f e i r B APRIL 2016 y c i l o Who is Afraid of European P Economic Diplomacy? o n a s e t n o European Union (EU) institutions are stepping up their effort to develop a coordinated, M coherent European approach to economic diplomacy. This includes the addition of o a distinct EU element to policy and action in this field, complementing that of EU i r e member states, many of which have strengthened economic diplomacy efforts in v a recent years. With the globalization-induced, fast-paced changes in the balance of S power and a Global Strategy on Foreign and Security Policy in the making, the time o c seems ripe for the EU to embark on this road. Yet Brussels needs to be clear on its s e objectives and on the added value of European economic diplomacy for EU member c states and for European businesses. Failing short-term benefits and a long-term n a strategy entailing offensive and defensive elements, European capitals and companies r F will end up contesting the EU’s efforts – worried about EU competence creep – and & will leave extra-European actors unimpressed about the EU as a global force with s n which to be reckoned. a m ij e H - o n Towards Joint European policy of EU capitals.2 The following year, a k Economic Diplomacy?1 Deputy Director-General for Enterprise and O Industry Antti Peltomäki led another EU e k Mission for Growth to China, this time to ai In July 2013, [then] Vice-President of the Chengdu. These EU missions ran parallel to a M European Commission Antonio Tajani led the high-profile bilateral trade missions that a ‘Mission for Green Growth’ to Beijing some seventeen EU member states organized with representatives from approximately to China between 2013 and 2015. Often, 50 European companies. A packed agenda, the aim here was to maximize the ability ranging from ministerial-level meetings to of domestic businesses to outpace their EU–China business matchmaking sessions, competitors – frequently from neighbouring sought to ‘add value’ to the otherwise EU countries – in the burgeoning Chinese predominantly national initiatives on trade market. and investment promotion and the foreign 2 See the following EU-webpages: http://ec.europa. eu/enterprise/initiatives/mission-growth/missions- for-growth/files/asia/china/will-you-miss-the- 1 The authors would like to thank all reviewers for m4g-to-china_en.pdf; and http://ec.europa.eu/ their constructive comments to earlier drafts of this enterprise/initiatives/mission-growth/missions-for- Policy Brief. growth/files/asia/china/programme_en.pdf. Clingendael Policy Brief While EU institutions in Brussels are synergic rather than adversarial dynamics? ratcheting up their efforts towards the This question is particularly pressing in development of more coordinated economic Europe’s relations with economic powers like diplomacy, intra-EU competition to access China, as growing trade with and investment new markets is clearly still very much alive. from this country also gives it increasing This raises the question of what in fact is leverage in European capitals. What should the ‘added value’ of the EU Missions for be the objectives and targeted actions of Growth, as a part of EU/European economic European economic diplomacy? Clearly, a diplomacy. Advocates of a state-centred long-term vision and short-term benefits to approach, convinced that business support such an approach need to be analysed so is best done at the national level, are critical as to engage European stakeholders and of any EU involvement, using a principled, (relevant) extra-European actors. Failing legalistic perspective to EU action to argue to do so will have European stakeholders that the EU has no competence in the area worried about EU competence creep, and of trade promotion or foreign policy. Pointing extra-European actors unimpressed about to the European countries’ relative loss of the EU as a global force. economic and political influence to new and bigger economies, others emphasize the Aiming for a Comprehensive need to work from a common framework Approach that combines efforts, thus adding scale to The strategy and action of key economic gain leverage. In the long run, the argument diplomacy strands – in particular, commercial goes, Europe will only be competitive on the diplomacy, development cooperation and global stage if it is perceived as a ‘common trade diplomacy – have been evolving in economic power’.3 Europe for several years already, both at the member state and EU level.5 This is not This Clingendael Policy Brief explicates surprising, as the growing global economic recent efforts in Brussels to develop interconnectedness has increased the a European economic diplomacy, and relative weight of economic and trade-related discusses whether there could indeed issues within the foreign and security policy be added value to European economic realm, thereby also raising the relevance of diplomacy – including a distinct EU element4 economic diplomacy.6 Governments of EU – for EU member states and European member states, including the Netherlands, businesses. Our analysis