Commercial diplomacy is a method of diplomacy. It concerns an activity conducted by public and private actors with diplomatic status to support business promotion between a home and host country. 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.
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Definition
In the 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. It is certain, however, that both kinds of diplomacy are "irrevocably intertwined" and thus "distinct [but] obviously closely related to [each other]".
Purpose
Commercial 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.
Commercial diplomacy is designed to influence foreign government policy and regulatory decisions that affect global trade and investment. 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 commercial diplomacy is a value-creating activity due to its usefulness in dealing with managerial and government concerns.
In this context, commercial diplomacy is profitable in 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.
Practitioners
Practitioners of commercial diplomacy are usually trade officials who are charged with negotiating international trade and investment agreements and resolving policy conflicts that affect international commerce. Officials from departments or ministries responsible for foreign affairs, finance, agriculture, industry, labor, health, the environment, the regulation of banks, telecommunications, air transportation, or the licensing of professionals can be commercial diplomats. Advocacy tools include letters, testimony, white papers, speeches, op-eds, phone calls, and personal visits to key stakeholders and decision makers.
Private sector
Some authors also include the role of the private sector. In their definition, commercial diplomacy contains “the work of a network of public and private actors who manage commercial relations using diplomatic channels and processes”. For example, the Albright Stonebridge Group describes itself as a "leading commercial diplomacy and strategic advisory firm".
Chambers of commerce and NGOs are examples of the private actors involved in commercial diplomacy.
Activities
Traditional commercial diplomacy activities include networking, intelligence, image campaigns and support. These activities are shown in the table below.
Other activities for commercial diplomacy and rationales that companies need are: need for access to reliable and neutral business information; credibility and image support in foreign markets; partner search; conflict handling; support of home country delegations (state missions); strategic concerns (e.g., energy).