Sardar Aminullah Khan

The global economic order is shifting, driven principally by the rise of emerging powers, changing structure of power and parameters of international system, distinctive diplomatic approaches and increasing involvement of international organizations. Successful economies that emerged on the global economic landscape including Japan, South Korea and of late China. used economic tools and commercial relations to strengthen their position in the world arena. The global economic crisis 2008-11 that engulfed the Americas and Europe provided fresh opportunities, particularly to China that promptly stepped in to control its own and saved several developed countries from bankruptcy.

Such new (economic) realities raised crucial questions about the role that economic factors play in perception of power by the governments and how economic power is projected and exercised on the international stage to their benefit; a challenging situation for old economic guards. Policy frameworks had to undergo change towards invention of new armaments that the nations need in economic warfare in international markets.

In Asia, before the rise of modern China, the Japanese model of economic diplomacy provided for an inverse relationship between political and economic interests that reinforce one another and should accordingly need to be seen in tandem. Japan successfully employed economic diplomacy as a central instrument of its foreign policy on these lines in quest for national security since the post-war period. As against this, the transatlantic world attached relatively greater importance to the military–economic linkage in its quest for influence in the world. So did South Korea and many others through promoting a more aggressive strategy at global level for consolidating their diplomatic relations and succeeded. Even the Indian and Bangladeshi and Sri Lankan initiatives are aggressive.

China emerged as new source of Asian economic power after liberalization and opening up to the world. It skillfully used economic diplomacy in its attempt to maximize its power in the global economic and political system and to achieve broader foreign policy goals. It formulated its bilateral economic relations with score of countries that had conflicting political and economic interests and were situated in different geo-strategically and geo-economically critical locations. More serious work started after China joined the WTO and the emergence of the 2008 international financial crisis.

China applied policy and practices of economic diplomacy that bore significant fruits and helped avoid collapse of its export-oriented economy even during the global financial crisis. China has since surpassed Japan and Germany as the second largest economy and first global trader. After successfully understanding the dynamics of international interactions in economic spheres, it used the economic diplomacy in development of bilateral/multilateral/institutional relations and created formidable interdependence.

These initiatives gave a new perception of modern diplomacy that envisaged an increased role of economic relations in the political/security, business, trade, finance and even IT in an interconnected world. Economic diplomacy was nourished as a primary goal before the diplomatic corps. On the whole, its development and significance was overarched in administrative structures for a quick and adequate reaction to changes in the world economic community. In other words, economic diplomacy and diplomacy in general, has been made an essential component of country’s foreign policy as a tangible and successful means of cooperation in international economic relations. New generation leadership led by President Xi also ensured that government’s policies continue to reflect the logic of economic diplomacy centered principally on the high-level visits, trade and investment deals, and inter-governmental coordination activities; all meant to advance simultaneously country’s economic growth and diplomatic goals. As a result, Chinese leaders found considerable in international arena to pursue many of national policies without demand too much change. Political support was provided through Third Plenum decision and followed in recent Policy Congress. In support, helped formulate internal trade rules, established free trade zones, focused on cultivating national champions capable of competing the advance countries and in terms of regional activity, there was a consolidation of leadership over Asia’s economies that enabled lessor competition as against the EU and Americas. In other words, operating mechanism for international trade was created that favored China. In a way, it managed economic issues in much the same manner as security issues with superpowers also with more economic dimensions of the policy framework.

Dominance of Geo-Economics on Geo-Politics made economic diplomacy an important means of achieving national security and broader foreign policy goals. So many instruments have evolved in terms of offensive arms in economic warfare. Experts believe that modern economic diplomacy has scientific directions involving examination of the complex trade and economic relations coupled with conventional diplomacy to further and influence the external economic policy. Even modern economies have been utilizing such frameworks. Countries like the US use strategic cooperation with other countries with a significant weightage to economic content in overall policy structure when the WTO has become theatre of conflict and economic nationalism manifests itself in imports as well as exports. Blossoming China-India and the US-China economic relations amply magnify this reality.

Thus in today’s world, in order to be globally competitive and to boost exports, and to play effective role in the economically integrated and well-linked global village, an effective economic diplomacy needs to be the essential part of foreign and other policy frameworks. More so when traditional state-to-state diplomacy is being fragmented and made more complex due to the participation of a growing number of non-state actors in international economic relations and involvement of multiple other government agencies in economic cooperation making the task more challenging for them in the world for trade and investment. Traditional approach can hardly succeed as has been the case of Pakistan.

Pakistan is a developing country and its prosperity is now more connected than ever to international economic relations and developments in the global economy. Given small volumes of exports vis-à-vis GDP, an analysis of the domestic and international policy settings and breakdown of existing and prospective sectors is essentially required to capitalize on global and regional opportunities. This requires targeted measure for promoting trade, encouraging economic growth, attracting foreign investment and also for supporting the Pakistani businesses. Economic diplomacy, unlike traditional diplomacy which promotes peace, directly supports the prosperity, sustained performance of the economy and can better protect national economic interest.

(The writer is a retired senior Economic Diplomat)