moves from a conceptual distinction between European economic diplomacy, which refers to the collection of strategies and actions of the EU 5 This Clingendael Policy Brief adopts a and EU member states (in coordination with comprehensive definition of economic diplomacy, private actors) in this field, and EU economic including activities in the field of trade and investment promotion (commercial diplomacy), diplomacy, which only includes the policies trade negotiations, global financial governance, and activities of EU institutions. Such a development assistance efforts and sanctions. distinction is important, as it highlights how This differs from the narrow definition of some EU the EU level is just one building block of countries, which regard economic diplomacy as the European Union, and its purposes are little more than business support. For more on this, quite broad in that they include both internal as well as on recent trends in economic diplomacy, (intra-EU) and external elements. see Maaike Okano-Heijmans, 2016, ‘Economic Diplomacy’, in: Costas Constantinou, Paul Sharp Could joint economic diplomacy be a way for and Pauline Kerr (eds), The SAGE Handbook of Europe to stop punching below its weight Diplomacy, London: SAGE (forthcoming in June). in the global (economic) arena, by fostering 6 For more on this, see, for example, Peter A.G. Van Bergeijk, Maaike Okano-Heijmans and Jan Melissen (eds), 2011, Economic Diplomacy: Economic and Political Perspectives, Leiden and Boston: Brill; and Stephen Woolcock, 2012, 3 See, for example, Chad Damro, 2012, ‘Market Power European Union Economic Diplomacy: The Role of Europe’, Journal of European Public Policy, 19 (5). the EU in External Economic Relations, Burlington, 4 See also the paragraphs below on Adding Value. VT and Farnham: Ashgate, esp. pp. 10–11. 2 Clingendael Policy Brief Denmark, the United Kingdom (UK) and the EU to step up its efforts in the field of Germany, have strengthened trade and economic diplomacy. This appears to be all investment promotion abroad, or commercial the more relevant given that around 90 per diplomacy. In addition, companies – rather cent of global growth is now coming from than non-governmental organizations – outside of Europe, hence making the need returned to centre stage in the delivery of to tap effectively into the ‘new markets’ even development assistance. The trend is to move stronger. A more sophisticated European away from global social quality thinking in economic diplomacy could contribute to development towards stimulating progress European Commission President Jean- by way of creating economic opportunities. Claude Juncker’s central policy goal of In this regard, improving access to finance strengthening growth and employment levels for European companies by broadening in the EU. For this to be possible, however, the mandate and the scope of action of the the still-standing unnatural dichotomy European Investment Bank (EIB) could prove between trade policy and trade promotion very useful for developing new projects – will have to be overcome, in EU legislation as which could contribute to growth and greater well as in economic practice. Moreover, in a stability, also in Europe’s neighbourhood.7 world of shifting power balances, fostering policy linkages across various fields – as Brussels’ new EU trade strategy of per High Representative/Vice-President October 20158 displays a similar and Federica Mogherini’s aspiration – is a dire unprecedented willingness to use political necessity. The need for more sophisticated tools for economic objectives and economic policies that ‘connect the dots’ between instruments for political purposes in new trade and investment, resource and food ways. Free-trade agreements are now a security, migration, global economic and tool not only to promote (economic) value, financial governance, and (sustainable) but also European values – ranging from development are now more essential than labour rights and civil liberties to sustainable during earlier times. development and market capitalism.9 This heralds a new era in EU trade diplomacy, To argue that synergies between policy wherein normative content is incorporated areas can and should be improved is into the more effective sides of the EU’s clearly not to say that EU action in (m)any clout. Economic power undoubtedly has of these fields is new. International trade the lion’s share herein. and investment negotiations, international financial regulation, environmental policy With the globalization-induced, fast-paced and development policy are the more changes in the balance of power and a obvious policy areas in which the EU has Global Strategy on Foreign and Security long acted on behalf of, or next to, its Policy in the making, the time seems ripe for member states. EU action in other fields, such as foreign policy and energy policy, is of more recent origin. Yet the EU has even acted in the field of trade and investment 7 EIB President Werner Hoyer in Florian Eder, promotion for many years already. Largely 2016, ‘The Last Untapped