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There is no doubt that today the role of economic diplomacy in order to enhance the economic interests abroad is extremely important. The promotion of economic interests is an important part of foreign policy. It was during the 15th and 16th century that economy diplomacy came into prominence in Italian states like Venice and Florence – Florence being the state that is credited with the system of exchanging resident diplomats. Normally, traditional economic diplomacy is concerned with economic policy issues, e.g. work of delegations at standard setting organizations such as WTO, IMF, WB etc. Economic diplomats also monitor and report on economic policies in foreign countries and give the home government advice on how to best influence them. Economic diplomacy employs economic resources, either as rewards or sanctions, in pursuit of a particular foreign policy objective. This is sometimes called “economic statecraft”. There is basic definition of economic diplomacy. Also, a simple search of the term economic diplomacy on the net gives us a mix of theoretical definitions and clarifications. Economic diplomacy is traditionally defined as the decision-making, policy-making and advocating of the sending state -business interests. Economic diplomacy requires application of technical expertise that analyze the effects of a country's (Receiving State) economic situation on its political climate and on the sending State's economic interests. The Sending State and Receiving State, foreign business leaders as well as government decision-makers work together on some of the most cutting-edge issues in foreign policy, such as technology, the environment, and HIV/AIDS, as well as in the more traditional areas of trade and finance. According to the article written by Dr. Ibrahim R. Mavlanov, the definition of economic diplomacy that we can find in „The Short External Economic Dictionary” is following: “the specific area of modern diplomatic activity, connected with the use of economic problems as object and means of struggle and cooperation in the international relations. Economic diplomacy, as well as diplomacy, in general, is a component of foreign policy, the international activity of the country; the foreign policy defines the objectives and purposes of economic diplomacy which represents the whole set of activities, forms, means and the methods used for realization of foreign policy”. Certainly, that commercial activity was always the important area of diplomatic
service while its means, methods and the purposes were defined by the actual moment of history. Several decades ago, particularly after the Second World War, commercial activity was considered as actions of so called political diplomacy. The career diplomats which were working in the sphere of strictly political intergovernmental mutual relations, had higher status and professional reputation in comparison with commercial attaches. However, if we examine a diplomacy origin in general, we will discover that trade was fundamental stimulus for the crossing of the national borders of those times and development of the interaction between the nations. Historical examples confirm that the intensive trade, regulated by the trading contracts, was inherent in civilisations of ancient Egypt and the Western Asia. Trade between the Old World and a New World prospered owing to the European colonization of Asia and discoveries of the gorgeous coasts of South America. All the basic achievements of the American foreign policy are based on the stable economic foundation. As regards to Europe, political relations were in advance of economic relations (that means including European integration processes as well), and created the base to advancement of economic interests. As for the USA, on the contrary, it is typical for them to maintain the leading economic expansion. Consequently, its results were consolidated in the form of corresponding political and legal relations later on. Therefore, economic diplomacy is privileged as the main economic key factor there for achievement of the foreign policy purposes. Besides, its accomplishment is unrelated to the considerable expenses provoked by the military intervention, while influence and efficiency proved to be relatively more stable and reliable than both political and especially military intervention. Some analysts emphasize that “the external economic relief is the convenient tool that enable government donor to have a direct impact on the countries, its receptors” . Furthermore, it is the universal mechanism of involving the countries in direct dependence on the “donor”. So, the economic aid has also political consequences. In a fact, as he stated it was accurately realised by the American leaders.
