strengthening the economic and commercial foundations including infrastructures of a country. In negotiating economic and commercial deals on a State to State basis, which should eventually take the form of a bi-lateral treaty between the two parties concerned, if one of the parties is a developing country, it should also negotiate a “capacity building” plan as an integral part of such a deal. It is through economic diplomacy that “economic dependence” on countries should be minimised, which should eventually allow the developing country to attain a competitive status.

Although decolonisation process started in the late 1940s, it was not until the 1990s that the concept of “capacity building” was really promoted by the international community. In economic diplomacy-based negotiations, the parties should ideally be treated as “partners” instead of “contracting parties”. However unbusinesslike it may sound, the more capable party should develop confidence in the minds of the less capable rather than treating it with “pity”.

Economic diplomacy is a dynamic concept in that it must be creative, innovative and inventive. People engaged in economic diplomacy must also possess the same qualities to be able to rise to its demands. Economic diplomacy is at its worst when it is operated on a false perception of bargaining power of the parties concerned. At the core of diplomacy is the art of negotiation, and in that art, there is no room for “muscle power”; instead, it represents the power to negotiate, which is nothing but inventive and innovative power of the actors. If it is to be based on “muscle power” and the “power to dominate” one by the other, then there would be no room for negotiation—it is otiose.

Economic diplomacy should not necessarily be anecdotal. Historic ties with countries may be a contributory factor for carrying on economic and commercial diplomacy between themselves, but it has its disadvantages too—it may consolidate into what may be described as diplomacy of dependency. After achieving their self-determination (decolonised sovereign States) the former colonies have in many cases stayed with their respective colonial masters in the belief that “rapport” would be more meaningful between them, which perception may be sustainable, but there is no harm in adopting a truly international outlook in expanding their economic and commercial activities. Cross-fertilisation of economic diplomacy may provide new opportunities, innovative ideas and competitive prices and advantages; this is, of course, not to suggest that the newly born countries should not develop any economic and commercial diplomacy and relationship with their former colonial masters. Economic diplomacy must derive benefits from as many sources as possible as it must also be as worldwide as possible.

As development stands for socio-economic development, human resource development is to be regarded as one of the main objectives of economic diplomacy too. Thus, economic diplomacy should be directed at knowledge-building with the help of others which would eventually lead to a knowledge-based economy, as without any creative knowledge there will be no solid foundation of a country. Diplomats should not therefore take a myopic view of economic diplomacy. It has already been stated that without an effective interacting economic diplomacy between countries, general inter-State diplomacy will have a fragile foundation; the examples of developing countries sufficiently evidentiary of this statement.

Without any effective reciprocity between the partner countries, there may not be any successful and long-lasting economic relationship between them. Economic diplomacy showed this progress through stages: initially, almost “unilateral”—seeking help from the developed by the developing countries, and gradually, through the learning—knowledge-building process, proper reciprocal arrangements will be effective. Although during the initial period, economic diplomacy between a developed and developing country is almost unilateral, a degree of reciprocity may nonetheless be imported into the process by providing some services or materials, determined by the parties themselves as well as by the developing country concerned.

The above-mentioned point deserves further attention because, historically, since the decolonisation days, in the name of economic diplomacy, majority of the developing countries tend to reciprocate with developed countries at the expense of their natural resources which policy should be urgently reviewed and reconsidered. Natural resources and human resources are the best form of wealth that a country may have. Economic diplomacy between two developed countries is usually based on a high degree of reciprocity and such reciprocity proves to be beneficial for both parties by virtue of their having effectively engaged in mutual sharing of knowledge and building of new knowledge. This is one of the reasons why effective knowledge-based resource building between two developed countries takes place at almost all relevant levels including educational and scientific research programmes between universities in their countries.

On the other hand, economic diplomacy between two developing countries of similar economic standing at a bi-lateral level can also be interesting and effective. Joint programmes of socio-economic development with the assistance of a developed country may prove to be useful and cost-effective. Economic diplomacy is not all about developing rapport with developed countries or other countries for creating the scope of export trade; it should be effectively utilised for internal socio-economic development of a country. The stronger a country at the level of socio-economic level, the better.

