Diplomacy: Theory and Practice, 5th ed.  –  Online updating pages

Chapter 14: Economic and Commercial Diplomacy

pp. 210-3, rising priorities: One of the most eloquent illustrations of why economic and commercial diplomacy has become so important in recent years is the World Bank’s graph of trade (exports plus imports) as a percentage of Gross Domestic Product (see Further reading below). For the world as a whole, this shows a remarkable steady increase from only 25 per cent in 1960 to 57.9 per cent in 2015, seriously interrupted only by the financial crisis in 2008. In the case of individual countries, the trade/GDP ratio, sometimes known as the ‘trade openness ratio’, measures the extent of their integration in the world economy. As the same page shows, even the traditionally self-reliant United States has seen its trade/GDP ratio more than triple – from 9 per cent in 1960 to 28 per cent in 2015. See also the more detailed stats given in the WTO’s ‘Trade profiles’ (Further reading below). Another good index of integration in the world economy is the rise in the ratio of foreign direct investment to GDP (see references on FDI in Further reading below), which has given its own impetus to economic diplomacy. In this connection, it is hardly surprising that in September 2016 – with more than 10,000 companies operating in the UK employing over 140,000 workers – Japan used both the G20 summit in China and its ambassador in London to warn the British government of the risk to these companies should the UK’s departure from the EU restrict their access to the European ‘single market’. Japan’s total outward stock of FDI rose from only 4.5 per cent of GDP in 1995 to 29.7 per cent in 2015 (UNCTAD … Japan).

pp. 210-12, USA: ‘I made export promotion a personal mission’, Hillary Clinton, US Secretary of State, 2009-13 (Hard Choices, p. 515).

p. 211, lines 4-5 down, embassy responsibility for the negotiation of commercial treaties: This needs qualifying. In 1917, Prince Lichnowsky – German ambassador at London on the outbreak of war in 1914 – writing on what was needed for entrants to the diplomatic career in a vein still typical, said: ‘A knowledge of the commercial side of political economy is useful though not essential, as the Consulates generally do all the work necessary in this field; on special occasions, as for instance when commercial treaties are being negotiated, special representatives are sent by the Foreign Office’ (Lichnowsky, p. 85 – see Further reading).

p. 212, line 7 down (excl. Box): An important index of the high priority attached to commerce is the tendency in recent years for the foreign ministries of major aid donors to absorb any separate international ‘development’ ministry. The purpose of this manoeuvre is to enable the foreign ministry to better bend national aid-giving to commercial (and political) interests. The most recent example of this is the British government’s announcement in June 2020 that its Department for International Development was to be absorbed by the Foreign and Commonwealth Office. This was controversial. Furthermore, such administrative decisions do not always turn out as planned.

p. 214, Embassy tasks …: In elaborating on the ‘reporting‘ function (line 9 up), it is most important to add the gathering of scientific and technical knowledge of economic as well as military significance, sometimes by stealthy means, as I have also noted on the updating page for the chapter on ‘Secret Intelligence’. Chinese embassies have achieved greatest notoriety for this work but they are not alone. I have added two references (Hannas, Roper) on this subject in Further reading below. For others, simply search ‘economic espionage’ and ‘foreign economic collection’ (the American term).

p. 215, economic warfare: ‘Economic warfare,’ says Kasnacheev, ‘was the overriding purpose of the other big office

[in the Soviet mission in Rangoon in the late 1950s] – the Economic Mission’ (Inside a Soviet Embassy, p. 72; also pp. 135-6). The other was the Trade Mission.

p. 217, line 13 down, UK Trade and Investment as commercial section of British embassies by another name: In 1976, UKTI was replaced by a new government department, the Department for International Trade, the post-Brexit flagship function of which is to seek trade agreements with non-EU countries. Its many offices abroad remain housed in British embassies or embassy compounds, now nattily described as ‘One-HMG platforms’ [HMG means ‘Her Majesty’s Government’]. Plus ça change …

p. 222, Box 14.4: Five other states (at least) should be added to this list: Cameroon, where Yaoundé provides the seat of government but the business capital is the port and larger city of Douala; and the Republic of the Congo, where Brazzaville is the national capital and Pointe-Noire (also a port city) is its economic counterpart. I am grateful to Julio Carlos Abrao for alerting me to these additional examples. It is worth noting that the American Chamber of Commerce in Cameroon is headquartered in Douala and an ‘Embassy Branch Office’  (originally a consulate) is located there. In addition: Morocco, where the seat of government is Rabat and the business capital Casablanca; New Zealand, where Wellington is the capital and Auckland is the business capital; and Belize, where the capital since 1970 has been Belmopan but the business centre remains in the old capital, now Belize City. For these last three examples I am grateful to Monika L. Sheldon-London, Robert Aino, and Javier Aguilar Morales respectively.

Further reading: additions and links

Badel, Laurence, ‘France’s renewed commitment to commercial diplomacy in the 1960s’, Contemporary European History, 21(1), February 2012

Barder, Brian:  Interview (British Diplomatic Oral History Programme), 6 March 1997, pp. 26-9

[UK] Department for Business, Innovation and Skills, ‘Openness to trade’ (BIS, 2015)

Department for International Trade (DIT) (n.d.)

Frontini, Andrea, ‘Advancing a multi-level system of European commercial diplomacy: is there a role for the EU?’ European Policy Centre, Policy Brief, 18 September 2013

FCO memo to House of Commons Foreign Affairs Select Committee, ‘Global Britain’, 12 March 2018

The Guardian, ‘Japanese ambassador warns companies could leave UK over Brexit’, 5 September 2016

Hannas, William C., James Mulvenon and Anna B. Puglisi, Chinese Industrial Espionage: Technology acquisition and military modernization (Routledge, 2013)

Kaznacheev, Aleksandr, Inside a Soviet Embassy: Experiences of a Russian diplomat in Burma (Hale: London, 1962)

Lichnowsky, Prince, ‘Diplomacy and democracy’, in Heading for the Abyss: Reminiscences by Prince Lichnowsky (Payson & Clarke, 1928); first published in the Berliner Tageblatt, summer 1917

National Audit Office, ‘One HMG Overseas ‘, March 2015

OECD, ‘Foreign Direct Investment (FDI) Statistics – OECD Data, Analysis and Forecasts’ (OECD, 2016)

Roper, Carl, Trade Secret Theft, Industrial Espionage, and the China Threat (CRC Press, 2014)

Ruël, Huub and Lennart Zuidema, ‘The effectiveness of commercial diplomacy: a survey among Dutch embassies and consulates’, Discussion Papers in Diplomacy, no. 123, March 2012 [A very thorough piece of research.]

Ruël, Huub (ed.), Commercial Diplomacy and International Business: A conceptual and empirical exploration (Emerald: 2012)

UNCTAD, World Investment Report 2016

UNCTAD, World Investment Report 2016. Country Fact Sheet: Japan

World Bank, ‘Foreign direct investment, net inflows (% of GDP)’ [1970-2015] (World Bank, 2016)

World Bank, ‘Trade (% of GDP)’ [1960-2015] (World Bank, 2016)

World Trade Organization, ‘Trade Profiles’ (WTO, 2016)