Treasure of European acting upon requests from EU member Integration’, Politico, 11 March, available online at http://www.politico.eu/article/eus-last-untapped- states’ diplomats in third countries asking treasure-werner-hoyer-mario-draghi-ecb/. for EU help in trade-promotion initiatives 8 See European Commission, 2015, ‘Trade for All’, throughout the years, the EU has developed available online at http://trade.ec.europa.eu/ specific tools to facilitate business doclib/docs/2015/october/tradoc_153846.pdf activities.10 Instruments include bilateral (accessed March 2016). trade-promotion programmes; cooperation 9 More specifically, the newness lies in the fact that with national chambers of commerce; and future trade agreements aim to promote European liberal values in a more direct way than before, by way of chapters in the agreements themselves, rather than by a clause linking trade agreements with political agreements that are negotiated with 10 Interviews with European Commission officials at partners in parallel. DG Trade and DG Growth, 11 February 2016. 3 Clingendael Policy Brief regulatory reform dialogues. Other European generate growth and jobs.12 The missions – although not EU – initiatives also illustrate comprised high-level political and business how trade promotion and advocacy at the meetings, seeking to promote industry and European level are hardly new. These include enterprises in various target countries in the the Enterprise Europe Network, which was Americas, Asia, the Middle East and even in developed as a bottom-up initiative from Europe, including within the EU. European businesses aimed at sharing information and facilitating match-making, The Missions for Growth appear to have and the approximately 30 European Business been somewhat of a ‘hobby horse’ of former Offices (essentially, European Chambers European Commission Vice-President of Commerce) that are currently operating Antonio Tajani – arguably the most active around the world. This activism may be commercial diplomat that the EU has had surprising, because the EU, by and large, so far. Their number peaked in 2013, with did not and does not have a mandate to eleven missions, followed by six missions act in these fields.11 Undoubtedly, trade in 2014 and hardly any thereafter. From the and investment promotion remain at the EU’s perspective, the Missions for Growth heart of more than a few EU member complement national economic missions. states’ economic diplomacy efforts today. They aim to support all 28 EU member It is, however, also where EU thinking on countries and are said to contribute to economic diplomacy originated. ensuring the external marketing of the European Single Market. Recognizing that the role of national authorities remains 2013 Onwards: The EU Stepping essential in facilitating companies exporting Up the Effort abroad, Commissioner-led missions are presented as an instrument for the Europe- wide representation of industrial sectors in EU economic diplomacy (EU ED) kicked one mission that no individual EU state could off in all but name in 2013 with a focus offer. on trade and investment promotion. The Directorate-General for Internal Market, Importantly, the objectives of EU economic Industry, Entrepreneurship and SMEs missions went beyond the narrow business [small and medium-sized enterprises] (DG and trade realm to include also political Growth) played a pivotal role in furthering objectives and promote sustainability. In the this ‘business end’ of economic diplomacy. words of Tajani himself, [then HR/VP]: The EU’s Missions for Growth became a very visible element in support for the Baroness Ashton asked me to co-lead her internationalization of European businesses own missions to Egypt and Myanmar; and and their competitiveness in order to we combined, extremely well, a political Task Force and an economic delegation to reach out to these countries in transition. Commissioner Potočnik joined the Mission for Growth to China, to strengthen our 11 Certain elements of the agricultural sector message on the need for green growth are an exception. See, for example, online at models in countries with the largest carbon http://ec.europa.eu/agriculture/newsroom/174_ footprints.13 en.htm. The lack of a formal mandate may also explain why both policy-makers – especially in national public administrations – and scholars overlook such EU action, which developed through 12 See online at http://ec.europa.eu/growth/industry/ a pragmatic and demand-driven approach. For international-aspects/missions-for-growth/index_ example, the only lengthy volume that has been en.htm. written on EU economic diplomacy to date, by 13 European Commission, 2014, ‘Missions for Growth: Stephen Woolcock, argues that the EU ‘does not Note d’information de M. Trajani’ [Note on the engage in commercial diplomacy, which individual Missions for Growth from Former Vice President member states still pursue’, whereas ‘the EU Tajani], Brussels: Secretariat General, Info (2014)3, promotes trade in the sense that it seeks to remove 28 January, available online at http://ec.europa. barriers to trade and investment’; see Woolcock, eu/DocsRoom/documents/4703/attachments/1/ European Union Economic Diplomacy, p. 10. translations/en/renditions/native. 