APRIL 2016 Who is Afraid of European Policy Brief Economic Diplomacy? European Union (EU) institutions are stepping up their effort to develop a coordinated, coherent European approach to economic diplomacy. This includes the addition of a distinct EU element to policy and action in this field, complementing that of EU member states, many of which have strengthened economic diplomacy efforts in recent years. With the globalization-induced, fast-paced changes in the balance of power and a Global Strategy on Foreign and Security Policy in the making, the time seems ripe for the EU to embark on this road. Yet Brussels needs to be clear on its objectives and on the added value of European economic diplomacy for EU member states and for European businesses. Failing short-term benefits and a long-term strategy entailing offensive and defensive elements, European capitals and companies will end up contesting the EU’s efforts – worried about EU competence creep – and will leave extra-European actors unimpressed about the EU as a global force with which to be reckoned. Towards Joint European policy of EU capitals.2 The following year, Economic Diplomacy?1 Deputy Director-General for Enterprise and Industry Antti Peltomäki led another EU Mission for Growth to China, this time to In July 2013, [then] Vice-President of the Chengdu. These EU missions ran parallel to European Commission Antonio Tajani led the high-profile bilateral trade missions that Montesano & Francesco Saverio Okano-Heijmans Maaike a ‘Mission for Green Growth’ to Beijing some seventeen EU member states organized with representatives from approximately to China between 2013 and 2015. Often, 50 European companies. A packed agenda, the aim here was to maximize the ability ranging from ministerial-level meetings to of domestic businesses to outpace their EU–China business matchmaking sessions, competitors – frequently from neighbouring sought to ‘add value’ to the otherwise EU countries – in the burgeoning Chinese predominantly national initiatives on trade market. and investment promotion and the foreign 2 See the following EU-webpages: http://ec.europa. eu/enterprise/initiatives/mission-growth/missions- for-growth/files/asia/china/will-you-miss-the- 1 The authors would like to thank all reviewers for m4g-to-china_en.pdf; and http://ec.europa.eu/ their constructive comments to earlier drafts of this enterprise/initiatives/mission-growth/missions-for- Policy Brief. growth/files/asia/china/programme_en.pdf. Clingendael Policy Brief While EU institutions in Brussels are synergic rather than adversarial dynamics? ratcheting up their efforts towards the This question is particularly pressing in development of more coordinated economic Europe’s relations with economic powers like diplomacy, intra-EU competition to access China, as growing trade with and investment new markets is clearly still very much alive. from this country also gives it increasing This raises the question of what in fact is leverage in European capitals. What should the ‘added value’ of the EU Missions for be the objectives and targeted actions of Growth, as a part of EU/European economic European economic diplomacy? Clearly, a diplomacy. Advocates of a state-centred long-term vision and short-term benefits to approach, convinced that business support such an approach need to be analysed so is best done at the national level, are critical as to engage European stakeholders and of any EU involvement, using a principled, (relevant) extra-European actors. Failing legalistic perspective to EU action to argue to do so will have European stakeholders that the EU has no competence in the area worried about EU competence creep, and of trade promotion or foreign policy. Pointing extra-European actors unimpressed about to the European countries’ relative loss of the EU as a global force. economic and political influence to new and bigger economies, others emphasize the Aiming for a Comprehensive need to work from a common framework Approach that combines efforts, thus adding scale to The strategy and action of key economic gain leverage. In the long run, the argument diplomacy strands – in particular, commercial goes, Europe will only be competitive on the diplomacy, development cooperation and global stage if it is perceived as a ‘common trade diplomacy – have been evolving in economic power’.3 Europe for several years already, both at the member state and EU level.5 This is not This Clingendael Policy Brief explicates surprising, as the growing global economic recent efforts in Brussels to develop interconnectedness has increased the a European economic diplomacy, and relative weight of economic and trade-related discusses whether there could indeed issues within the foreign and security policy be