Economic Diplomacy: Time to Get Down to Business

Depending on whom you ask, “Economic Diplomacy” is either the new cornerstone of foreign policy or a partial and distorted vision for how to effectively bolster a country’s economic and commercial interests.

Since 2006, economic growth has been a key priority for the Harper government, underlying everything from domestic policies on immigration and job creation to the expansion of duty-free ports and an ambitious trade agenda.

Announced in late 2013, the government’s Global Markets Action Plan aims to ensure all diplomatic assets promote Canadian business. The Honourable Ed Fast, Canada’s Minister of International Trade, says the Plan “represents a sea change in the way Canada’s diplomatic assets are deployed around the world.”

Six months later, what impact, if any, does this plan on Economic Diplomacy have on Canadian interests at home and abroad?

On June 3, 2014 thePANEL debated this issue with high-level panelists speaking in front of a packed auditorium at Ottawa’s Library and Archives.

Noting the challenges and opportunities of pursuing economic diplomacy, William B.P. Robson, President and CEO of the C.D. Howe Institute highlighted the risk of “subsidizing exports” while Rt. Hon. Perrin Beatty stressed the vital importance for Canada’s diplomatic service to take a more active role in supporting Canadian businesses abroad. Moreover, Beatty stressed that The Global Markets Action Plan aims first and foremost at “equalizing the playing field a little bit” with other countries’ governments, the United States for instance, that “help their companies every way they can”, he said. But the United States is far from being the only country that is deploying its diplomatic assets in a way that drives its economic interests.

Learning from the French?

A year before the Harper government’s announcement of the Plan, in late 2012, France was described by the UK as “the best at pushing its national interest,” especially in the areas of economy and international commerce. Although at first sight France’s trade balance of goods—with a €61.2 billion deficit in 2013—would not suggest the same conclusion, the French government’s foreign-affairs vision has increasingly shifted its focus to commerce. This shift has become even more visible since the incumbent Foreign Minister Laurent Fabius took office two years ago.

Fabius, who has served as France’s Prime Minister and Minister of Economy in previous French governments, laid out a strategic direction for France’s foreign policy called “economic diplomacy.” Since its inception, the French Ministry of Foreign Affairs and International Development boasts the appointment of nine high-level negotiators with key partners (China, Brazil, Russia, Japan, the United Arab Emirates, Algeria, Mexico, India, and the Balkans) and six ambassadors assisting small and medium-sized firms in their search for business opportunities abroad. In Paris, contacts with companies have almost doubled, from 400 to 700 regular meetings.

Even if a number of significant contracts have been officially concluded in the framework of this new policy (for instance the successful bid by Alstom to deliver 3600 passenger cars to 600 South-African trains), it is difficult however to assess precisely and quantitatively the direct influence those measures had on French exports.

A common endeavour

Perhaps one of the most significant achievements of the new policy is the structural reform that was put in place in order to strengthen the collective support for France’s economic interests. Abroad, economic committees have been created in more than 130 countries. Chaired by the French ambassador in the country, the work of the committees builds on a comprehensive approach and is designed to shape the way French economic interests are pushed forward locally by bringing together public and private stakeholders.

Whilst Trade and Foreign Affairs have already been melded in Canada, Ottawa would do well to adopt the same sort of holistic approach to better advocate the country’s commercial interests in emerging markets if it is to meet the self-imposed objective of doubling the 11,000 or so small and medium-sized Canadian firms currently operating in emerging markets.

Canadian defence industries at the forefront

With 109,000 Canadians working for the defence and security industries, the development of exports in this sector is one of Ottawa’s priorities. “The government recognises that to sustain a healthy domestic industrial base, we need to tap into the global market” National Defence Minister Rob Nicholson told executives from Canadian defence industries last month in a speech at the defence and security trade show in Ottawa. “We have a network of defence attachés who […] have helped identify opportunities for Canadian industry and have helped facilitate contact,” he added. Typically, this network should connect with a local overarching body under the supervision of the Canadian ambassador in a system similar to what the French government is currently implementing.

With a potential total investment of CAD $490 billion by the government over the next decades, the Canadian defence industry represents a tremendous opportunity for Ottawa to create Canadian jobs while building a coherent technological and industrial base that could help Canada take a stronger role among defence exporters.

In 2011, the defence and security sector generated more than 12.6 billion dollars for the Canadian economy. Of those 12.6 billion, the government wants to increase the foreign-revenue portion which amounts to $6.4 billion (51 per cent).

However, if the government has repeatedly expressed its wish to make Canada a bigger defence exporter, it remains unclear whether it is willing to make the necessary decisions. Albeit rich with more than 2,000 firms according to a 2012 report by KPMG, the current defence and security industrial base remains divided and nothing thus far indicates that current defence acquisition programmes will harmonize the government acquisition process and the industry.

The way forward

Beside some small structural and organizational reforms, Canada needs, above all, to clearly identify a roadmap and to draft precise guidelines defining what Ottawa’s economic diplomacy priorities are, what these entails and how they fit into the government’s other priorities in foreign policy such as international law, human rights, and defence. Notwithstanding the national sovereignty considerations that make defence exports a unique area of international commerce, there is an increasingly fierce competition between major markets in defence and security. However, as we have recently seen in the case of Russian executives Chemezov and Sechin or when it comes to sensitive exports of defence and security equipment, commercial ties will undoubtedly raise legitimate concerns as to the way Ottawa articulates Canada’s economic interests abroad vis à vis its long-standing policy on human rights. Chrystia Freeland, MP underscored this question of values during Tuesday’s thePanel debate noting, “we need to be prepared if the moment comes—and it’s always a balance, but sometimes there’s a tipping point—to pull out, to sacrifice our economic interests when our values are at stake.”

If the strengthening of defence exports is one aspect of a multi-facetted strategy to promote Canadian growth, “economic diplomacy” also entails a wider range of resources that can be leveraged. Building on the provisions of the 6-year old Global Commerce Strategy, Ottawa should maintain its efforts in identifying and negotiating new free trade agreements after those with the European Union and South Korea are concluded. The development of foreign direct investments as well as the country’s appeal in terms of tourism are of particular relevance and should be added to the complete skillset Canada must showcase abroad. As former deputy minister of Foreign Affairs and International Trade Len Edwards said during the debate, “economic Diplomacy is not a new concept, but it is important for it to remain a broad one.”

This is what economic diplomacy is all about: adopting a comprehensive approach and leveraging the country’s skills by connecting existing networks and resources to maximise Canada’s economic influence worldwide. In that sense, the Global Markets Action Plan is a welcome initiative to help boost Canadian exports. Six months after the plan was launched, it may be time to review how it is being implemented and how it might be further strengthened. Canada must enhance its capacity to push forward its commercial interests in emerging markets, while remaining consistent with other priorities including the country’s commitments on human rights which remain a strong guiding principle of Canada’s long-term foreign policy.

The CIC’s National Capital Branch sponsored thePanel debate featuring Carole MacNeil, Host of CBC News Now; the Honourable Perrin Beatty, President and Chief Executive Officer of the Canadian Chamber of Commerce; Chrystia Freeland, MP; Len Edwards, former Deputy Minister of Foreign Affairs and International Trade; and William B.P. Robson, President and CEO of the C.D. Howe Institute.