4 Clingendael Policy Brief Few would dispute that EU missions can the Netherlands, in particular, approach add value, at least in theory, for example business support from a predominantly in countries where EU member states national perspective.15 At least in part, are not (widely) represented, and by this is explained by their well-established enhancing political leverage through capabilities in this area. Economic economic scale. Failing to engage with diplomacy’s link to nation branding and – in and learn from EU member states’ lessons the case of the Netherlands – legitimation of learned in this realm, however, results in the monarchy feature into this as well.16 missed opportunities. Hence, despite their laudable objectives and partial success, The EU has not so far seriously tackled the Tajani’s Missions for Growth have been issue of how national policies and practices criticized for their poor preparation and in the field of commercial diplomacy interact follow-up, and for the lagging structured with those of the EU. Similarly, EU member involvement of EU member states. If the EU state governments and private-sector can improve on these fronts, and systematize organizations have barely discussed the effective ex-ante and ex-post assessment issue – partly because they remain largely mechanisms, it is not unlikely that the unaware of the increasing EU activism and/ Missions for Growth will grow in number or because they do not wish to encourage it. again in the future. This applies especially to those EU member states with a traditionally narrow – that is, Improving on Stakeholder mostly commercial and competitive – notion Engagement of economic diplomacy. Following Tajani’s unprecedented frontline activism, the EU has been trying to Considering other European businesses step up its engagement with European mostly as rivals in obtaining short-term stakeholders by intensifying cooperation with gains, however, overlooks the longer-term governments and trade promotion bodies.14 benefits of cooperation and coordination. This has resulted in a series of bilateral and A joint approach would enable the EU as a multilateral meetings, both in the EU member whole to use its economic clout for political states and in Brussels. The discussion about and strategic purposes, particularly when the role of the EU in economic diplomacy dealing with major powers such as China and is clearly picking up speed, also in light Russia. European economic policy-makers of the changing tactics. The personal and businesses seem to be forgetting that background of new Vice-President of the European actors are not just ‘senders’ of Commission for Jobs, Growth, Investment economic diplomacy. Even if they may not and Competitiveness Jyrki Katainen, desire a European hand in their commercial originally from Finland and therefore more ventures abroad, a coordinated framework representative of the Northern European definitely works to their interest when on the ‘spirit’, probably adds weight to the more ‘receiving end’ of it – for example, when it restrained standpoint. This may explain the comes to opposing Chinese steel-dumping or decrease in the number of Missions for actions undermining the safety of sea lanes Growth – at least for now. in the East Asian region. While certainly not all EU member states oppose the new-found activism in Brussels as a matter of principle, more than a few 15 The Dutch Ministries of Foreign Affairs and remain cautious – if not wary – of Brussels of Economic Affairs are particularly reluctant, moving beyond its trade-policy mandate although they – together with representatives of the and into the field of trade promotion. As Netherlands Enterprise Agency – participated in the hinted at before, the United Kingdom and more recent meetings in Brussels, but not before; informal discussion with a high-level Dutch official, February 2015. 16 A key (stated) purpose of the foreign travels 14 See online at http://ec.europa.eu/growth/industry/ undertaken by Dutch King Willem-Alexander is to international-aspects/missions-for-growth/ add status and impact for Dutch businesses, hence involving-eu-members/index_en.htm (accessed on blurring the distinction between state visits and 14 January 2016). trade/economic missions. 