Economic Diplomacy Economic Diplomacy Economic and Political Perspectives

Economic Diplomacy Economic Diplomacy Economic and Political Perspectives Edited by Peter A.G. van Bergeijk, Maaike Okano-Heijmans and Jan Melissen LEIDEN • BOSTON 2011 Originally published as Volume 6, Nos. 1-2 (2011) pp. 1–218 in Brill’s journal The Hague Journal of Diplomacy. Cover illustration: Jan Henderikse, ‘PP29-C’ (detail), 1967, coins on silver fabric, 94 × 122 cm. Reproduced with the kind permission of the artist. This book is printed on acid-free paper. Library of Congress Cataloging-in-Publication Data Economic diplomacy : economic and political perspectives / edited by Peter A.G. van Bergeijk, Maaike Okano-Heijmans and Jan Melissen. p. cm. Includes index. “Originally published as Volume 6, Nos. 1-2 (2011) of Brill’s journal The Hague Journal of Diplomacy”−T.p. verso. ISBN 978-90-04-20960-2 (pbk. : alk. paper) 1. International economic relations. I. Bergeijk, Peter A. G. van, 1959- II. Okano-Heijmans, Maaike. III. Melissen, Jan. HF1359.E2455 2011 337−dc23 2011028458 ISBN: 978 90 04 20960 2 Copyright 2011 by Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Global Oriental, Hotei Publishing, IDC Publishers, Martinus Nijhoff Publishers and VSP. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill NV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA. Fees are subject to change. Contents Introduction Economic Diplomacy: The Issues .......................................................... 1 Peter A.G. van Bergeijk, Maaike Okano-Heijmans and Jan Melissen Conceptualizing Economic Diplomacy: The Crossroads of International Relations, Economics, IPE and Diplomatic Studies .............................. 7 Maaike Okano-Heijmans Globalism Ascendant, Regionalism Stagnant: Japan’s Response to the Global Financial Crisis .......................................................................... 37 Mireya Solís ‘Great Power Style’ in China’s Economic Diplomacy: Filling the Shoes of a Benign Hegemon? .......................................................................... 63 Yang Jiang EU Economic Diplomacy: The Factors Shaping Common Action ....... 83 Stephen Woolcock The Economic Effectiveness of Diplomatic Representation: An Economic Analysis of its Contribution to Bilateral Trade ............... 101 Peter A.G. van Bergeijk, Henri L.F. de Groot and Mina Yakop Commercial Diplomats in the Context of International Business ......... 121 Olivier Naray Any Ties that Bind? Economic Diplomacy on the South Asian Subcontinent .......................................................................................... 149 Han Dorussen, Syed Mansoob Murshed and Hugh Ward Economic Diplomacy in a Changing World ......................................... 171 Maxime Verhagen and Henk Bleker The Diplomacy of the Financial Crisis in Context ................................ 187 Nicholas Bayne vi contents Development Cooperation as Economic Diplomacy? ............................ 203 Arjan de Haan Subject Index ......................................................................................... 219 Name Index ........................................................................................... 227 Introduction Economic Diplomacy: The Issues This special issue ofThe Hague Journal of Diplomacy* brings together contributions by specialists and practitioners in the field of economic diplomacy. We believe that it is time to take stock of new insights at the interface of international economics, politics and diplomacy, and that complementary academic perspectives from the disciplines of economics and politics can enrich the study of diplomacy. Economic diplomacy is, of course, not a new phenomenon. From the very beginning of regulated contact between separate polities in the ancient world, economic interests were a driver of emerging diplomatic relations.1 It is fair to say, however, that for much of the modern era the commercial diplomatic activities of the European powers were generally seen to be distinctly inferior to political work. Unsurprisingly, the economic dimension therefore did not receive much attention among traditional students of diplomacy. Today we see a very different picture, in Europe and beyond, and in the worlds of practice and academia. West- ern governments give greater priority to their commercial diplomacy and foreign ministers see no reason to hide their view that diplomacy should contribute to national welfare and economic security. In a climate of enhanced global competi- tion, practical and indeed also scholarly thinking about the subject is in flux, with many