The Political Economy Of Commercial Diplomacy

This dissertation is based on the author's multi-year research in the field of commercial diplomacy. It represents the author's preliminary results in a continuing study. For a long time in China, most research on diplomacy has been continuing focusing on political diplomacy rather than going beyond the traditional political and diplomatic framework. Therefore, few researches have been found with regards to the political economy of diplomacy. This dissertation is a rudimentary effort to fill this gap.This dissertation has combined the methodology of theoretical analysis with empirical studies in its research. Since the research areas have involved broader subjects, the methodology of economics, international political economics and international relations have also been applied.The dissertation begins with a review of the historical evolution of commercial diplomacy by focusing on three aspects: the scope of the study, the content of commercial diplomacy and the role of commercial diplomacy. After defining the intrinsic and extrinsic meanings of commercial diplomacy, the author introduces the concept of the commercial diplomacy circle which states that while government is the main player in commercial diplomacy, business and interest groups also play key leveraging roles in a commercial diplomacy circle. The author also conducts theoretical comparative studies which point out the historical linkage of commercial, economic and trade diplomacy.At the core of this research is the interaction of political and economic factors in commercial diplomacy. By comparing traditional Marxism and contemporary international politics and economics, the author points out that the effects of commercial diplomacy vary considerably among different political and economic systems, and concludes that economic development is the key to drive diplomatic relations. Developed economies tend to pursue "strong politics-strong economy" in diplomatic strategies, while undeveloped economies have "weak politics-weak economy" as their diplomatic strategies. An empirical analysis using a number of political and economic variables has been applied to a study of Sino-US and Japan-US commercial diplomatic relations. The analysis shows that as long as there are common security interests, the nature of bilateral diplomatic relations is cooperation rather than confrontation. On the other hand, if conflicts of security interests exist between two countries, the degree of interdependence of bilateral economy and trade determines the character of diplomatic relations.Double-edged game theory has been applied to analyze the role of government in commercial diplomacy. The analysis indicates that government negotiates with foreign governments and foreign interest groups on Level II, the International Level, and with domestic legislators and domestic interest groups on Level I, the National Level. Each level of negotiation is shown to constrain the other. The author examines government objectives in commercial diplomacy and the politics of trade protection initiated by various interest groups. A case study of the American congress, government and several interest groups leads to the conclusion that commercial diplomacy involves regulation capture. The author also analyzes policy implications of the privatization of commercial diplomacy by considering US- EU business alliances and argues that privatization of commercial diplomacy functions as a new business protection strategy whereby industries strive to increase international market share by active commercial diplomacy attacks rather than depending on seeking reduction on tariffs and other non-tariff barriers.The central aim of the research is to serve and promote China's diplomatic strategy. The author has sought to study the policy implications for Chinese commercial diplomacy. The author analyses domestic and international environment affecting China's foreign strategy, and concludes that peace and development is the mainstream but instability exist with regionalism and trade politics thriving in the world. China is experiencing an enormous growth of world economic power which has lead to a shift from political to commercial diplomacy. Relations with the EU and the US are characterized by equality, mutual benefit and a win-win philosophy. The author analyzes five areas of interest in Chinese commercial diplomacy: security interests, commercial interests, economic interests, political interests and social interests as well as additional considerations of the use of political and economic interaction and building an effective administrative regime. The author also conducts a forward-looking analysis advocating involvement of three new issues in China's commercial diplomacy in the 21st century -environment, labor standards and energy security.The guiding ideology of this dissertation is the pursuit of academic exploration and innovation. This research explores the challenges facing diplomacy which have been raised by globalization, builds a theoretical framework of commercial diplomacy, and argues against the historical views of diplomacy as a single political concept. Under this framework, national interests have to be considered at both international and national levels in terms of commercial diplomacy.The main innovative achievements reflected in this dissertation include:First, the author has clearly defined the intrinsic and extrinsic meanings of commercial diplomacy. The research has been conducted within the framework of international political economy. A new concept "the commercial diplomacy circle" has been introduced, and political and economic interactions have been discussed at both international and domestic levels. The author argues that while government is the main player, business and interest groups have important roles in commercial diplomacy as well. After comparative studies of commercial diplomacy, economic diplomacy, and trade diplomacy, the author concludes that commercial diplomacy is the most appropriate term to describe international relations and the blend of commerce and diplomacy. This study has enriched the content of international political economics.Second, pioneering research on US-China and US-Japan bilateral relations has been accomplished by empirical analysis. The empirical study found that common security interests are a pre-condition for stable diplomatic relations. As long as there are common security interests, bilateral relations tend to be cooperative rather than confrontational. If conflicts of security interest exist between two countries, stability of diplomatic relations depends on the degree of economic, especially trade, dependency. If mutual reliance on foreign trade is high, it may produce positive effects on bilateral relations. If conflicts exist on security interests with political recognition of "common commercial interests", then commercial interests will have positive effects on development of diplomatic relations, such as actively promoting the expansion of bilateral trade. Conversely, if no political recognition exists, commercial interests will be upgraded to "market competitive threat." The results of this analysis have corrected existing research results on Sino-US relations.Third, this research defines five objectives of China's commercial diplomacy based on security, commercial, economic, political and social interests. With analysis of the policy implications of commercial diplomacy the author argues that China's growing power in international political economy has increased its bargaining power in the world. Therefore, China should realize its national interests by developing efficient commercial diplomacy strategy and highlighting the important role of political and economic interaction.Fourth, the author studied institutional arrangements and its impacts on commercial diplomacy. At the national level, the establishment of an effective commercial diplomacy mechanism is the most crucial factor. In terms of legislative arrangements, the author points out that legislation, technical standards, international laws and regulations have formed a regime of institutional protection. Therefore, China is facing severe challenges on legislative and institutional arrangements involved in building effective commercial diplomacy strategies. The author also studied trade discriminatory systems in developed countries and concluded that these systems have become the most powerful natural barrier for developed countries to use to protect their national interests and has become an important component of foreign policy.By focusing on political economy of commercial diplomacy, this dissertation has great theoretical and practical significance. It has established the theoretical framework of commercial diplomacy, which demonstrated the basic rules of political and economic interaction in commercial diplomacy. This has enriched the theory of international relations and international political economics. This dissertation has also offered practical significance by its empirical research on commercial diplomacy, which has provided valuable experiences for developing countries, particularly for China, to develop its commercial diplomacy strategy towards 21st century.