added value to European economic realm, thereby also raising the relevance of diplomacy – including a distinct EU element4 economic diplomacy.6 Governments of EU – for EU member states and European member states, including the Netherlands, businesses. Our analysis moves from a conceptual distinction between European economic diplomacy, which refers to the collection of strategies and actions of the EU 5 This Clingendael Policy Brief adopts a and EU member states (in coordination with comprehensive definition of economic diplomacy, private actors) in this field, and EU economic including activities in the field of trade and diplomacy, which only includes the policies investment promotion (commercial diplomacy), trade negotiations, global financial governance, and activities of EU institutions. Such a development assistance efforts and sanctions. distinction is important, as it highlights how This differs from the narrow definition of some EU the EU level is just one building block of countries, which regard economic diplomacy as the European Union, and its purposes are little more than business support. For more on this, quite broad in that they include both internal as well as on recent trends in economic diplomacy, (intra-EU) and external elements. see Maaike Okano-Heijmans, 2016, ‘Economic Diplomacy’, in: Costas Constantinou, Paul Sharp Could joint economic diplomacy be a way for and Pauline Kerr (eds), The SAGE Handbook of Europe to stop punching below its weight Diplomacy, London: SAGE (forthcoming in June). in the global (economic) arena, by fostering 6 For more on this, see, for example, Peter A.G. Van Bergeijk, Maaike Okano-Heijmans and Jan Melissen (eds), 2011, Economic Diplomacy: Economic and Political Perspectives, Leiden and Boston: Brill; and Stephen Woolcock, 2012, 3 See, for example, Chad Damro, 2012, ‘Market Power European Union Economic Diplomacy: The Role of Europe’, Journal of European Public Policy, 19 (5). the EU in External Economic Relations, Burlington, 4 See also the paragraphs below on Adding Value. VT and Farnham: Ashgate, esp. pp. 10–11. 2 Clingendael Policy Brief Denmark, the United Kingdom (UK) and the EU to step up its efforts in the field of Germany, have strengthened trade and economic diplomacy. This appears to be all investment promotion abroad, or commercial the more relevant given that around 90 per diplomacy. In addition, companies – rather cent of global growth is now coming from than non-governmental organizations – outside of Europe, hence making the need returned to centre stage in the delivery of to tap effectively into the ‘new markets’ even development assistance. The trend is to move stronger. A more sophisticated European away from global social quality thinking in economic diplomacy could contribute to development towards stimulating progress European Commission President Jean- by way of creating economic opportunities. Claude Juncker’s central policy goal of In this regard, improving access to finance strengthening growth and employment levels for European companies by broadening in the EU. For this to be possible, however, the mandate and the scope of action of the the still-standing unnatural dichotomy European Investment Bank (EIB) could prove between trade policy and trade promotion very useful for developing new projects – will have to be overcome, in EU legislation as which could contribute to growth and greater well as in economic practice. Moreover, in a stability, also in Europe’s neighbourhood.7 world of shifting power balances, fostering policy linkages across various fields – as Brussels’ new EU trade strategy of per High Representative/Vice-President October 20158 displays a similar and Federica Mogherini’s aspiration – is a dire unprecedented willingness to use political necessity. The need for more sophisticated tools for economic objectives and economic policies that ‘connect the dots’ between instruments for political purposes in new trade and investment, resource and food ways. Free-trade agreements are now a security, migration, global economic and tool not only to promote (economic) value, financial governance, and (sustainable) but also European values – ranging from development are now more essential than labour rights and civil liberties to sustainable during earlier times. development and market capitalism.9 This heralds a new era in EU trade diplomacy, To argue that synergies between policy wherein normative content is incorporated areas can and should be improved is into the more effective sides of the EU’s clearly not to say that EU action in (m)any clout. Economic power undoubtedly has of these fields is new. International trade the lion’s share herein. and investment negotiations, international financial regulation, environmental policy