Chapter 8: An Agenda for Economic and Commercial Diplomacy
Economic realism is a powerful antidote to political enthusiasm. In the international economic arena the visions of politicians are often impressive, gestures are spectacular and the tempo of change is assumed to be high. In reality the economic scope for improvement is often small in the short term. Economic processes exhibit considerable inertia. Consequently, economic reality often seems to lag behind political dreams. A clear discrepancy exists, however, between on the one hand the globalization of production and the international co-operation that are almost tangible in multinational corporations, and on the other hand, world politics where the colour of one’s passport often completely dominates affairs. Too many problems are still being dealt with from a national – and all too often nationalistic – point of view. Remedies are mainly sought in domestic policies which in many cases actually distort international exchange. Globalization is at the basis of the network of nations, as economies are linked through international trade in goods and services, through capital flows (foreign direct and portfolio investment, lending and aid) and increasingly through the migration of labour. Globalization, on the one hand, is a source of substantial welfare gains. On the other hand, opening up of its economy makes a nation vulnerable to foreign pressure. International interdependence is also the basis for economic warfare and it may create diplomatic conflicts, for example between the United States and Japan over Japanese cars or between the European Union and the United States over agriculture. Policies that in the past could rightly...
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