Current challenges to economic diplomacy It would not be an overstated conclusion to argue that the Financial and Economic crisis of 2008-2010 and recent regional and international economic development has changed the global economic landscape and international affairs more generally. The relationship between economics and politics has never been as interlinked. The challenges never as complex. From debt and bankruptcy to energy dependence and currency wars, instability of the financial system to inflation, migration and trade in illicit products, every nation is faced with the necessity to make economic security a
top foreign policy priority. Economic diplomacy and economic security have risen to the top of international policy agenda, driven by a mix of political and economic factors. Or economic diplomacy can be used to generate and increase economic security. This is of eminent importance given the trend in globalisation with new economic powers showing their muscles, stronger each day. The structural instability of the global economic system created post-Bretton Woods is the order of the day for high and low politics; as are issues of competitiveness and world poverty. Main challenges and themes: future of the EU; tensions between the US and China as well as Russia; the threat of a new food-price crisis that will destabilize poor countries; global governance from the UN to the Group of 20 nations; and the panoply of regional crises from North Korea to the Middle East; sovereign debt crisis in Europe; the need for greater investment into human capital and innovation, energy and resource dependence. With the US and China now the world’s two largest economies, the state of SinoAmerican relations looms large in international affairs, Diplomats are paying attention to economic questions such as exchange rate instability and trade imbalances. But strategic tensions are also rising. The US has been vocal in its concern about the growth of Chinese military capabilities and the threat they pose to its dominance of the Pacific. The Chinese are unhappy about the US’s recent assertion of a national interest in territorial disputes in the South China Sea. This burgeoning strategic rivalry between the two countries will colour the discussion of a range of other issues, including North Korea and the threat of energy and food shortages. Based on Raymond Saner and Lichia Yiu research paper, the economic diplomacy conducted by MFA or other government ministry officials has been defined as follows: Economic Diplomacy is concerned with economic policy issues, e.g. work of delegations at standard setting organizations such as WTO and IMF. Economic diplomats also monitor and report on economic policies in the foreign countries and give the home government advice on how to best influence them. Economic diplomacy employs economic resources, either as rewards of sanctions, in pursuit of a particular foreign policy objective. Commercial diplomacy on the other hand describes the work of diplomatic missions in support of the home country’s business and finance sectors in their pursuit of the economic successes and the country’s general objective
of national development. It includes the promotion of inward and outward investment as well as trade. Important aspects of a commercial diplomats’ work is the supplying of information about export and investment opportunities and organized and helping to act as hosts to trade mission from home. In some cases, commercial diplomats could also promote economic ties through advising and support of both domestic and foreign companies for investment decisions. The difference between Economic Diplomacy and Commercial Diplomacy can best be illustrated in Figure 1.
At this point, a further distinction should be clarified between economic and commercial diplomacy. Dr. Woolcock argues: “promoting national exporters and investors (what I would call commercial diplomacy) and seeking to shape international negotiations on economic topics (broadly defined), which I would call economic diplomacy. Commercial diplomacy should presumably be driven by the sponsoring ministries at the national level. Awareness of economic diplomacy issues should come from all government departments (i.e. environment on climate change, finance on financial stability etc)”.
Moldavian economic diplomacy According to the regulation of activity of the International Economic Relations Department (the main structure under MFA which promote economic diplomacy) Economic diplomacy is one of the main components of foreign policy Republic of Moldova and aims to protect and promote national economic interests over outside the country, thus contributing to growth and prosperity of the Republic Moldova. In the context of accelerated globalization and the dynamics of international processes, basic priority of Economic Diplomacy of the Republic of Moldova shall support economic development of the State, through the integration of national economy in the international economic relations. Traditionally, the decisive role in achieving economic diplomacy lies to Ministry of Foreign Affairs and Diplomatic Missions. Under existing practice, most ministries of foreign affairs around the world attaches great importance of economic diplomacy. Economic diplomacy objectives are developed taking into account the provisions of the Acts of the Republic of Moldova and international practice, including: programs governance, socio-economic development strategies and investment, conceptions of European integration, other decisions, provisions and guidelines: These are: Promote Moldova's economic interests abroad; Develop cooperation with international economic organizations; Optimizing the MFA on economic cooperation with national governmental institutions. In the successful implementation of the objectives of Economic Diplomacy, Foreign Ministry considers primarily perform an institutional reform that would include the following: Establish an effective framework for cooperation on economic issues of inter-MFA and institutions in the country, including the Ministry of Economy, Ministry of Finance, Chamber of Commerce and Industry, Investment and Export Promotion Agency; Increase the staff efficiency and Diplomatic Missions of the Foreign Ministry on Economic diplomacy, based on principles of professionalism, transparency and merit appraisal.