observers reflecting on current threats to, and opportunities for, the global political and economic systems. It is a truism that the golden decades in which globalization, growth and ‘less government’ appeared to provide the recipe for welfare and less conflict came to an end in 2008/2009. As the global financial crisis unfolded, this shift was visible even in those Western countries that had until then been the staunchest *) Most contributions in this volume originated from the conference titled ‘Economic Diplomacy Beyond 2010: Geo-Economic Challenges of Globalization and Economic Security’, which was co-organ- ized in October 2009 by the Netherlands Institute of International Relations ‘Clingendael’ and the Inter- national Institute of Social Studies of Erasmus University. The Dutch Ministry of Economic Affairs’ financial support for that conference is gratefully acknowledged. 1) See the article by M. Okano-Heijmans, ‘Conceptualizing Economic Diplomacy: The Crossroads of International Relations, Economics, IPE and Diplomatic Studies’, The Hague Journal of Diplomacy, vol. 6, nos. 1-2, 2011, 7-35, this issue. 2 peter a.g. van bergeijk et al. defenders of the mantra of neo-liberal capitalism.2 A number of crises and imbal- ances regarding food, the environment, energy and the global economic and financial system coincided, providing in a sense the ultimate ‘litmus test’ for any country’s ability to influence the rules and institutions of global governance.3 This concurrence of crises not only exposed a lack of appropriate international governance — economic, financial and political — and the fragility of the global system. It was also a symptom of geopolitical and geo-economic shifts that had been under way since the 1990s, when a new phase of globalization set in. Students and practitioners of economic diplomacy seem to be well placed to understand and foresee the interactions among these different spheres of influence. Economic diplomacy is a significant part of a much larger set of international arrangements that breed trust between nations.4 Moreover, positive non-economic spillover effects from economic diplomacy may emerge in the field of high politics. The ‘liberal peace’ school of thought relates increasing bilateral trade and investment to a reduced escalation of conflicts among states.5 Such external effects are important for economists, since they help them in providing theoretical justi- fications for government intervention. These effects are equally important for political scientists, because of the implication that the ‘low’ politics of economic and commercial diplomacy, which have long been frowned upon in diplomatic circles, are inseparable from global political relations. The Rebalancing Act It is increasingly recognized that the emerging economic powers that make up the so-called BRIICS countries6 have become invaluable engines of world economic growth and are essential to solve global challenges, including climate change and the scarcity of natural resources. Several of the BRIICS nations and a number of other emerging powers are not (yet) full members of the family of democratic market economies, and at the same time they pose challenges to the United States’ hegemony and the new world order that developed in the post-war era. Interna- tional policy-making in today’s context is a rebalancing act from the West towards 2) Examples include the Netherlands and the United Kingdom. Other countries, including the United States and Belgium, had already placed increased emphasis on economic diplomacy since the 1990s. 3) See the article by M. Solís, ‘Globalism Ascendant, Regionalism Stagnant: Japan’s Response to the Glo- bal Crisis’, The Hague Journal of Diplomacy, vol. 6, nos. 1-2, 2011, 37-61, this issue. 4) See, for example, A. Rose and M. Spiegel, ‘International Environmental Arrangements and Interna- tional Commerce’, in: P.A.G. van Bergeijk and S. Brakman (eds.), The Gravity Model in International Trade (New York: Cambridge University Press, 2010), pp. 255-277. 5) See the review of the literature on the liberal peace model in the article by H. Dorussen, S.M. Murshed and H. Ward, ‘Any Ties That Bind? Economic Diplomacy on the South Asian Subcontinent’,The Hague Journal of Diplomacy, vol. 6, nos. 1-2, 2011, 149-169, this issue. 6) The BRIICS nations are Brazil, Russia, India, Indonesia, China and South Africa. economic diplomacy: the issues 3 the East.7 The search for a new equilibrium that is associated with the changing role of the emerging powers is nowhere more visible than in the G20 group of

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