5 Clingendael Policy Brief EU Competence Creep Business Organization Worldwide Network or Economic Diplomacy (EBOWWN) published position papers on European and EU economic diplomacy. Strategizing? Predictably, EUROCHAMBRES makes a strong, if somewhat narrow, argument The current phase in the development of a for a more forceful strategy on European broader EU/European economic diplomacy economic diplomacy in support of the began in early 2015. Discussions moved internationalization efforts of SMEs. Its call to a higher political level, beyond the for enhanced business support is largely Missions for Growth, and were now for the triggered by the fact that a low proportion first time officially branded as economic of the EU’s SMEs (13 per cent) are active in diplomacy.17 This has fuelled concerns in international markets outside the EU. More some EU member states as well as business than the EBOWWN, EUROCHAMBRES organizations that economic diplomacy is also makes a real attempt at ‘unpacking’ being used by Brussels – in particular, the the business-support element of economic European External Action Service (EEAS) diplomacy.19 Little is said, however, about – to further its ‘incrementalist’ ambitions. the choice (not) to use particular tools; how For these worries to be converted into a efforts at the EU and EU member state level positive stance towards a more coherent, should complement each other; and what strategic European economic diplomacy, exactly the added value of EU ED should be. EU institutions are hard-pressed to explicate For its part, Business Europe is more hesitant the objectives, tools and (expected) added to contribute to the discussion; by March value of the undertaking. 2016, the organization had yet to publish its own position paper. This may be explained Things started to move in January 2015, by the fact that Business Europe represents with a meeting organized by DG Growth companies that are active in Europe and with trade-promotion organizations (TPOs) focuses on trade policy rather than trade of EU member states. In February 2015, promotion.20 the European Commission launched a call for tenders seeking to promote European At a fundamental level, however, the economic diplomacy. This initiative set out to European business community is united in develop cooperation projects gradually with its assessment that companies operating in national TPOs, along with strengthening the third countries stand to benefit from a shared European Trade Promotion Organization’s vision among all key European stakeholders, network; and to spur closer collaboration at the EU and member state levels. Views with EU member states and their TPOs in the diverge with regard to the extent to which framework of the Missions for Growth and cooperation should be formalized, with some other internationalization activities of the actors stating that ‘EU and EU member Commission.18 states should work in the same direction’, In March 2015, a meeting with European business organizations (EBOs) signalled the growing involvement of the private sector 19 EUROCHAMBRES, February 2015, European in this new EU drive towards reforming Economic Diplomacy: Position Paper, available economic diplomacy. Aiming to contribute online at http://www.eurochambres.eu/content/ to the effort, business organizations default.asp?PageID=1&DocID=6825. An argument such as the Association of European is made for EU economic diplomacy to capitalize Chambers of Commerce and Industry on improved exchanges between three areas (EUROCHAMBRES) and the European of business support – advocacy and visibility, market intelligence, and market access services – and includes specific suggestions as to how to streamline and improve the internal organization of the trade and investment promotion activities of 17 Interview with an official of DG Growth, the EU. International Affairs, Brussels, 11 February 2016. 20 Authors’ interview with representatives of Business 18 See only at https://ec.europa.eu/easme/node/781. Europe, Brussels, 11 February 2016. 6 Clingendael Policy Brief others calling for a unified ‘team Europe’ Communication by the end of 2016, and a approach, and yet others calling on the high-level seminar on economic diplomacy EU to use proactively its capacity to speak and foreign policy, which was organized by with a single strong voice.21 In addition, the the European Political Strategy Centre in business community calls for the linkage March 2016, contributed to the forthcoming between economic and foreign policy tools communiqué’s purposes of strategic thinking and objectives to work both ways – that is to and stakeholder engagement.23 say, while it is perfectly legitimate for the EU to use its economic clout for foreign policy The early activism of DG Growth through purposes, if the EU is indeed to have a true its Missions for Growth may explain why economic diplomacy, the reverse should also this directorate still appears to be ahead of be true. In this light, for example, HR/VP other institutions in thinking about European Mogherini has been called upon to integrate economic diplomacy. On its website, a economic and business-related issues useful attempt is made at elucidating a into her discussion agenda when visiting core objective that DG Growth has set for third countries, without limiting herself to itself in the economic diplomacy realm – addressing the broader (and loftier) foreign namely, to ensure a level playing field for and security policy issues. Evidence of EU businesses.24 DG Growth’s proposed set change in this direction is not readily found, of actions in this field is worth elaborating however, even if Mogherini has often met here in greater