Commercial diplomacy

Commercial diplomacy is a method of diplomacy. It concerns an activity conducted by public and private actors with diplomatic status to support business promotion between a home and host country.[1] It aims at generating commercial gains in the form of trade and inward and outward investment by means of business and entrepreneurship promotion and facilitation activities in the host country.[2] Commercial diplomacy is pursued with the goal of gaining economic stability, welfare, or competitive advantage.[3]

Definition

In the literature the concepts of Economic diplomacy and commercial diplomacy are often used interchangeably.[3] Definitions of both concepts vary, and consequently the relationship between them is also described differently. Some authors argue that commercial diplomacy is a subset of economic diplomacy.[4] It is certain, however, that both kinds of diplomacy are "irrevocably intertwined" and thus "distinct [but] obviously closely related to [each other]".[5]

Purpose

Commercial diplomacy emphasizes the government's role, being defined as "a government service to the business community, which aims at the development of socially beneficial international business ventures".[6][7] It is "the work of diplomatic missions in support of the home country's business and finance sectors and includes the promotion of inward and outward investment, as well as trade".[8] Commercial diplomacy thus includes "all aspects of business support and promotion" including investment, tourism, R&D, and intellectual property.[9]

Commercial diplomacy is designed to influence foreign government policy and regulatory decisions that affect global trade and investment. It is concerned with government regulations and actions that affect international commerce—including standards in areas such as health, safety, the environment, and consumer protection; regulations covering services such as banking, telecommunications and accounting; competition policy and laws concerning bribery and corruption; agricultural support programs; and industrial subsidies. Potter (2004) argues that commercial diplomacy is a value-creating activity due to its usefulness in dealing with managerial and government concerns.

In this context, commercial diplomacy is profitable in that it makes exporting and operating abroad easier; it is a valuable instrument for export promotion and operating abroad; it enables companies to perform tasks abroad more quickly and increases the amount of exports and company results by providing information about rules, regulations, culture, public tenders and the market of the host country; by providing support during the partner search; and by providing assistance in trade disputes, fairs, and missions. Especially for companies that have financial limitations, access to reliable information and a broad network abroad are essential.[10][11]

Practitioners

Practitioners of commercial diplomacy are usually trade officials who are charged with negotiating international trade and investment agreements and resolving policy conflicts that have an impact on international commerce. Officials from departments or ministries responsible for foreign affairs, finance, agriculture, industry, labor, health, the environment, the regulation of banks, telecommunications, air transportation, or the licensing of professionals can be commercial diplomats.[12][13] Advocacy tools include letters, testimony, white papers, speeches, op-eds, phone calls, and personal visits to key stakeholders and decision makers.

Private sector

Some authors also include the role of the private sector.[14][15] In their definition, commercial diplomacy contains “the work of a network of public and private actors who manage commercial relations using diplomatic channels and processes”.[14] For example, the Albright Stonebridge Group describes itself as a "leading commercial diplomacy and strategic advisory firm".[16]

Chambers of commerce and NGOs are examples of the private actors involved in commercial diplomacy.[17]

Activities

Traditional commercial diplomacy activities include networking, intelligence, image campaigns and support. These activities are shown in the table below.

Network activities Intelligence Image campaigns Support
Developing business and government contacts Gathering and disseminating commercial information Promoting goods and services In negotiations; contract implementation and problem-solving
State visits Market research Participating in trade fairs, introducing potential exporters Gathering export marketing data
Buyer-seller meetings Reporting to home country Sensitizing potential foreign investors Supervision of violations of IPRs and contracts
Match-making Consultant to both countries Gathering export marketing data Advocacy
Search for partners, distributors, investors, lawyers Image studies, joint scientific research Tourism promotion Coordination of legal action
Personal network Awareness campaigns

Other activities for commercial diplomacy and rationales that companies need are: need for access to reliable and neutral business information; credibility and image support in foreign markets; partner search; conflict handling; support of home country delegations (state missions); strategic concerns (e.g., energy).[18]

See also

References

  1. ↑ Naray, O. (2008). "Commercial Diplomacy: A Conceptual Overview." Conference paper for the 7th World Conference of TPOs – The Hague, The Netherlands.
  2. ↑ Ruel, H. J. M. and Visser, R. (2012). "Commercial diplomats as corporate entrepreneurs: explaining role behavior from an institutional perspective", International Journal of Diplomacy and Economy.
  3. ↑ 3.0 3.1 Reuvers, S. and Ruel, H. J. M., "Research on Commercial Diplomacy: Review and Implications" in Commercial Diplomacy and International Business: a conceptual and empirical exploration, Ruel, H. J. M., ed. (Advanced series in Management, Emerald, 2012).
  4. ↑ Okano-Heijmans, M., and Ruel, H. (2011). "Commerciële diplomatie en internationaal ondernemen: Koopman versus dominee in de nieuwe economische wereldorde", International Spectator, 65(9), 463-467.
  5. ↑ Berridge, G. J., A Dictionary of Diplomacy (Basingstoke: Palgrave, 2001): p. 128.
  6. ↑ Kotabe, M., and Czinkota, M. R. (1992). "State government promotion of manufacturing exports: A gap analysis", Journal of International Business Studies, 23(4), 637-658.
  7. ↑ Naray, O. (2010). "Commercial Diplomats in the Context of International Business", The Hague Journal of Diplomacy, 6, 121-148.
  8. ↑ Ozdem, M. I. (2009). Government Agencies in Commercial Diplomacy: Seeking the Optimal Agency Structure for Foreign Trade Policy. North Carolina State University, p. 8.
  9. ↑ Naray, O. (2010). "What a good commercial diplomat has to know and be capable of", Exchange: The Magazine for International Business and Diplomacy, 2 (December 2010): 8-9.
  10. ↑ Busschers, S. (2012). "The Value of Commercial Diplomacy from an International Entrepreneurs perspective", in Commercial Diplomacy and International Business: a conceptual and empirical exploration, Ruel, H. J. M., ed. (Advanced series in Management, Emerald, 2012).
  11. ↑ Potter, E. H. (2004). "Branding Canada: The Renaissance of Canada's Commercial Diplomacy", International Studies Perspectives, 5, 55-60.
  12. ↑ Rose, A. K. (2005). "The foreign service and foreign trade: embassies as export promotion", World Economy, 30(1), 22-38.
  13. ↑ Lee, D., and Hudson, L. (2004). "The old and the new significance of political economy in diplomacy", Review of International Studies, 30, 343-360.
  14. ↑ 14.0 14.1 Lee, D. (2004). "The Growing Influence of Business in U.K. Diplomacy", International Studies Perspectives 5, p. 51.
  15. ↑ Stadman, A. (2012). "Competitors or Collaborators: a comparison of Commercial Diplomacy policies and practices of EU Member States", in Commercial Diplomacy and International Business: a conceptual and empirical exploration, Ruel, H. J. M., ed. (Advanced series in Management, Emerald, 2012).
  16. ↑ Chang, Ben (1 July 2013). "Senior Additions Strengthen Albright Stonebridge Group As Leading Global Commercial Diplomacy Firm".
  17. ↑ Saner, R. and Yu, L. (2003). "Discussion Papers in Diplomacy: International Economic Diplomacy; mutations in post modern times". Netherlands Institute of International Relations ‘Clingendael”.
  18. ↑ Kostecki, M., and Naray, O. (2007). Commercial diplomacy and international business (Den Haag: Nederlands Instituut voor Internationale Betrekkingen Clingendael, April 2007): p. 41.