Commercial Diplomacy in the 21st Century
Lead article from the June 2005 issue of Centerpoint
The Woodrow Wilson Center and the Council of American Ambassadors co-convened an April 11 conference, titled "The Ambassador's Changing Mission in the 21st Century." The first panel explored the growing importance of traditional diplomacy—representing and advocating America's economic interests abroad. A second panel examined ways in which commercial diplomacy has been used to achieve national security and foreign policy goals.
The conference was co-sponsored by the Wilson Center's new Program on Science, Technology, America and the Global Economy (STAGE), which explores paths for long-term growth in the United States and around the world.
"In a world where today's innovation is tomorrow's export and today's export will help fund tomorrow's innovation, an effective use of commercial diplomacy is often a critical element in making sure the products and services of American industry go through the doors opened by our trade negotiators," said Kent Hughes, director of the STAGE Program.
In his opening remarks, Bruce S. Gelb, president of the Council of American Ambassadors, president of the Wilson Council, and a member of the Wilson Center's Board of Trustees, noted that the focus on commercial diplomacy is particularly important and timely "with the very large deficit we are running, and the enormous competitive growth that's taking place in East and South Asia." Gelb went on to stress that effective commercial diplomacy overseas contributed to economic growth at home in " a country where jobs motivate everything that makes our system work." Following Gelb's introduction, Hughes asked each panel to make specific, actionable recommendations that could help the ambassador pursue both types of commercial diplomacy.
Promoting U.S. Commercial Interests
Stuart E. Eizenstat, former deputy secretary of the Treasury, moderated the first panel. He defined commercial diplomacy as: "the official U.S. government's support for U.S. companies and business interests in the host country." By facilitating the ability of U.S. firms to conduct global business overseas, they are able to create profits abroad and "ultimately jobs not only in [the host] country but at home as well."
This panel featured Jerry K Mitchell, former deputy director general for the Commercial Service; Peter S. Watson, former president and CEO of the Overseas Private Investment Corporation (OPIC); and Virginia Weil, senior adviser to the Business Council for International Understanding. Carl Spielvogel, former U.S. ambassador to the Slovak Republic, provided the commentary.
Panelists shared the view that commercial diplomacy had become more important in an era of global competition for markets, investment opportunities, and technologies. At the same time, the panel recognized that with so much cross-border investment, mergers, and joint ventures, identifying the specific American interest had become more complex. Because several American companies or American-based operations may be competing for the same contract, the ambassador often had to advocate on behalf of the United States rather than on behalf of a single company.
Panelist Peter Watson commended the current Administration for enabling his former agency, OPIC, to focus on and conclude agreements with companies and countries it had not previously engaged. "It led OPIC to achieve something it hadn't been able to do in its 32-year history and that was to conclude a bilateral agreement with one of our most important, strategic political and economic partners: Mexico," Watson said. "Believe it or not, within six months of concluding that agreement with Mexico, it resulted in $60 million worth of investment going into Mexico."
He also cited new investment in the countries of sub-Saharan Africa. "We have gone from a very meager amount of investment in sub-Saharan Africa, $85 million, to the point today that we are at $1.9 billion. That is not in large infrastructure projects. It is in housing, HIV/AIDS, water programs in villages " Watson attributed these successes to the ambassadors. "This is in no small part a function of how strongly committed the missions are, the ambassadors and their staff are, to achieving these goals and objectives."
Several panelists noted the managerial challenges facing the ambassador. On the commercial side alone, the ambassador would be working to coordinate the activities of the Agriculture, Commerce, and Treasury departments.
Recommendations included reworking National Security Directive #38 (which spells out the powers and responsibilities of the ambassador) to emphasize the importance of commercial diplomacy. The panel also called for opening more ambassadorships to Foreign Service officers who pursue careers in the economic sphere and the commercial service. They asserted that career and non-career ambassadors should be linked to key contacts in the various agencies that support commercial diplomacy, including the Ex-Im Bank, OPIC, and the Trade and Development Agency.
Panelists also expressed appreciation for a recent book on commercial diplomacy by the Business Council on International Understanding that included lessons drawn from specific cases and broader recommendations.
Commercial Diplomacy and Foreign Policy
Peter Watson moderated the second panel that featured Robert D. Hormats, vice chairman of Goldman Sachs (International); Sebastian Mallaby, editorial writer and columnist for The Washington Post; Ambassador Charles E. Cobb, Jr. former undersecretary of Commerce and former U.S. ambassador to Iceland, and Kent Hughes. Alfred H. Kingon, former U.S. ambassador to the European Union, provided added commentary.
Panelists complimented the State Department for continuing to pursue commercial diplomacy. They stressed that by fostering economic growth in the U.S. economy, traditional commercial diplomacy helped provide the underlying foundation for many foreign policy and national security goals.
They also praised the institution of the Cobb Award (named after Ambassador Cobb) that provides a cash award for Foreign Service officers who excel in commercial diplomacy.
Several panelists noted some significant gains for commercial diplomacy in the opening to China and the formation of the European Union. They also noted that the vision of a Middle East Free Trade Area and the greater integration of the Middle East into the global economy could contribute to peace and prosperity in the region.
Panelists also pointed to the ongoing efforts to negotiate a Free Trade Area of the Americas. "These issues clearly are beyond trade, clearly beyond commercial issues," said Ambassador Cobb. "They are really the first steps of a broader integration in our hemisphere, and hopefully a broader integration similar to what Europe has successfully achieved over the last few years." He added, "These agreements are going to deal with not only trade, not only economic development, but also will be dealing with drugs, dealing with terrorism and other foreign policy objectives we have."
During the Cold War, a combination of moral concern, enlightened self interest, and competition with the Soviet bloc had led the United States to focus on growth and nation-building in the developing world. In the brief post-Cold War era, that interest waned. As the United States refocuses on the importance of growth in promoting governments and the need for private investment in the developing world, the ambassador will be faced with the added challenge of working with the U.S. Agency for International Development, development agencies from other major donor countries, and key international agencies.
The panel also noted instances in which traditional commercial advocacy would have to yield to other foreign policy priorities. One former ambassador noted the United States had limited its pressure on China with regard to intellectual property because China was a critical partner in the ongoing effort to dissuade North Korea from developing nuclear weapons. Another panelist noted that in representing a particular company, the United States ran the risk of making globalization appear to be about nothing more than corporate interests. Pushing for broad policies—the rule of law or open markets—or working through multilateral organizations would reduce the charge of conducting what one participant dubbed a "Halliburton foreign policy."
Among this panel's recommendations was the importance of preparing ambassadors for working with development agencies. Panelists said the opportunities for career Foreign Service officers should be broadened to include business, commercial, and international development matters, as well as the current emphasis on political and public affairs. By meeting with international businesses, current and future ambassadors can glean a better sense of what conditions are necessary in a country to attract foreign direct investment.
The Woodrow Wilson Center and the Council of American Ambassadors plan to release a conference report, to include the recommendations of both panels, and circulate it widely in policy circles. Gelb and Hughes both expressed the hope that this conference marked only the beginning of many collaborative efforts between the two organizations.