Rana/20081 Economic Diplomacy--Basics Kishan S Rana

Rana/ Role of Economics It lies at the center of diplomacy. This was always true in the historical past (e.g the Amarna archives of Middle Egypt BC).  Today economics often determines relations (examples: US-China, US-India)  FTAs, CECAs, and accords set the framework

Rana/ Who Handles Economic Work?  UNIFIED – Australia, Canada, Sweden.  PART-UNIFIED – UK, Japan (only for aid).  THIRD AGENCY – Singapore.  COMPETITION – India, Mexico, Thailand.  MFA ABDICATION – China, Germany. There are other variations.

Rana/ (Cont) Stages Progressive stages, exist concurrently  Salesmanship: Pushing exports, attracting FDI, focus on market entry, brand credibility, self- introduction  Networking: Building local connections, links between counterpart agencies, public diplomacy, broad outreach  Regulation: Negotiating accords on DTA, investment protection, trade preferences, FTAs & RTAs; enforcement

Rana/ (Cont)  Advancement of national economic interest is at core of external relations  Turf battles leave only losers  Winners practice ‘whole of government’ methods, with unified policy direction  Embassies abroad are essential action tools  High opportunity cost of embassy under-use

Rana/ Country Promotion & Image  Need to show country brand in ‘powerful, attractive and differentiated way’; but must be rooted in reality  Image affects all aspects of external dip  Many pursue branding and re-branding  Many examples, results not always clear

Rana/ Continued  ‘Brand audit’ establishes base line, need honesty, objectivity  Public-private partnerships work best, both in home and target country  Using local partners adds to credibility  Should guard against over-marketing

Rana/ Continued  ‘India Brand Equity Fund’ is innovative PPP device -- in comparison with other countries  Perhaps need review to optimize it further  Some integration with tourism marketing also worthwhile  Indian media have produced innovative models of their own

Rana/ Promotion Methods  Image “audit”.  Using both wide catchment creation and pursuit of specific targets.  Using locals + “success stories”.  Outreach, integrating all diplomatic sectors, from culture to consular services.  Mobilizing regional approach.

Rana/ FDI Promotion  Important study by the World Bank in 1991, updated in 2000, on different methods used by countries, and the “success formula”.  Main conclusion: the best method has been targeted pursuit of selected targets + steady persuasion.  We can call this “hunt & rifle shot” method.  Experience of Singapore’s EDB, Israel, Ireland

Rana/ Continued Embassies SALESMANSHIP Task  Reaching out to targets  Build ally networks  Use inter-connections  Link trade & investment + S&T  Success stories Headquarters REGULATION Task  Rule-based vs. case- by-case  Global competitiveness  Motivate home actors  Pre-negotiation work  Support embassies

Rana/ Trade Promotion METHOD  Analyze import basket  Focus on new products & markets  Motivate institutional contact  Facilitate delegations  Use trade fairs ALSO CONSIDER  Resolve trade disputes  Help two-way trade  Integrate eco dip with other activities  Set own targets  Host ‘buyer-seller’ meets at embassy

Rana/ FTAs  Asia-Pacific: total of 77 FTAs signed, 65 under negotiation, at bilateral level  All FTAs involve some pain; key issue is net gain, seen in dynamic manner  FTA negotiations hinge on preparation, anticipation of partner’s perspective, interests  Harvard Negotiation method

Rana/ Continued  South Asia is the world’s least integrated region  Analyze Sri Lanka FTA lessons  Take long view of national interests, moving beyond today’s concerns  Painless FTAs do not exist  Need integrated view of our objectives in target markets

Rana/ Role of Innovation  Comment by one scholar: “Diplomacy is about nothing other than innovation.”  Examples: -- ‘Team Canada’ initiatives, using PPP models. --Indo-British Partnership: focused, self-financed counterpart programs. -- Singapore’s EDB; India’s ‘Team 9’ in Africa.  Integrate eco dip into total diplomacy

Rana/ Conclusion  Target-setting through consultation, pursuing unified strategy  Building promotional networks, at home and abroad  Sustaining ‘whole of government’ approach  Better utilization of embassy networks  Vision, holistic actions, sustained pursuit