Economic diplomacy requires application of technical expertise that analyze 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 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 – All government agencies that are involved in international economic mandates are players in economic diplomacy (though they often do not describe them as such). Further, non-state actors such as non-government organizations (NGOs) engaged in international economic activities are also players in economic diplomacy (Bayne and Woolcock (eds) 2007). 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.
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.
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.
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