Introduction
With President Trump disrupting the rule-based trading system and using tariffs to try to bring jobs and investments back into the United States, there is currently no shortage of discussion about economic diplomacy. Around the world, governments are grappling with how they can help their national firms to cope with the fallout from rising protectionism. They also seek to modernize diplomatic tools to promote certain types of international business (IB) that advance their countries’ economic interest. The focus on economic diplomacy is not new, with the subject having received spurts of attention during times of both rising multilateralism (e.g., after GATT implementation) and mounting protectionism (e.g., after September 11, 2001). What is new about the current cycle of interest, however, is the pace of change within diplomatic services and the amount of resources that are dedicated to economic diplomacy.
In this context, recent scholarship acknowledges the need for a comprehensive analytical framework of economic diplomacy, which can shape our understanding of its activities, tools, and goals. Several recent studies have indeed started combining elements from the fields of international relations and international political economy to capture both the economic and political dimensions of economic diplomacy (e.g., Okano-Heijmans 2011). However, what is often overlooked in this discussion, and will be the central argument of this article, is that any comprehensive economic diplomacy framework requires a strong understanding of IB. Economic diplomats commonly focus on export promotion and inward foreign direct investment (FDI) attraction, while avoiding import attraction and outward FDI promotion. We illustrate in this article that this approach is built on wrong premises and discuss how IB scholarship can aid in the development of new frameworks that allows for more effective economic diplomacy strategies.