detail, as it elucidates some with representatives of local businesses linkages with other policy fields and the during her foreign travels. roles played by other EU actors. They include the following: first, trade negotiations, at A next step in the forging of a comprehensive both World Trade Organization (WTO) and EU/European economic diplomacy was made bilateral/regional levels, in which DG Trade in June 2015, with the establishment of the takes the lead; second, cooperation with ‘inter-service group’ on economic diplomacy. governments, notably via dialogues covering This meeting brings together a wide range issues such as standards, conformity of commissioners (EU ‘ministers’) with an assessments and innovation, and specific external portfolio, as well as the EEAS and industry sectors, including space technology, the EIB.22 With DG Growth and the EEAS involving a variety of EU actors, including taking the lead, this high-level group focuses the DG for Environment and the EEAS; third, on: what is being done (inventory and cooperation with regions and international assessment); where the EU can improve or bodies, including with Mediterranean add to already existing actions at both the and Eastern neighbour countries as part EU and EU member state levels (gaps); and of the European Neighbourhood Policy how to improve (future developments). The (ENP), as well as with the Association of inter-service group is to publish an official South-East Asian Nations (ASEAN) and the Asia–Europe Meeting (ASEM), on issues including entrepreneurship, space policy and tourism. Here also, there is a clear role for the EEAS as well as for the 21 European Business Organization Worldwide Directorate-General for Neighbourhood and Network (EBOWWN), Position Paper: EU Economic Diplomacy, 7 September 2015, Enlargement Negotiations (DG NEAR) and available online at http://media.wix.com/ the Directorate-General for International ugd/84660e_612623bacfb043b8a4fe2363077399d6. Cooperation and Development (DG pdf, p. 1; EUROCHAMBRES, European Economic DEVCO). Finally, instruments to support the Diplomacy, p. 5; and authors’ interviews with internationalization of EU businesses, include stakeholders. 22 Among others, this includes DG Trade, DG International Cooperation and Development (DG DEVCO), DG for Environment (DG ENV), DG 23 More details of this meeting can be found online at Economic and Financial Affairs (DG ECFIN), DG http://ec.europa.eu/epsc/events/detail/2016-02- Neighbourhood and Enlargement Negotiations 25-economic-diplomacy_en.htm. (DG NEAR), DG Research and Innovation, and DG 24 See online at http://ec.europa.eu/growth/industry/ Regional and Urban Policy. See also below. international-aspects/index_en.htm. 7 Clingendael Policy Brief the Competitiveness of Enterprises and Small certain businesses’ home states are not and Medium-sized Enterprises programme officially represented by way of embassies, (COSME), the Partnership Instrument, the consulates and trade offices, etc. This will European Neighbourhood Instrument and benefit especially the smaller EU member the research programme Horizon 2020. states that lack a well-equipped trade- This has, in a way, also established a role promotion machinery. Relatedly, stronger for the Directorate-General for Research and EU ED would foster better policy linkages, Innovation (DG Research) in economic thereby helping businesses not only with diplomacy. The European Structural and more straightforward trade-promotion Investment Funds, which support economic initiatives, but also by raising business- development across all EU countries in related concerns at high-level political line with the objectives of the Europe meetings. In EU economic missions, a 2020 strategy, are also of relevance here thematic rather than bilateral/strictly – particularly the Regional Development, commercial approach seems especially Social and Cohesion Funds.25 useful to forge links with development goals such as sustainable energy and food security, to which a plethora of European Adding Value? businesses can contribute. Undertaking this at the EU level, alongside similar national The business dynamism described above initiatives, adds value by providing a broader is a telling sign of how private actors framework, which compounds economic and pragmatically understand the potential political resources and therefore strengthens positive returns of enhanced and coherent the scope and depth of, for instance, European economic diplomacy. Aiming for free-trade agreements (FTAs), thereby also a more comprehensive approach, two sets bolstering the profile of European actors of value added by EU economic diplomacy among third parties. can be identified, serving external and internal objectives – that is, the EU’s relations In addition, EU ED can improve European with the rest of the world and relations businesses’ much-needed access to among EU member states. Externally, EU finance in order to support economic ED should promote European objectives in growth and uphold the EU’s competitive the field of economics as well