Increasingly, the intensity of European Union (EU) institutions efforts to develop a coordinated, coherent European approach to economic diplomacy is taking shape. The policy strategy has a distinct EU element, complementing EU member states that have strengthened there economic diplomacy efforts. The policy objectives of the EU economic diplomacy strategy recognises that the new global order is undergoing profound changes which is impacting on globalisation and the emergence of new economic powers. This has seen the ‘economy’ taking over as the main driver of political influence, necessary for a developing Global Strategy on Foreign and Security Policy.The assertion is that the time is ripe for the EU to embark on a clear, objective and value addition of European economic diplomacy for EU member states and European business organisations.
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The article aims to understand the economic diplomacy strategy approach of the European Union and the practical approach being taken for Member States inclusion and participation; the role of European stakeholder engagement in particular the European business organisations.
The European economy has entered its fifth year of recovery, which is now reaching all EU Member States. Recent reports – Brighter skies over eurozone as growth and employment pick up,- suggest that unemployment in the bloc is at its lowest for almost eight years and economic growth is at 0,5 % in the first quarter of 2017 – Spring Economic Outlook – well ahead of the UK’s 0,2 %.
Given that around 90 per cent of global growth is now coming from outside Europe is presenting an opportunity for the EU to continue flexing it’s muscles as a global economic player. However, it’s comprehensive approach (coordinated framework) in commercial diplomacy, development cooperation, and trade diplomacy is still evolving.
The need to tap effectively into ‘new markets’ will further require development of a more coordinated, intra-EU competition to influence Non-EU emerging foreign markets.
Only a policy approach that best defines its global strategy Global Strategy for the European Union’s Foreign And Security Policy can achieve this.
The EU economic diplomacy has been developing since 2013 with an initial focus on trade and investment promotion. The Directorate – General [DG] for Internal Market, Industry, Entrepreneurship and SMEs [small and medium-sized enterprises] (DG Growth) played a pivotal role in furthering the ‘business end’ of economic diplomacy for example by ensuring a fair and level playing field for European businesses so that they can exploit opportunities in external markets.
On the ‘political end’ the DG for External Policies of the Union has had a key role in the planning, assistance and facilitation of the European Parliament and delegations.
This, to initiate dialogue and provide expertise in foreign and EU external relations necessary for shaping the diplomacy agenda beyond the EU policies. The European External Action Service (EEAS), incorporating the EU delegations, and the new EU competence for direct foreign investment under the treaty of Lisbon also provides additional diplomacy support.
These European Commision departments are responsible for the evolving nature of economic diplomacy and involved in the complementary activities like market access negotiations and regulatory cooperation with neighbouring countries. In essence offering the EU the tools to assume an independent identity in economic diplomacy.
This is a clear sign that the Commission has been engaged de facto in economic diplomacy in the absence of a coherent and comprehensive strategy.
An illustration of this view, is the EU’s Missions for Growth; which became a very visible element in support for the internationalisation of European businesses and their competitiveness in order to generate growth and jobs overview of EU Instruments contributing to the Internationalisation of European Businesses. These Commissioner – led missions were presented as an instrument for the Europe-wide representation of industrial sectors in one mission that no individual EU state could offer.
The then, European Commission Vice-President Antonio Tajani recognised that the role of national authorities remained essential in facilitating companies exporting abroad. However the objectives of EU economic missions went beyond that narrow business and trade realms – Going further to include political objectives and promoting sustainability.
This approach supported the move from business promotion to a wider notion of economic interest promotion.
The sudden shift in globalisation led the EU to evolve the concept of commercial to economic diplomacy at the level of the Member States. Some Member States moved from an initial focus on promoting businesses abroad to developing a strategy involving their diplomatic networks in the economic arena.
Officials and VIPs were used to represent and sell their products and technology on international markets, with the luxury of economic counsellors in embassies to advise ambassador’s on economic issues.
Governments of EU Member States’ including the Netherlands, Belgium and the United Kingdom took concerete steps to set up dedicated websites, and put in place a support network to accompany enterprises on markets abroad.
France, recently designated representatives on economic diplomacy to specific countries and the German Ministry of Foreign Affairs on its website have highlighted the nations economic diplomacy strategy to strengthen commercial diplomacy or trade and investment promotions abroad.
