DEFENCE DEGREE COLLEGE FOR WOMEN

Syeda Nayyab Hashmi

BBA vii
Submitted to Mam Ayesha
Submitted by Syeda Nayyab Hashmi
Topic Economics diplomacy
Diplomacy

The term diplomacy is derived via French from the ancient Greek diplōma, composed of
diplo, meaning “folded in two,” and the suffix -ma, meaning “an object.” The folded document
conferred a privilege—often a permit to travel—on the bearer, and the term came to denote
documents through which princes granted such favours. Later it applied to all solemn
documents issued by chancelleries, especially those containing agreements between
sovereigns.

Economical diplomacy

Economic diplomacy is concerned with ‘international economic issues’ to ‘enhance

prosperity’, which has been ‘the main priority for states in most regions of the world.
In a broad sense, economic diplomacy can be defined as any diplomatic activity that
promotes the state’s economic interests. It also includes diplomacy that uses economic
resources to achieve a specific foreign policy objective.

In a narrow sense, economic diplomacy is about export promotion and inward investment.
This is sometimes called commercial diplomacy.
Economic diplomacy is the use of government recourses to promote the growth of a
country’s economy by increasing trade, promoting investments, collaboration on bilateral and
multilateral trade agreements and etc.

It can also mean the use of the economy to promote foreign policy objectives. Most
commonly known are foreign aid and economical sanctions.
Economic diplomacy is a specific area of modern diplomatic activity connected with the use
of economic problems as an object, means of struggle, cooperation in international relations.
It presupposes diplomatic service activities focused on increasing exports, attracting foreign
investment and participation in work of international economic organizations, that is, actions
focused on reaffirming a country's economic interest at international level.
Economic diplomacy, like diplomacy in general, is an integral organic part of foreign policy
and international activities of a state. Foreign policy determines the goals, objectives of
economic

Evolution of economic diplomacy :

The exchange of goods demonstrates the value of bargaining, fosters skill in the activity, and
cannot flourish in the absence of civil – if not necessarily friendly – relations. This seems to
be why, in Ancient Greece and probably elsewhere, the exchange of goods between
neighbouring tribes and cities at the fairs held at shared religious shrines contributed to the
growth of diplomatic institutions. The Delian League, which grew from such a basis, reached
its height in the early seventh century BCE. It is no surprise, therefore, that from the first,
modern diplomacy, i.e. the diplomacy conducted chiefly by means of resident missions
headed by a foreign national that took root in the late fifteenth century AD, had an economic
flavour.

ED's objectives:
 ● Realization of national economic interests on world arena.
● Protection of economic security through diplomatic methods.
● Increase of country's international competitiveness.

Economic targets

● Expansion of mutually beneficial economic cooperation.

● Use of national resources either for foreign policy purposes or for gaining
advantages through trade partners and strengthening a country's international
competitiveness.
● Gaining benefits, competitive advantages in the world market, ensuring
national interests in a rapidly globalizing world.
● Ensuring foreign economic security. Prevention of threats to the balanced
development of economy due to violation of foreign economic relations.
● Providing a country with conditions for international economic cooperation,
which ultimately contribute to raising the level and quality of life of its
population. Development of national foreign economic relations for the future.
Increasing level of economic development of the country. Solving global
problems.

Economic diplomacy since 1500s

In the modern period of European history, extending from about 1500 to the First World War,
high politics generally dominated the work of most diplomatic missions because the potential
of permanent representation for the conduct of foreign (political) policy was soon realised.
This was eventually the destiny even of the British Embassy at Constantinople, for by the
end of the eighteenth century the Levant trade was in serious decline and whether the
decaying Ottoman Empire should be propped up or carved up (‘the Eastern Question’) was
an issue that was already beginning to mesmerise the great powers. The latter-day focus on
high politics was also reinforced by the increasing attractiveness of ambassadorships to the
aristocracy, the members of which traditionally held ‘trade’ in contempt. (The earliest
residents had not been grandees.)