as foreign edge in innovation. SMEs in particular, but policy. Internally, it can contribute to a also multinational corporations (MNCs), strengthening of European aggregate stand to benefit from such action in the capabilities. Here, EU ED serves an important short term, while a revamp of the market intelligence function and should include benefits a broader group of businesses and a mechanism by which EU member states consumers in the long term. Financial tools collectively reconcile their internal and serving this purpose include the European external economic diplomacy objectives. Fund for Strategic Investments (EFSI) –the so-called ‘Juncker Fund’, mainly for projects Adding Value Externally: within Europe – as well as EIB projects Economic and Foreign Policy more broadly. By engaging in policy-based One area of external policies concerns the loans, the EIB creates a more favourable added value of EU economic diplomacy in investment climate, thereby spurring the economic field, including for private development and paving the way for more economic actors.26 First, EU ED could companies to invest in those countries. facilitate market access in countries where While the bank’s finance climate has served to advance European interests in sustainable development for years already, the EIB could also play a bigger role in easing the 25 See online at http://ec.europa.eu/regional_policy/ pressure of migration flows by means of en/funding/. projects that improve social institutions in 26 Authors’ discussion with policy officials of Dutch Europe’s unstable neighbourhood, including institutions, the European Commission and the around Syria. EEAS, The Hague and Brussels, January–February 2016. 8 Clingendael Policy Brief The beneficial ‘blend’ of economic and acting from a common framework.28 A more political issues brought about by EU ED sophisticated European economic diplomacy paves the way for the analysis of the other would thus contribute to upholding the external area of added value: foreign policy. neo-liberal fundamentals of the existing This side of the coin is to balance the implicit international order. belief carried in a narrow, business-like approach to economic diplomacy that aims Second, EU ED serves the purpose of for immediate and medium-term gains – diplomatic signalling, both positive and namely, that the market will do its work negative, by using related initiatives to to keep more fundamental challenges strengthen relations with preferred partners to the existing neo-liberal rules-based while excluding (in a ‘sanctioning’ way) order in check.27 As China’s challenges others. In this regard, the newly established to civil liberties and to maritime law in its EU–China Connectivity Platform could be region clearly illustrate, this is a dangerous read through these diplomatic/geopolitical assumption. A comprehensive approach to lenses as a way for both Brussels and Beijing European economic diplomacy can address to further marginalize Russia while stepping this challenge. Two points in particular up their infrastructure cooperation. Similarly stand out. minded, albeit not directly EU-promoted, economic diplomacy initiatives are the Trans- First, a stronger EU ED would be a powerful Pacific Partnership (TPP), which excludes channel through which the EU and its China from a United States (US)–Japan member states could communicate their trans-oceanic network, and China’s Belt and ‘rules of the game’ to third parties in a Road Initiative, which in turn does not involve coherent way. By developing the advocacy the US and Japan. Geopolitically minded, angle of such a pragmatic tool, the EU economic power-play by others should would convey a more solid image of itself not necessarily cause the EU to respond as a truly global actor, capable of having in kind. However, it should have European a deeper impact in global policies and – capitals thinking about how to address the more broadly – governance. This has clear consequences of such actions. benefits for European businesses as well. After all, today’s geo-economic struggle Thus, in addition to being essential for is fundamentally about ensuring a stable, safeguarding economic competitiveness, secure environment and a fair and level the development of European economic playing field for one’s businesses at home diplomacy would also benefit the projection and abroad; remaining (or becoming) a of the much-discussed European normative standard-setter in the economic and financial power. In conveying their values, the EU fields; and creating an international system and EU member states stand to benefit that favours one’s own system of politics from the pragmatism that European and economics, including the norms and economic diplomacy may bring. As the values that characterize it. The leverage that competition between divergent ideas and comes with the combined EU market power underlying normative principles grows, mere suggests that EU member states will be rhetoric that hinges on claiming the moral better able to achieve these objectives when high ground no longer works – indeed, if it ever did. While ‘verbalization’ of the values-based nature of certain policies is certainly important, what really matters for normative promotion are actual policies that convey such values directly. Instead of 27 For a useful counter-argument to this assumption, see Nadine Godehart, 2016, ‘No End of History: A Chinese Alternative Concept of International 28 See, for example, Maaike Okano-Heijmans and Order?’, Berlin: SWP Research Paper (RP2), Daniel Lanting, 2015, ‘Global Economic Governance January, available online at http://www.swp-berlin. in Transition: China’s Activism and its Impact org/fileadmin/contents/products/research_ on Europe’, Clingendael Report, The Hague: papers/2016RP02_gdh.pdf. Clingendael Institute, October. 