These individual Member States strategy have been seen to overlook the longer-term benefits of cooperation and coordination on economic diplomacy at the EU level. As a block, it’s arguable that a joint approach would enable the EU as a whole to use its economic clout for political and strategic purposes; particularly when dealing with major powers such as China, U.S.A and Russia.
Business promotion therefore remains a Member State competence and that is one reason why cooperation between the Commission and the Members States’ have ben limited.
The United Kingdom and the Netherlands, illustrates the perennial concern that economic diplomacy can be used by the European External Action Service to further its ‘incrementalist’ ambitions rather than serving to promote trade and investment.
The sovereignty issues raised at Member States’ level are still very sensitive for matters relating to business promotion and economic diplomacy. This, perhaps explains why the Commission through DG GROW and the High-level foreign ministry officials meet twice a year to only discuss global issues limited to the environment, water and migration.
What we read from the ‘sovereignty issues’ is that the EU institutions had difficulties analysing and developing in detail the objectives, tools and added value of economic diplomacy to Member States.
The lack of an intelligence function by which EU Member States could collectively reconcile internal and external economic diplomacy objecives could only be addressed at a higher political level.
Thus in 2015 The Council recomendation issued 2015 – Broad guidelines for the economic policies of the Member States and of the European Union keeping faith with the Europe 2020 strategy.
This mechanism proved to be a powerful efficient tool for Member States’ to have exclusive competence in the promotion of business and investment; aswell as creating an enabling environment for more involvement in the promotion and explanation of existing free trade agreements (FTAs) that help EU companies reap the benefits.
The EU-EAC EPA Economic Partnership Agreement (EPA)
covering trade in goods and development cooperation is one such partnership agreement pursuing better regulation agenda in Non-EU emerging markets.
The above mechanism needed institutional support to maintain its effectiveness and sustainable the agenda. The ‘inter-service group’ on economic diplomacy was established to bring together representatives of the Commission services; the EU External Action Service; and the European Investment Bank to make proposals for further improving the coherence and effectiveness of the EUs external actions in the economic arena.
To make economic diplomacy more effective, the ‘inter-service group’ was tasked to define a strategic approach; set priorities and identify the internal tools for working better together, including with EU delegations.
At the European Parliament in October 2016 Vice-President Katainen praised the group for helping to strengthen EU internal coordination. He announced that the next steps would equip EU delegations with better guidance and instructions on how to support EU economic interests abroad.
The EU drive towards reforming economic diplomacy for Member States inclusion and involvement began with an initiative launch of the Cooperation with the European Trade Promotion Organisations (More information). This Commission’s call for tenders sought to promote European economic diplomacy.
The narrative and current understanding in both the European External Action Service and the Commission, is making it clear that; it is no longer a question of the EU institutions replacing Member States’ action but rather adding real value to what already exists.
The EU economic diplomacy strategy therefore ensures on complementary and subsidiarity as an overlapp with Member States.
In Jean-Claude Juncker’s Commission, investment has been prioritised in addition to jobs and growth. The approach is to make the growth sustainable, inclusive and resistant to future world economic shocks with the support and assistance of EU institutions to put Europe on a path to economic recovery.
The Commission’s departments, the European External Action Service and the European Investment Bank have been working more closely together to improve EU economic diplomacy activities. The EIB President Wemer Hoyer in an interview ‘The Last Untapped Treasure of European Integration’ 2016 noted that improving access to finance for European companies by the EIB could prove useful for developing new projects – which could contribute to growth and greater stability in Europe and to her neighbourhood.
Financial tools including the European Fund for Strategic Investments (EFSI) have been developed as vital value additions.
The EIB by engaging in policy-based loans, helps to create a more favourable investment climate, thereby spurring development and paving the way for more companies to invest in third countries.
It also provides long-term financing in support of EU presence in partner countries through foreign direct investments (FDI) within areas covered by the external mandates’ objectives. The renewed impetus of the Africa-EU Partnership factsheet is one example which incorporates sustainable economic development Attract Responsible & Sustainable Investments that helps to generate sustainable growth for all.
