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Renata Cavalcanti Muniz

This chapter is a systematic literature review of case studies focused on economic diplomacy from the field of International Relations and International Political Economy. It examines 19 case studies looking at descriptive characteristics and content. The idea is to contribute to knowledge on the implementation of case study methodology as well as understand how IR and IPE use the methodology to study economic diplomacy. Moreover, it provides a discussion of the concept of economic diplomacy and instructions for case study implementation. The analysis follows three pillars: Focus, Implementation and Reporting. The findings indicate that although there is widespread use of case study in researching economic diplomacy, there is little discussion on the benefits of using the methodology, rather the usage of case studies is taken for granted and often implemented without following systematic procedures. The findings also indicate the need for more research on economic diplomacy and development.

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Volker Nitsch

Politicians travel abroad a lot, for various reasons. Despite technological advances (allowing for communication close to face-to-face interaction), travel activities by politicians have increased over the last few decades. The types of their trips range from formal, multi-day visits to brief logistical stop-overs, from the regular exchange of information in working meetings to ceremonial visits. Diplomatic activities are costly involving money, time and effort. As a result, and also due to a gradual shift of focus in diplomacy towards economic issues, a growing literature aims to quantify the economic benefits of such activities. The author reviews selected issues in the analysis of the economic effects of foreign travels by politicians. After highlighting possible differences in the effects dependent on the visitor’s official position, he emphasizes that only few travels, dependent on their purpose, may be economically relevant. Possible endogeneity in the choice of travel destinations is a key difficulty for identification.

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Andrew K. Rose

The author examines the trade effect of soft power (global influence considered to be admirable by other countries) using a standard gravity model of bilateral exports, a panel of data for 1998–2013, and an annual survey conducted for the BBC by GlobeScan which asks people in up to 46 countries about whether each of up to 17 countries were perceived to have “a mainly positive or negative influence in the world”. Holding other things constant, a country’s exports are significantly higher if it is perceived by the importer to be exerting more positive global influence. This effect does not vary much across time, but does across countries. In particular, the exports of Israel and North Korea are more, and the United States and Russia are less affected by soft power. This stands in comparison to the non-effect of sanctions on trade. Boycotts, Divestment and Sanctions is abbreviated to BDS in the chapter. Succinctly, even if the S in BDS is BS, the B is not.

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Michiel de Nooij, Marcel van den Berg and Henri L.F. de Groot

For small open economies economic diplomacy is an important determinant of trade intensity, foreign direct investments and economic development, but comes at non-negligible costs. It is therefore important to evaluate the social welfare effects of economic diplomacy. The authors present a social cost benefit analysis of Dutch economic missions (head of state and ministerial levels) estimating its annual net present value at over €100 million. Central in their analysis is the welfare notion that extra exports only increase welfare to the extent that exporting companies are, on average, more productive than non-exporters. The economic benefits of economic missions are more difficult to quantify than the costs. Suggested avenues for further research include the quantification of the impact of missions on exports and foreign direct investment, and the productivity premium of exporters and the learning effect, especially for new exporters that require government support.

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Research Handbook on Economic Diplomacy

Bilateral Relations in a Context of Geopolitical Change

Edited by Peter A.G. van Bergeijk and Selwyn J.V. Moons

This Handbook positions economic diplomacy as a multidisciplinary field and presents state of the art research relevant to policy makers and academia around the globe focusing on four themes: the role of economic diplomats, the impact and evaluation of economic diplomacy, politics and trade and emerging markets. It offers academic, business and policy perspectives taking stock of knowledge produced with qualitative and quantitative research on Northern America, Europe, Africa, Asia and Latin America.
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Olivier Naray

The author provides quantitative evidence on commercial diplomats’ time allocation on their roles (facilitation, advisory and representation), activity areas (trade promotion, investment promotion and so on) and individual features, thus filling the gap in the current literature focusing on the managerial dimension of commercial diplomacy. His results show that commercial diplomats spend more than half of their time on the activity area of trade promotion. Commercial diplomats may have to tackle too many different technical activity areas such as intellectual property and tourism. Therefore, diplomats risk losing focus on their core business. It is recommended to reconfirm trade promotion as the core business instead of overwhelming commercial diplomats with other technical areas such as research and development and science and technology. The question also arises as to what extent the heavy advisory role is still recommendable while private business firms provide services that could partially replace this function.

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Arjan Lejour

The author discusses and compares various ways in which firms can overcome export barriers through analysing a microdata panel of 16,500 Dutch exporters for the years 2003–07. Based on previous work, he analyses a stepping stone strategy for discovering new export markets and economic diplomacy instruments, for example trade missions and trade posts. A stepping stone strategy seems particularly effective for approaching markets close to existing export markets. The effects are export market, sector and firm specific. The presence of trade posts and trade missions to particularly middle income countries stimulate the entry to new markets by 0.05 to 0.15 percentage points. Trade posts do not seem to be effective in developed markets. Although government diplomacy could make the difference between exporting and not exporting to a country, the firm characteristics are much more important such as size, productivity, export experience and stepping stone markets.

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Peter A.G van Bergeijk and Selwyn J.V. Moons

Peter A.G. van Bergeijk and Selwyn Moons discuss the emergence of the concept of economic diplomacy in the fields of Accounting, Business Economics, Conflict Studies, Development Studies, International Economics, International Relations, International Trade, Management Science, Peace Science, Political Science and Public Finance. The focus should be on bilateral activities such as nation branding, trade missions, trade fairs and network activities of embassies and consulates and the impact of these tools on import, export and Foreign Direct Investment. The field should extend beyond the traditional boundaries of commercial diplomacy and business diplomacy and also cover the not-for-profit-sector, including universities and other knowledge institutes, the health sector, the cultural sector, NGO’s etc. One key finding for research is the need to consider significant heterogeneities with respect to (the efficacy of) instruments, countries, institutions levels of development and behavior and decision-making of firms.

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Prahastuti Maharani

The author analyses the role of Trade Attachés and International Trade Promotion Centres (ITPCs)using a multimethod approach that consists of (1) a benchmark analysis against Thailand and Malaysia; (2) a standard gravity panel model estimated with fixed and random effects and also used in before-after analysis; (3) document analysis; and (4) background interviews with Indonesian trade representatives in Australia, Indonesia and the Netherlands. ITPCs and Trade Attachés yield positive and significant effects on export. In contrast, the presence of an embassy and consulate in the host country is not significantly correlated to bilateral trade flows. Economic diplomacy is important for building a good country image and to promote an emerging market as a reliable trading partner with high quality export products. Economic diplomacy, however, is not a panacea as the author clarifies while discussing challenges such as lacking exporter preparedness, substandard logistics infrastructure and budgets that remain below those of neighbouring countries.

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Hugo Lapeyronie, Mathilde Maurel and Bogdan Meunier

The authors analyse how a set of slow-moving determinants affect trade between the European Union, on the one hand, and Central and Eastern European and African countries, on the other hand, over the period 2005–12. They focus on two sets of slow-moving determinants, Doing Business institutions and logistical infrastructure as well as embassies and Ambassadors. Trade is disentangled for three types of goods: primary goods, parts and components, and capital goods. They show the beneficial effects of soft and hard infrastructure, compare the latter with the benefit of opening an embassy, compute the extra trade of a move towards better trade facilitation and Doing Business indicators, and find that a huge part of the missing bilateral trade fixed effect of North African countries is accounted for by soft and hard infrastructure, and that diplomatic activity is also a powerful driver of regional integration.