Economic Diplomacy as Impetus for Domestic Reforms

Can diplomacy be utilised by a state for its own domestic economic reforms? I attempt to answer this rather unconventional question – particularly focusing on the Philippine context – in my Master in Contemporary Diplomacy dissertation entitled Economic Diplomacy as an Impetus for Philippine Domestic Reforms: Theory, Evidence, and Recommendations.

My curiosity stems from a decade of practising economic diplomacy, from being a Special Assistant to the Undersecretary (Vice-Minister) for International Economic Relations to serving as Second Secretary/Chargé d’affaires, a.i. at the Philippine Permanent Mission to the World Trade Organization (WTO).

Traditionally, diplomats project and promote national economic interests to gain export markets or foreign direct investments, rather than utilise external forces to shape domestic economic realities. They typically articulate positions highlighting the strengths and priorities of their respective economies. And they tend to downplay weaknesses and shield sensitivities.

Despite the ‘best foot forward’ mentality of economic diplomats, international engagement has resulted in changes to domestic economic capacities and policies. History suggests that economic diplomacy has actually been useful as an impetus for internal reform, through commitments to international treaties, dispute settlement, free trade agreements, overseas development assistance, peer reviews, and capacity building. It is unclear, however, whether they have simply been results driven by external forces, by-products of a state’s diplomatic efforts aimed at traditional objectives, or by intended outcomes from deliberate and systematic approaches taken by a state’s own foreign policy actors.

I begin my dissertation by establishing the relationship between economic diplomacy and domestic reform, and then apply the conceptual linkage to the Philippine context. While there has been extensive thinking in the field of economic diplomacy and the political economy of domestic policy and institutional reform, the linkage between the two appears to be a novel research topic.

Notwithstanding the prevailing thought that views domestic conditions as an exogenous factor, eminent theorists and practitioners do not seem to close the door on employing economic diplomacy in furtherance of domestic reforms. Economic diplomacy as a reform catalyst is related to Rana’s ‘second order functions’ of diplomacy, for example policy advice through economic reporting and narration of best practices. Moreover, economic diplomacy is more broadly defined by Berridge as ‘any diplomatic activity concerned with the advancement of the state’s economic interests’. If domestic reforms were considered an aspect of economic development and hence, national economic interest, then diplomatic activity that deals with advancing economic reforms could hypothetically be considered within the purview of economic diplomacy.

Economic diplomacy has also evolved through time. What started as representation and reporting on market conditions developed to trade promotions, and then to investment generation through enhanced competitiveness, followed by rulemaking to enhance predictability. Extending Rana’s view that diplomatic representation is only as good as the product being sold, diplomacy could potentially make that product better through provision of feedback and other means, i.e., backward integration of functions in the supply chain.

I argue that diplomacy can enlarge the interface of external and domestic environments through its numerous roles and functions, enhancing the synergies of external and local pro-reform factors. Diplomats can play a role in policy transition strategies in the reform process, applying Trebilcock’s political economy approach to ‘dealing with losers’. For instance, instead of focusing only on the efficiency and welfare gains from freer trade, diplomats could specifically address psychological and communitarian concerns through data analysis, the sharing of good practices, and an appropriate framing of the message. Negotiators may seek phased-in implementation, reciprocal concessions, safeguards, and exceptions, as well as technical assistance, to address opposition. As policy entrepreneurs, diplomats can provide reform options through advocacy or creating venues for public participation.

In my dissertation I liken this reform process to the unpredictability and context-specificity of mountaineering, viewing the state as the climber and the summit as the reform objective. The diplomat could act as the climber’s multipurpose Swiss pocket knife, which can be used in a variety of ways, depending on their  skill and creativity. Being handy, always ready to be deployed, durable for use in subsequent climbs, and flexible for utilisation in other undertakings, the pro-reform diplomat would be a ‘Swiss-knife catalyst’, acting at one time or another as messenger, analyst, reporter, facilitator, negotiator, advisor, planner, coordinator, capacity-builder, promoter, lecturer, innovator, lobbyist, or implementer.

I also surveyed cases where diplomats have been used as catalysts for reforms, i.e., United States civil rights legislation, Vietnam’s Doi Moi, India and WTO commitments on intellectual property rights, China’s WTO accession, and numerous agreements on services trade. Diplomats played a facilitative role by examining and contextualising best practices, building capacity, making the case for reform in legislative processes or through public opinion, locking in unilateral reforms, undertaking new commitments, incorporating reforms in development plans, or applying transition mitigation strategies. The buy-in of high-level officials engaged in international affairs and domestic policymaking was crucial in most cases.

The Philippines has used economic diplomacy for reforms unevenly.  As part of my dissertation, I have also examined the role diplomats played in the Philippines’ unilateral liberalisation, WTO, and other FTA commitments, sectoral reforms that introduced privatisation and competition, and capacity-building initiatives. However, apart from the consistent leadership of reform-minded presidents as top diplomat, the Department of Foreign Affairs (DFA) had only been tapped to play ad hoc roles in certain phases of the reform process, for example testifying before Congress, providing inputs to the judiciary, negotiating, capacity building, coordinating with external players, and assisting in missions. When it has been involved, it has oftentimes been effective, particularly as a troubleshooter.

I then suggested ways by which the Philippines could utilise economic diplomacy effectively in a conscious, active, and systematic manner in furtherance of its own domestic reform efforts. With numerous pending challenges, diplomats could help gather increased external resources, rally domestic constituents, and overcome opposition through transition mitigation and other strategies.

Ryan Gener is a foreign service officer at the Philippine Department of Foreign Affairs. He obtained a Master in Contemporary Diplomacy degree from the University of Malta and DiploFoundation (2017). His academic paper does not represent the views of the Philippine government.