Active involvement in promoting economic diplomacy to honorary consuls of the Republic of Moldova abroad. Optimization of external economic action through the creation of mechanisms and necessary tools to promote our economy abroad. Establishment of trade and economic departments in the Diplomatic Missions of Moldova abroad. Priorities Economic Diplomacy The state policy in foreign economic relations, aimed at further integration the country in the world economy and ensure sustain economic growth, will focus on a priority on developing the following directions: • Promoting trade with priority given to export promotion; • Attracting investment and new technologies in national economy; • Attracting foreign economic assistance; • Promoting the favorable image of the country's in terms of economic and investment. Despite the fact that economic diplomacy is considered one of the priorities of activity of the Moldavian Ministry of Foreign Affairs and European Integration, in reality de facto it is virtually invisible. Roughly we can say that our economic diplomacy is rather achieved through business (promoting brands abroad as Cricova, Milestii Mici etc.), even there are the institutions empowered by law to do it, i.e. Ministry of Foreign Affairs and Ministry of Economy. Financial resources provided MFA and diplomatic missions on economic diplomacy size are insignificant when considered as Moldova's foreign trade value is higher than its GDP. Accordingly to discussion had with Vladimir Rusnac, the Head of International Economic Relation Department (IERD), is a total lack of qualified staff in the economic field, both in the Foreign Ministry, and diplomatic missions as well as delegated. International Economic Relations Department (IERD) from MFAEI has only four employees, including Director. More than that, according of reorganizations to be realized in the ministry, the IERD is likely to be abolished, so the fate of economic diplomacy will be more uncertain than before. Moldova currently has no accredited ambassador abroad that has economic studies. Only four diplomatic
missions of Moldova abroad has diplomats with economic studies, while only represented by one employer (in Moscow, Kiev, Bucharest and Bruxelles) and economic and commercial sections of the embassies are virtually nonexistent. The Investment and Export Promotion Organization (MIEPO) which should assist economic agents on the one hand, and MFA and diplomatic missions abroad on the other hand, is prevented from doing it because of very limited human resources (agency has only 10 employees(!)) and the financing granted. There is a Poor communication and coordination between the MoE and MFAEI on economic diplomacy promoting. Also, there is a poor communication and coordination between the MFAEI and MIEPO (Moldovan Investment and Export Promotion Organization). And last, but not least, there is no a platform for discussion, any governmental or non-governmental, on the economic diplomacy subject and dimension etc. In Moldova there is no practical work, especially scientific, dedicated to the field of economic diplomacy. So, as officials in the MFA have expressed even, our economic diplomacy is weak, very weak. Respectively, SWOT analysis represented in table below shows the state of things as it is reality.
Table 2. SWOT Analysis regarding the state of economic diplomacy in the Republic of Moldova Strengths Economic diplomacy is conducted by business rather than through MFA Wine branding promotion, like Cricova, Milestii Mici etc. Weaknesses/Limitations MFAEI economic diplomacy is pretty weak International Economic Relations Department (IERD) has only four employees, including Director According reorganizations to be realized in the ministry, the IERD is likely to be abolished Moldova currently has no accredited ambassador abroad that has economic studies Only four diplomatic missions of Moldova abroad has personnel diplomats with economic studies, while only represented by one (in Moscow, Kiev, Bucharest and Bruxelles) Poor communication and coordination between the MoE and MFAEI on economic diplomacy Poor communication and coordination between the MFAEI and MIEPO (Moldovan Investment and Export Promotion Organization) There is no a platform for discussion, any governmental or non-governmental, on the economic diplomacy subject and dimension etc. High-level corruption in the judiciary scare foreign investors Opportunities Moldova has a special relationship with the EU, including the Eastern Partnership EC has started official negotiations with Moldova on the Deep and Comprehensive Free Trade Agreement (DCFTA) Moldova is a member of CEFTA Moldova has privileged relations with some EU countries such as Poland, Romania, Slovakia, etc., for which could benefit from assistance and trainings in the field of economic diplomacy Moldova is a full member in several international economic organizations, such IMF, WB, WTO, EBRD, WCO (World Customs Organization) etc. Moldova participates in most European and regional economic forums, such as Krynica Economic Forum Vienna Economic Forum, etc. Threats Moldova benefits from financial support from the EC, WB, IMF, and others foreign organization and structures, for which could invest in the field of economic diplomacy
