Economic Diplomacy and International Relations

Some consider economic diplomacy to be a fairly recent addition to the work of professional diplomats, who previously tended to concentrate almost exclusively on political tasks. Commercial work, like other functional sectors, consular or cultural, was traditionally viewed with disdain, and represented a secondary career track for high-flying diplomats. However, in a globalised and interconnected world, economics is more important than ever as a determining element in international affairs. It is also a sizable component of relations between states. Thus, economics has moved to center-stage in diplomacy and now extends beyond ‘commercial diplomacy’. Aside from foreign trade, it includes external investments, financial flows, aid, bilateral and multilateral economic negotiations and technology exchanges, which all ‘brand’ countries and contribute to image-building.

Economic diplomacy is an active and interconnected factor in integrated diplomacy, where the lines of division between functional areas are blurred, and each sector influences the other.

In some ways, we have evolved back to the earliest recorded days of relations between kingdoms and principalities, when commerce was an important motivation for reaching out to other foreign entities. It led ancient civilizations to exchange spices, silks and other precious commodities with distant lands, thereby creating the norms and procedures within which the exchanges could be carried out. These were the first ‘international’ accords and treaties that were not only concerned with conquest and territory, but with mutually beneficial commercial dealings within a legal framework.

This portal explores the multiple dimensions of modern economic diplomacy as a component of international relations.

The portal's principal content is derived from the economic aspects of diplomatic activity analysed at length in Ambassador Kishan Rana's book, "Bilateral Diplomacy", published by DiploFoundation, Malta, 2002.

Chapter 4: ‘Economics and Diplomacy’

This chapter sketches the importance of economics in diplomacy. It looks at the way economic work is handled by different governments, some through integrating commerce and foreign affairs, others by making the foreign ministry responsible for aid programs, and many more through enforcing a separation of economic and external affairs. It outlines the methods used in economic promotion, and goes on to consider the issue of country image and ‘branding’, which is closely connected with economic as well as political activities abroad, especially as national stereotypes are the dominant way in which foreign countries and peoples are perceived by all of us. The role of innovation in diplomacy is also sketched.

Chapter 5: Trade, Investments, Aid and Technology

These are identified as the four pillars of economic work and are examined in detail from the perspective of diplomacy practitioners. Trade, especially export promotion, is a primary external affairs activity, whether it is handled by professional diplomats or by commercial specialists who are aided by the diplomatic machinery. In a similar fashion, the mobilisation of foreign direct investments (FDI) is a goal pursued by all countries, developing and developed. Actual methods used in these activities are illustrated with examples. The chapter also examines the gap between the lip service that many pay to economic diplomacy and the existing weaknesses in implementing it in a number of developing states.