The EIB has cooperated even more closely with the Commission and the European External Action Service on building an EU economic diplomacy. The bank has engaged in activities that are not its core business, such as migration, trade facilitation, with possible operations in new countries (such as Afghanistan, Iran and Cuba) and participation in international fora such as the G20, G7 and the IMF, where the EU voice is critical.
Strong institutionsm like the European Commission and the EIB are therefore contributing to the sustained dynamics of financial transfers which provides important lessons for the integration process.
As a way forward it is envisaged that the European parliament should also play a stronger role to enrich and further the debate on EU economic diplomacy.
According to DG for External Policies [Policy Department Section], an imporant step would be to associate the European parliament to the ‘inter-service group’ (mentioned above).
As the role of the EIB increases – the level of funds from the EU budget used to finance EU actions to support economic diplomacy will also increase.
The European parliament would therefore be expected to provide oversight scrutiny on this rising, budget spending.
Policy experts express the view, that the European parliament’s involvement should therefore be increased in order to provide better coordination and effective monitoring of complementarity and subsidiarity; ensuring that action at EU level adds value to action at Member State level.
In addition, the European parliament can then put forward more issues to be included within the scope of economic diplomacy – in order to keep pace with the rapid changes wrought by global issues including the rules based trade system; the economic global governance ; and the promotion of a sustainable economic development model.
In March 2015, a meeting with several European business organisations (EBOs) signalled the growing involvement of the private sector in the new drive towards reforming economic diplomacy. The aim was to enable business organisations to contribute to the effort.
The Association of European Chambers of Commerce and Industry (EUROCHAMBRES) for example supported the strategy on European economic diplomacy for the internationalisation of SMEs – calling for enhanced business support. This to largely reflect on the low proportion of the EUs SMEs (13%) active in the international markets outside the EU.
In a policy paper titled ‘European Economic Diplomacy:Position Paper’- EUROCHAMBRES went on to suggest that the business support element provided by the EU to SMEs should complement the existing efforts at EU and Member States level to avoid duplication.
BUSINESS EUROPE on the other hand, warned against excessive use of economic tools to pursue political objectives that could be detrimental to the EU’s economic interests abroad new trade and investment strategy. Underpinnning the point, that any EU economic diplomacy strategy needed to ensure that more European companies took advantage of business opportunities in third markets.
The European Business Organisation Worldwide Network (EBOWWN) statement on EU support for EU Business Abroad reiterated optimism for the EU use of economic diplomacy, emphasising that any help to companies in third markets should focus on ensuring market access and engagement in trade promotion.
In terms of priorities, EBOWWN recognises that EU Commission for trade and investment policy, should limit, its efforts on advocacy and regulatory issues first, and trade promotion second as an important complement.
Vice – President Katainen’s speech at the EPSC seminar Economic Diplomacy and Foreign Policy: Friends or Foes was timely to add support to business and well focussed on the European economic diplomacy as more framed in relation to the need to support EU businesses that want to go abroad. As “This would enable them to sell their products, invest, and make deals on international markets”.
The EU economic diplomacy would he said “use all instruments and resources to give EU companies the competitive edge to ensure that trade deals deliver jobs and growth back to the EU”.
At a fundamental level, however, the European business community are united in its assessment that companies operating in third countries stand to benefit from a shared vision among all key European stakeholders , at the EU and Member State levels.
The Clingendael policy brief on EU economic diplomacy, further observes that the European economic diplomacy strategy should equally consider how the EU and its Member States can respond to the economic diplomacy policies – of third countries towards the EU or any individual EU Member State.
This would require the need to strategise not just on ‘outgoing’ economic diplomacy, but also on what is termed ‘incoming’ economic diplomacy.
This is important because the EU is not only a subject in economic diplomacy but also an object;
Accordingly, European economic diplomacy should incorporate ‘offensive’ (outgoing) and ‘defensive’ (incoming) elements as two sides of the same coin, when thinking through solutions for the emerging global economy.
These angles of economic diplomacy are important, as the trend in global economic trade and investment points to more, rather than less, economic dependence by EU Member States on Non-EU emerging markets, that are not only growing fast but moving up the value chain.
How that will impact on EU prosperity depends on how the EU evolves it’s economic diplomacy strategy, whilst monitoring the offensive economic diplomacy of emerging global players.
Regional Integration & International Trade 