Tuesday, July 3, 2012

Globalisation, Economic Statecraft and domestic policy making

How interconnected are the world's of foreign policy, diplomacy and economic policy? While traditionally foreign policy has been associated with strategic affairs of security and political affairs, globalisation has forced countries to rethink their strategies and priorities.

An interesting concept of "Global Economic Statecraft Day" has been initiated by the US Department of State. Though the Department of State, as I understand, does not deal with issues of international trade, the introduction of this concept is a recognition of the inextricable link between globalisation, economic interests and foreign policy.

Speaking on the occasion the President of the U.S. explained:
" In the 21st century, our nations are connected like never before. In our global economy, our prosperity is shared. That’s why, as President, I’ve committed the United States to a new era of engagement with the world, including economic partnerships that create jobs and opportunity for all our citizens.
It’s part of our larger effort to renew American leadership. And I thank Secretary Clinton, and all of you, for making “economic statecraft” a pillar of American diplomacy. Because just as we have to harness our economic strengths to advance American leadership in the world, we need to harness our foreign policy to advance our prosperity here at home."
The U.S. Secretary of State explained the rationale of the concept here:
" To meet the challenges of the 21st century we needed to start thinking differently.  So last fall, I announced the State Department’s ambitious Economic Statecraft agenda, which is putting our diplomacy to work to strengthen our economy at home and produce real results for the American people, harnessing the forces of global economics to strengthen our diplomacy abroad."
Thus, the main pillars of the concept, inter alia, are strengthening U.S.exports, access to foreign markets, promoting local jobs, encouraging investment into America and promoting peace and security through economic prosperity.

The US Department of State website provided a succinct analysis of the rationale for the concept:
"1. We fight for a level playing field for American businesses around the world.When the competition is fair, American companies thrive. When it isn't, we push back. We protect companies from discrimination, unfair trade practices and barriers behind borders. Earlier this year, when a small bedding manufacturer in the Northwest sought help appealing a Canadian customs ruling we felt violated NAFTA rules, our diplomats led the charge. By fighting for duty free access for this company's exports, we saved over 1,500 American jobs.

2. We open new markets to American trade and investment. Last year we teamed up with our colleagues at the U.S. Trade Representative's office to pass three major Free Trade Agreements (FTAs). Our FTA with South Korea alone is projected to deliver over $11 billion in new U.S. exports while supporting more than 70,000 American jobs. The next batch of FTAs will be even better: we're negotiating a high-quality Trans-Pacific Partnership (TPP) agreement that will create a free trade market covering 40 percent of global trade and raise the bar for labor, environmental, and competitiveness standards.

3. We promote American exports. Two years ago, President Obama announced theNational Export Initiative to double U.S. exports by the end of 2014. We partnered with our colleagues across the government and sprang into action. Last year, U.S. exports reached a record $2.1 trillion, a 33.5% increase since the initial announcement that helped create over 1.2 million new jobs.

4. We protect American intellectual property (IP). For decades, we have helped ensure that our innovators are rewarded fairly for their ideas. We are also enlisting new players to the cause -- including a coalition of private companies that are leading by example and fighting IP theft within their own supply chains. That helps American producers, innovators, and workers.

5. We make regulations make sense. Nothing is more frustrating than bureaucratic red tape. We are working to harmonize, when possible, international regulatory standards to reduce costs and open new doors for American businesses. It may not make the headlines, but it does create jobs.

6. We encourage the world to invest in America. Foreign investment is responsible for more than five million American jobs, and every additional dollar of foreign investment means more jobs at home. That's why we are working hand-in-hand with the Department of Commerce, as well as state and local governments across the country to attract money from overseas for projects large and small. For example, we helped coordinate a Canadian automotive company's $20 million investment in Michigan, which created over 100 American jobs.

7. We help American businesses take part in on growth around the world.Growth in the developing world is a goal for USAID -- it is also an opportunity that we're helping American companies to seize. For example, as Brazil invests billions to host the World Cup and Olympics, we just signed a deal that will help U.S. companies compete for lucrative infrastructure contracts.

8. We connect our cities to the world. We've negotiated Open Skies air transport agreements with over 100 partners countries. Each agreement better connects businesspeople and tourists to the American market by opening opportunities for U.S. and international airlines. The direct flight between Memphis and Amsterdam alone, for example, injected $120 million into Tennessee's economy and created over 2,200 local jobs.

9. We promote tourism to the United States. Tourism supports over 7.6 million American jobs. In 2011, over 62 million international visitors contributed a record $153 billion to our economy. That means our consular officers aren't just issuing visas, they're creating jobs. So, we're working hard to meet skyrocketing demand for visas: last year, we issued 7.5 million tourist visas, nearly 20 percent more than we did in 2010.

10. We promote global peace and security -- and that's good for America's bottom line. History teaches that stability pays better dividends than strife, and cooperation is more lucrative than conflict. We invested about $13 billion in postwar Europe through the Marshall Plan. Now, our annual exports to the EU total $240 billion."
I found the concept itself quiet novel and interesting. To me, it signifies the following:

1. The recognition of the growing importance and primacy of international economic law and policy in overall national decision making.

2. With increasing interconnectedness and globalisation, foreign policy and strategy is taking a new meaning. Economic foreign policy, as compared to the traditional politico-security foreign policy paradigm, is the future. Recognising that the benefits of globalisation would reach a few to the detriment of others, the concept of "equitable" Economic statecraft too must be explored. How do we spread the benefits of international trade to a larger population? How does the State address the interests of the "losers" in the globalisation process? The emphasis on equitable economic statecraft would carry with it more stakeholders.

3. A country, even in a globalised world, pursues its national interest. In this policy access to markets for US businesses, US jobs at home, level playing field for US companies abroad, protecting intellectual property of US companies are they key strands. This is positioned in the context of a globalised world where these national interests are in consonance with global rules. Hence, to take a few lessons from here - Encouraging your own industry promoting your own exports, promoting domestic jobs and trying to gain access to foreign markets from your own national companies is seen as a legitimate foreign policy agenda. Are these all compatible with WTO rules? While the specifics of a program will determine its WTO compatibility, these principles, if applied in a non-discriminatory manner, would be permissible. Creating employment and promoting globalisation are seen as compatible objectives.

4. Another issue in promoting this strategy is the close co-ordination of government officials at home, abroad and business interests. Business interests are viewed as co-terminus with national interests - "seizing the opportunity to channel the collective might of diplomats, development experts, and businesspeople to create economic opportunities for the American people." Thus, if a US company's interests are affected abroad, the US Government takes the responsibility to protect its interests. If a US company faces a discriminatory measure in another country, it is seen as much a problem for the company as for the country. Does this mindset exist in other countries, especially developing countries? In many developing countries there is deep distrust between the bureaucracies and business. For many years, they have been on opposing sides. Protecting business interests is seen as taboo, and many times, against the larger public, national interest. Business interests are seen as "profit making" entities and detrimental to larger public interest. Business interests are also seen as representing a small minority while the State represents the marginalised majority. How would this national mindset play out in a globalised world? Is there a need for closer coordination of business, government and expert interests to further one's national agenda? 

5. This policy puts economics at the forefront of foreign policy which in a way is good. However, if this is good policy for the U.S. then it should be perceived by the U.S. as a good policy for other countries to adopt to protect their domestic industries. Different standards cannot be applied to other countries that follow the same principles of protecting their domestic business interests, seeking access to foreign markets as well as promoting local jobs. However, there is a principle that these should be in consonance with WTO rules.

Overall, an interesting policy initiative in the context of globalisation and domestic policy making.

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