Regional economic diplomacy in various regions of the world has become proactive particularly over the past five decades or so although its origin may be traced in the Zollverein in Germany or the Benelux Union or the Nordic Council before the current regional economic integrations came into being. Regional economic integrations have their merits as well as disadvantages, and diplomacy between regional economic integrations or between them and the non-member countries have certain special features and characteristics which have received attention in a separate chapter of this work. The crucial point for diplomats to consider whether regional economic integrations hinder trade liberalisation process in the world whereby not all countries may have market access to integrated markets even though their products are of the required standards and competitive in price.

Economic diplomacy has yet another dimension—its full play at an international level with a view to discussing matters of “concern” in relation to international economic issues. At such platforms (ECOSOC, WTO, UNCTAD and UNIDO, etc.) diplomats must develop framework agreements and eventually binding conventions. Economic diplomacy is not merely concerned with negotiations of commercial issues; the process of strengthening the economy of the country is also one of its most important aspects.

Economic diplomacy is not merely concerned with negotiations of commercial issues; the process of strengthening the economy of the country is also one of its most important aspects. This issue is particularly relevant to developing countries, but developed economies also go through a continuing development process. In other words, economic diplomacy at a bi-lateral level should be a continuing phenomenon; in this process proposals for infrastructural development, private foreign investments, capacity building, etc. must also be negotiated. Dynamism in ideas should be the driving force behind economic diplomacy.

Economic diplomacy is based on the capacity of parties to create opportunities and in this process the status of the parties should not assume much importance for it is an exercise which is based on creativity. A developing country’s diplomat can be as creative; indeed, many of them are. The product of creativity may be progressively achieved through “capacity building”.

One of the basic differences between economic diplomacy and the “mainstream diplomacy” is that whereas the latter is primarily concerned with developing and maintaining inter-State relationships, economic diplomacy is a more specific form of diplomacy with specific objectives like those of applied sciences—whatever may be agreed upon through economic diplomacy should be implemented in a tangible form—industry or anything that will add to the development process, in the State. Economic diplomacy is concerned with reality based on a country’s capacity—intellectual, industrial, scientific, etc.

Creativity in relation to the best utilisation of the reserves of a country—human and natural—is one of the important objectives of economic diplomacy at an inter-State level. Economic diplomacy is not solely concerned with gaining economic or commercial benefits for others; one of its principal objectives is to create and maintain rapport with other countries.

Like mainstream diplomacy, economic diplomacy is to be operated as a vehicle to reach a predetermined destination, which is the creation and maintenance of bi-lateral commercial relationship for mutual interest. The term “mutual interest” should not be misconceived. “Interest” in this context would mean economic and commercial interest,³ of both the sending and receiving States. The term “mutual” in this context would mean “performed by each of the parties concerned towards or with regard to the other(s); reciprocal.”⁴ This meaning is relevant when both the parties to an agreement are of similar standing, economically, commercially or otherwise; but when the parties are not so, “mutuality of interest” would not be achieved, and in that situation, the lesser party should not take a subservient role but try to negotiate businesses in a way whereby both parties would benefit, for example, a developing country, instead of looking for an opportunity to import foreign products, should propose a BOT (Build, Operate and Transfer) programme with that country whereby the richer country would set up the industry in the lesser (developing country) and train indigenous people so that eventually they are able to manufacture the product and export to that country on mutually beneficial terms. The lesser country will have to import that product only for a short period of time. There is always room for well thought-out strategies. It is important to...

Table of contents

• Cover
• Front Matter
• 1. The Nature of Economic Diplomacy and Foreign Policy-Making
• 2. The Focus of Economic Diplomacy Foreign Policy-Making
• 3. The Tenets of Economic Diplomacy and Foreign Policy-Making
• 4. The Boundaries of Economic Diplomacy and Foreign Policy-Making
• 5. Economic Diplomacy and Commercial Diplomacy
• 6. Emerging Markets and Diplomacy
• 7. The Changing Pattern of International Economic Diplomacy
• 8. Negotiating Techniques in Economic Diplomacy
• 9. Economic Diplomacy in Crisis
• 10. International Trade Practice
• 11. Economic Diplomacy at International Fora
• 12. Economic Diplomacy and Private Foreign Investment
• 13. Developing Countries and Economic Diplomacy
• 14. The Role of Non-Governmental Organisations in Economic Diplomacy
• Back Matter