However, economic diplomacy was by no means completely discounted because:

● The consular posts established by merchants remained active and were, indeed,
taken over by the state during the course of the seventeenth century, becoming
outposts of a ‘sovereign’ diplomatic mission, whether legation or embassy.
● International trade began to grow enormously in the first half of the eighteenth
century and, in the late nineteenth century, so did investment abroad (direct and
portfolio) by the major capitalist states: Britain, France, and Germany, with the United
States also beginning to enter the lists.
● Diplomatic missions were responsible for the negotiation of commercial treaties; that
is, the general framework in which trade was conducted in bilateral relationships.
As rivalry intensified between the major trading states for foreign markets and between the
major capital-exporting states for foreign concessions (to sink mine shafts, build railways, cut
canals, etc.), so economic diplomacy began to make a real comeback in the late nineteenth
century. This was also the high point of the colonial era, when European states established
control over vast swathes of territory in Africa and Asia, driven by a search for raw materials
and markets. In the course of the twentieth century, with further increases in the relative
importance of international trade and investment, it was well on course to being once more
the top priority of many diplomatic missions. How did this take shape?

Economic diplomacy in 19th to 20th century

Consular services, although remaining separate from diplomatic services, were gradually
reformed: better organised and professionalised, with senior consular officers salaried,
although the pace of these changes varied significantly from state to state.

Diplomatic missions themselves became more directly involved in supporting their

businessmen and bankers looking for new markets and investment outlets. Diplomatic
generalists as well as the new ‘commercial attaché’ took on this work.

Heads of mission (ambassadors or ministers) and their diplomatic secretaries still negotiated
commercial treaties. However, when their posts became more easily reached by railways
and steamships and such treaties were particularly important, they were commonly assisted
in this by experts sent from home. (This is confirmed in Germany’s case by Prince
Lichnowsky, Berlin’s ambassador at London before the First World War; see the References
and additional reading list). They also tended to ignore the day-to-day promotion of trade.
Instead, they usually confined their interest to major capital investment projects, especially
when such schemes were thought to serve wider political interests such as:

● Bolstering their country’s prestige and undercutting that of a rival;

● securing control of, or influence over, a vital line of communication, e.g. the new
Suez Canal (French driven), the Berlin-Baghdad Railway (German driven); or
● fuel needed for military purposes, coal and oil.
This work involves
● Embassy support in the placement of capital on advantageous terms (securing
‘concessions’), including the encouragement by receiving states of what today would
probably be called ‘good governance’ (e.g. by pressing financial advisers and
customs officers on governments unfamiliar with Western capitalism, such as those
of the Chinese and Ottoman empires), pressure on host governments for guarantees
for the repatriation of profits and for monopolies for their businesses in a particular
region (e.g. Japan and Russia in Manchuria), and so on.
● Embassy intervention to protect capital investments once placed, which evolved into
the legal doctrine of ‘diplomatic protection’: that any means consistent with
international law might be employed by one state in seeking redress for an injury to
one of its nationals or corporate bodies caused by an internationally wrongful act or
omission on the part of another – providing all local remedies have been exhausted.
The application of this doctrine was particularly notable – and much resented – in
South America. The doctrine could be invoked in either of the following situations:
 ● violence and disorder at the scene of the investment, perhaps caused by
revolutionary turmoil; or
● revocation of privileges or breach of contract in regard to a particular investment.

When ‘diplomatic protection’ was employed in such circumstances, typically by the capitalist
states of the Northern Hemisphere, it was often something of a misnomer: the ‘local
measures’ (usually local courts) were often ignored and it could – and in the nineteenth and
early twentieth centuries often did – extend well beyond a démarche by a head of mission. It
could also involve such measures as arbitration, judicial settlement, sanctions, reprisals –
even armed intervention and outright annexation. Not surprisingly, it provoked a counter-
doctrine.