Some recommendations for Moldavian economic diplomacy to be taken strictly: training of diplomats by training specialized in economic diplomacy, either abroad or in attracting trainers from abroad; full funding of all activities of MFAEI and diplomatic missions abroad related to economic diplomacy; more communication between MFAEI, MIEPO, business, media, academia, NGO’s and research institutions in the field of economic diplomacy, otherwise it is doomed to total failure; in the current relations between Moldova and EU, in particular to negotiate DCFTA, economic diplomacy should be the primary activity in the foreign policy of the State; Economic Diplomacy should to be a multi-agency affair; strong public diplomacy and image-building; engaging in multi-lateral forums; take the ideas&solutions from the others model of economic promotion that could be followed and implemented in a moldavian strategy; Moldavian chamber of commerce and industry should create one common plan of how to inform, advise and train employees of SMEs about internationalization, this programme should be always coordinated with the agency's projects, MFAEI and MIEPO;
Provide more information, reports, data used to build and enrich Moldavian
Investment and Export Promotion Organization ( http://www.miepo.md/); creating the economic-commercial sections in Moldova’s embassies abroad and employing qualified personnel; to create new instruments which will help to promote companies with innovative, hi-tech products on foreign markets; among them financial instruments to protect intellectual property; to benefit from public-private partnership when organizing new supporting programmes for SMEs: chambers, regional agencies of entrepreneurship,
banks, consulting companies; to do foreign markets research and indicate priority directions for polish export and investment; to create a coherent and effective national branding campaign. Conclusions Knowledge of the fundamental principles and methods of economic diplomacy is pertinent not only for diplomats as such. The objectives, tasks, and instruments of economic diplomacy are important for all entities and functionaries of economic policy with its different aspects and vectors. Using the experiences described in this paper, it can be seen that the method for engaging in economic diplomacy is very closely intertwined with the understanding of national interests in their multifaceted manifestations. In so doing, it must be noted that only by acquiring diplomatic skills can a civil servant or participant in international economic relations protect his own and national interests. Versatility, flexibility, sound judgment, good communication and strong economic and business skills are all needed in the execution of Economic Diplomacy. This is what the management of the foreign policy (and service, too) needs to be modified to in changed internal and external conditions. Along with other countries in the region, Moldova’s economy is exceptionally open and export oriented with considerably limited sources of raw materials, a small internal market but could have a comparative advantage, with its integration into the EU. Is well known that Moldova is distinguished by the absence of its own development resources and its long-term prosperity is strongly dependent upon international economic cooperation.
List of acronyms EU IMF WB MFA European Union International Monetary Found World Bank Ministry of Foreign Affairs
MFAEI Ministry of Foreign Affairs and European Integration of Moldova MIEO CCI WTO Moldavian Investment and Export Promotion Organisation Chamber of Commerce and Industry World Trade Organisation
CEFTA Central European Free Trade Agreement OECD Organization for Economic Co-operation and Development
DCFTA Deep and Comprehensive Free Trade Agreement Bibliography and electronic sourses: 1) Research paper „New Era of Economic Diplomacy and its application to enhance the economic security. Valences and its limits in small states” by Dr.Iurie Gotișan ,Erasmus Post-Doc Fellow,Pultusk,Poland,June 2012 2) Nicholas Bayne and Stephen Woolcock, The New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations, The London School of Economics and Political Science, UK October 2007 3) Saner, R. and Yiu, L. (2003), International Economic Diplomacy: Mutations in Modern Times, Studies in Diplomacy No. 84, Clingendael, The Hague. 4) http://hgd.mvpei.hr/en/selected_topic/ 5) http://www.globalzero.org/en/who/sergey-rogov 6) http://economicsanddiplomacy.blogspot.com/ 7) http://www.mfa.gov.md/img/docs/regulamentul-drei.pdf 8) http://miepo.md/pageview.php?l=ro