9 Clingendael Policy Brief advocating virtuous behaviour by means Adding Value Internally: of commendable but empty statements, Strengthening Capabilities European economic diplomacy could The internal area of EU economic diplomacy’s strengthen its lead by example – that is, added value refers to its role in strengthening through real actions – by incorporating European collective capabilities. This includes normative content into the more effective the function of intelligence-gathering and sides of its clout, where economic power information exchange. A stronger EU ED undoubtedly has the lion’s share. could relaunch the EU’s role as a forum for discussion among national actors, rather Two more concrete examples will help to than insisting on its much more controversial clarify this point. First, strategically enhanced nature as a ‘substantial’ multinational/ economic-diplomacy tools could be used supranational actor. Even from this less by the EU to attach ‘positive strings’ when ambitious perspective, EU-scale action negotiating deals with third countries. can serve economic and foreign policy Particularly towards the developing world, purposes, especially when dealing with big such an approach would increase the emerging markets, particularly at the initial effectiveness of the EU’s efforts to promote stages when a bilateral approach is likely more sustainable development models, to be disadvantageous for any individual entailing higher standards in a wide range EU member state. of policy areas, from labour rights to food security. Second, although certainly more Serving businesses, the EU can provide complex to implement, the normative role a valuable platform for the ‘peer-to-peer’ of economic diplomacy could be extended exchange of expertise among private to ‘harder’ security domains. The EU could and public actors. This not only fosters deploy its economic arsenal to sanction the creation and development of higher (positively or negatively) third actors’ benchmarks for future endeavours, but commitments to upholding the much- will also facilitate ‘package deals’ aimed at advocated rules-based international order. spurring horizontal and vertical groupings In this light, should China decide to snub an across value chains. Enhanced dialogue unfavourable ruling by the Permanent Court with EU institutions could even improve the of Arbitration in the context of the South chances of individual European enterprises China Sea disputes (which is expected by gaining access to EU funds. Moreover, mid-2016), resolute economic diplomacy- businesses stand to benefit from an based action from Brussels would greatly intelligence-gathering function of EU ED. bolster the credibility of the many démarches EU-level scoping exercises would surely in support of international law. be more accurate than those carried out by national actors, resulting in a better In considering these various elements, it is understanding of the several trade hurdles important to highlight how the economic that private economic actors might face and foreign policy potential of external when venturing into a foreign market. economic diplomacy’s added value should This applies in particular for procurement not be compartmentalized. Especially in the procedures, with China being an outstanding longer term, economic diplomacy actors case in point. and instruments with seemingly dominant economic aims could instead prove their Contributing to foreign policy purposes, ‘versatility’ by further contributing to the the EU ED intelligence function would also pursuit of foreign policy goals. Consider, serve to gather and process information for instance, how the promotion of jobs and about actions undertaken by third parties growth by the EIB and the European Fund for within Europe – that is, it would strengthen Strategic Investments (EFSI) will also foster European capabilities to deal better with greater stability at the continental level, ‘incoming’ economic diplomacy. Developing a including in the EU neighbourhood. With joint approach to incoming investment would tools like these, the EU is better equipped benefit EU member states because of greater to address ‘cross-cutting’ policy challenges intelligence on (planned) foreign investment such as migration. in Europe. For their part, investors into the 10