Trade is no longer just about buyers and sellers, shipping and marketing, firms and distributors. Nor is it only about customs officials and border inspections, tariffs and quotas, export subsidies and import licenses. Over the past three millennia, trade has moved from being a series of infrequent journeys to meet unknown peoples, to exchange familiarity for the exotic benefit of rulers and elites, to being today a primary driver of global economic growth. Trade as a percentage of world economic output has increased from around two percent in the early nineteenth century to nearly 35 percent in the year 2000.
Trade today is an inescapable, indispensable component of a global economy that enables the world’s billions to work, earn a living, and consume and invest the fruits of their labours. Without international trade, there can be no global economic prosperity. The dramatic increase in trade relative to overall global economic activity is a metaphor for the increasing necessity for people across the world to engage with one another: to deal with each other’s differences and to do business with one another. Alongside this great rise in international trade has been a parallel increase in another fundamental and essential human activity: diplomacy.
Until recently, diplomacy that addressed trade issues tended to be viewed as a narrow and technical subset of diplomacy, Peripheral and subordinate to international security issues. But the diplomacy that makes trade possible and profitable is no longer just about nation-state governments, bilateral trade liberalization treaties, multilateral trade organizations and Free Trade Areas.
Trade diplomacy as it has evolved to this day is about much more than that, as the following story attests.
Trade diplomacy can be seen as the use of diplomatic means to support Trade or commercial activities such as export and foreign direct investment (FDI), pursued with means and resources available to the country aiming at economic stability, welfare and a national competitive advantage.
It could also be seen as the deployment of diplomatic tools by business representatives to promote and support business interests across national borders, with the aim to obtain value in terms of both strategic and economic benefits.
Trade diplomacy focuses on development of business between two countries. It aims at generating commercial gains in the form of trade and inward and outward investment by means of business and entrepreneurship promotion and facilitation activities in the host country. Commercial diplomacy is pursued with the goal of gaining economic stability, welfare, or competitive advantage.
As a term, Trade/commercial diplomacy emerged in the second half of the twentieth century, but the concept certainly existed in previous centuries. In literature the concepts of economic diplomacy and commercial diplomacy are often used interchangeably. Definitions of both concepts vary, and consequently the relationship between them is also described differently. Some authors argue that commercial diplomacy is a subset of economic diplomacy.
Trade diplomacy emphasizes the government's role, being defined as "a government service to the business community, which aims at the development of socially beneficial international business ventures". It is "the work of diplomatic missions in support of the home country's business and finance sectors and includes the promotion of inward and outward investment, as well as trade". Commercial diplomacy thus includes "all aspects of business support and promotion" including investment, tourism, R&D, and intellectual property.
Trade diplomacy is designed to influence foreign government policy and regulatory decisions that affect global trade, investment and commerce. It is concerned with government regulations and actions that affect international commerce—including standards in areas such as health, safety, the environment, and consumer protection; regulations covering services such as banking, telecommunications and accounting; competition policy and laws concerning bribery and corruption; agricultural support programs; and industrial subsidies. Potter (2004) argues that Trade diplomacy is a value-creating activity due to its usefulness in dealing with managerial and government concerns.
In this context, Trade diplomacy is profitable that it makes exporting and operating abroad easier; it is a valuable instrument for export promotion and operating abroad; it enables companies to perform tasks abroad more quickly and increases the amount of exports and company results by providing information about rules, regulations, culture, public tenders and the market of the host country; by providing support during the partner search; and by providing assistance in trade disputes, fairs, and missions. Especially for companies that have financial limitations, access to reliable information and a broad network abroad are essential.
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