Economic Diplomacy

Diplomacy deals with the management of relations between states and relations between states and other actors in world politics (Woolcock & Bayne, 2011). Generally, it is the whole mechanism of representation, communication and negotiation though which entities with standing in world politics implement their foreign policy, more specifically, it is the way how states manage their foreign relations and support their national interests abroad via official spokespersons of the state – ministers, ambassadors and envoys; without resort to coercive measures or propaganda. Diplomatic means lead to achieving goals of states without the use of violence, through negotiations between states in order to achieve the stated goals (Berridge, 2010; Roach, Griffiths & Callaghan, 2014).

Economic diplomacy focuses on state’s economic goals, its international economic interests, respectively. Paradoxically, economic diplomacy has a greater width than diplomacy itself, concerns more actors and interferes even in domestic politics. Because of the increasing economic interdependence caused by globalization, economic diplomacy is complex, and it is part of national policies of every state. The main concern of economic diplomacy is the actions of all government members and agencies with economic responsibilities, reaching to the international environment, as well as the actions of non-state actors, whether they act abroad as independent players on their own or shape government policies (Woolcock & Bayne, 2011).

The state is however the primary actor in economic diplomacy (Van Bergeijk, Melissen &

Okano-Heijmans, 2011). The Czech Ministry of Foreign Affairs defines economic diplomacy as ’a set of measures intended to promote government policy in the field of the movement and exchange of goods, services, labour and incoming and outgoing investments’ (Ministry of Foreign Affairs of the Czech Republic [MFA], 2010, p. 471). Economic diplomacy is involved in creating a positive image of the Czech Republic in the world and plays an important role in the process of formulating, promoting and protecting the interests of the country in the European Union institutions and other international (economic) organizations (MFA, 2010).

With the increasing economic dependence of states on each other already mentioned, growth in international trade and the whole development of the international environment and international relations, economic diplomacy is becoming more and more important in the last decades and it happens at the expense of political diplomacy. And even after the 11th of September when the security issues have again been raised and then even more discussed in

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recent years in the context of the migration crisis and terrorism in Europe, the importance of economic diplomacy did not drop and economic targets remain among the top priorities of foreign policy for countries with open, external-dependent economies (Ilie & Dumitriu, 2017;

Woolcock & Bayne, 2011). What is more, often they blend in domestic political goals. The growing interdependence in the globalised world wipes out the differences between domestic and international politics in general and the economic diplomacy more and more depends on national decision-making processes. Apart from the complex of interdependencies, the number of players competing to influence the results of these relationships grows as well (Saner & Yiu, 2003). Therefore, Woolcock & Bayne (2011) distinguish three kinds of contradictory tensions governments must cope with in economic diplomacy: between economics and politics, between domestic and international pressures, and between government and other forces. The tension between international economics and international politics of a state is given by the fact that states are rather political units than economic ones. The impact of this tension is always present, and governments use a variety of methods for reconciling it. It is believed that whatever other states do, it is beneficial for a country to remove trade barriers to external competition; however, that meets political obstacles arising from domestic political pressures and protectionism (Oatley, 2015; Woolcock & Bayne, 2011). The second major tension between domestic and international pressures represents the basis for all economic diplomacy today and hinders domestic decision-making by complicating the position of foreign ministries among other economic diplomacy actors. Finally, the last significant tension is between state and other non-state forces, when decisions taken by the government affect business and the domestic market and the states must now also negotiate with foreign firms (Van Bergeijk et al., 2011). This tension has greatly advanced in last years, especially during the financial crisis in 2008 (Woolcock & Bayne, 2011).

As states cannot be considered unitary actors in economic diplomacy, not only systemic factors shape the economic diplomacy. Woolcock and Bayne (2011) identify six distinct factors forming the economic diplomacy of a state: three systemic, two domestic and one ideational.

The systemic factors include relative economic power – bigger economies usually have bigger economic power; international organizations or regimes (such as World Trade Organisation);

and markets, where the decisions in financial and monetary policies can immediately affect financial markets. But in order to gain more comprehensive view of the structure of state, two further domestic factors must be considered. Firstly, the interests are nowadays no longer simply national – for instance sector interests to a great extent shape national preferences and

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thus economic diplomacy. All the different interests of various social groups influence national approaches to economic topics. Secondly, in the domestic decision-making usually there must be consensus more institutions, especially when ratifying international agreements (Woolcock

& Bayne, 2011). To give an example, in the Czech Republic, according to the Regulation 144/1993 Coll., the international agreements are divided into three categories – presidential, government, and departmental, where presidential international agreements on the most serious issues are negotiated by the president, but must also be approved by the Parliament of the Czech Republic. In addition, the division of these powers itself is part of the domestic decision-making too. Finally, the last factor is the personal set of beliefs of the negotiator. Everyone has their own convictions and ideas which can impact upon economic diplomacy and shape how the negotiator approaches negotiations (Woolcock & Bayne, 2011). And these strong beliefs and their influence are evident, as it will be shown later, in the case of Czech President Miloš Zeman.

The main functions and tasks of economic diplomacy are to create conditions for the fulfilment of the economic interests of the state abroad and to support the commercial and investment activities of national business entities when entering foreign markets. Moreover, economic diplomacy can encourage foreign investors to the Czech market. In this respect, economic diplomacy is to a certain extent also a means of realizing interests of the domestic economic policy of the state, especially its pro-export policies, policies linked to the inflow of foreign investments, and programs to support the investment of domestic entrepreneurs abroad (Štouračová, 2008). In more detail, at the macro level economic diplomacy focuses on multilateral diplomacy aimed at creating conditions for the fulfilment of economic interests of the state, contributing to improving the functioning of world markets by promoting optimal trade and political rules, using participation in meetings of international economic institutions to influence the rules of functioning of international economic processes; as well as bilateral diplomacy focused on relations with specific states, contractual negotiations, presentation of the state as an attractive destination. At the micro level, economic diplomacy is focused mainly on bilateral diplomacy and focuses primarily on supporting domestic business entities in relevant foreign markets (Štouračová, 2008). In addition, between multilateral and bilateral agreements there is also the regional dimension of economic diplomacy, offering a quick way of opening markets, easier to accept as it occurs within a regional group of countries with similar preferences and level of development (Woolcock & Bayne, 2011). The Czech Republic is a member of the Visegrad Group, also known as the Visegrad Four, uniting four countries in the

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Central European region – the Czech Republic, Hungary, Poland and Slovakia (International Visegrad Fund, n. d.). Last, there is the fourth level of cooperation – plurilateralism. Plurilateral level of economic diplomacy is a stage between the regional and multilateral levels. Plurilateral bodies are for example the OECD, the G8 and G20 or the Commonwealth. The Czech Republic is a member of the OECD, since December 1995 (Organisation for Economic Co-operation and Development [OECD], 2018). Organisations on this level of economic diplomacy provide a forum for the member governments and moreover, they enable governments with similar preferences to develop agreed positions for negotiation in multilateral context (Woolcock &

Bayne, 2011).