In a global landscape that is constantly evolving, economic diplomacy is emerging as a powerful tool for mitigating conflict and promoting world peace. Economic diplomacy is a form of diplomacy that involves the strategic use of economic tools to advance countries’ national interests while promoting peace, stability, and prosperity. As nations attempt to navigate a complex global economic landscape that has been weakened by rising geo-political tensions, it has been realized, in recent years, that economic prosperity and stability is often the basis for lasting peace. This realization has played a pivotal role in international relations, with the increased role of economic diplomacy. This diplomatic approach not only aims to resolve disputes through economic tools, but also highlights the importance of working together – as nations – to solve some of the world’s most pressing issues, to bridge the gaps, and foster long-lasting peace.
The United State’s Department of State defines economic diplomacy as a “means to both harness global economic forces to advance America's foreign policy and employ the tools of foreign policy to shore up our economic strength.” Economic diplomacy plays a crucial role in shaping the landscape of international relations, international trade, and promoting peace. In contrast to traditional diplomatic approaches which tend to rely primarily on political and military forces, economic diplomacy focuses on economic policies and tools to advance a country’s strategic goals. These policies are created with the intention of fostering mutual benefits for the countries involved. In an interconnected world in which countries become dependent on one another, the establishment of strong economic ties is crucial and has the potential to lower geo-political tensions when the parties’ interests are represented and taken into considerations during the decision-making process.
Living in such an interconnected world poses an important challenge for countries, who must first and foremost protect their local economies. Governments must work towards achieving economic diplomacy, which encompasses creating strong economic ties with other nations, while protecting domestic companies, and achieving their strategic goals. Doing so can be particularly challenging for countries who have not only different priorities and objectives, but also vary in their economic needs; some nations may seek new foreign investments, other more technological development and some access to more natural resources. Countries have different trade balances, especially in terms of exports and imports, and also because countries have a comparative advantage in the production of various goods and services. Economic diplomacy comes into play as nations have to navigate the complexity of trade imbalances, through the negotiations of fair trade agreements, macro-economic tools such as tariffs and protectionism policies. The negotiations of trade alliances become crucial to achieve economic diplomacy, ensuring an agreement representing the interests of the nations involved in the negotiations is met. A failure to reach a mutually beneficial agreement in international trade could lead to conflicts, such as trade wars, which negatively impacts the economy of many countries, and the overall balance of trade. Trade disputes may lead to job losses, decrease in productivity, diplomatic tensions, and a rise in products and services’ price.
Since the establishment of the World Trade Organization (WTO) in 1955, 164 nation-states have joined the international organization which plays a pivotal role in the global economic landscape, serving as a multilateral forum for regulating international trade and fostering a rules-based system. The goal of the WTO “operates the global system of trade rules and helps developing economies build their trade capacity”. These rules have been important to ensure that international trade runs as smoothly, predictable, and freely as possible, the WTO advocates on its website. Although the WTO is the largest in size, a significant number of trade organizations and trade agreements have been created since, in a continuing effort to increase global trade, advance the global economy through the promotion of fair trade practices, and through agreements. In a globalized world, the establishment of these organizations has been important in the promotion of international trade, economic cooperation, and the development of emerging markets.
In 2012, the United States Institute of Peace (USIP) published a report that explicitly references how business can promote peace. Since then, numerous organizations have presented research, analysis and reports on how business, trade and entrepreneurialism can contribute to the promotion of peace in the international and diplomatic scene. The USIP report first acknowledges the continuing violence and instability in our world - although this report is ten years old, its statement is still pertinent to this day - it is growing more important for nation states and their national governments to seek other means of promoting peace. There are five main ways in which corporations have the potential and the ability to promote stability: by providing jobs and economic opportunities; by respecting the rule of law and international labor and environmental standards; by adopting principles of corporate citizenship; by undertaking risk assessments specific to the political environment of conflict-affected regions; and, in certain circumstances, by engaging in Track Two diplomacy, as outlined in a report from USIP.
The USIP provides an argument that ethical businesses are already contributing to peace, and the awareness of the consequences of their behaviors only further motivates these firms to act ethically. Economic activity is a significant factor in mitigating conflicts, studies by both the World Bank and the United Nations respectively have shown a correlation between poverty and violence. Economic growth often leads to an increase in economic activity, which in turn creates more employment opportunities. Employment can provide individuals with a steady stream of income, thereby enhancing their economic welfare and reducing the likelihood of them being involved in illegal or criminal activities due to lack of alternatives or because of a sense of hopelessness. Similarly, economic activity can alleviate poverty by increasing household disposable incomes.
The report emphasizes the importance of the rules of laws, and international standards when conducting business in a foreign country. Unethical business practices not only harm the reputation of the companies involved but can also have severe social, environmental, and economic consequences. For instance, a lack of commitment to ethical business practices can further negatively impact a company’s productivity level, lead to legal issues, and can create a hostile business environment. In today’s ever-changing world and with the rise of geo-political tensions, it has become increasingly important for large companies – but also for governments – to respect the rule of law and abide by international labor and environmental standards that can contribute to peace. For example, companies can work to raise the awareness of child labor, unsafe working conditions, or protecting workers. The lack of ethical business practices has the potential to negatively impact the communities in which the company operates, the disregard of labor laws can lead to social unrest, protests, but also the tarnishing of a company’s public image. Corruption has the potential to fuel instability and violent conflicts. Therefore, businesses that uphold robust ethical principles and maintain a strict zero-tolerance stance against corrupt practices play a pivotal role in promoting peace.
The report further mentions corporate citizenships, which can be defined in simple terms as a commitment to ethical behavior in strategy, operations, and culture. Today, many companies have what we call a “Corporate Social Responsibility '', an annual report that aims at highlighting the company’s efforts in terms of sustainability, but also responsible and ethical business practices. These reports become very important to foster peace as it demonstrates the company’s commitment to various stakeholders, emphasizing its role beyond profit-making and towards contributing positively to society. The last two methods by which corporations can contribute to the promotion of peace involve participating in Two Track Diplomacy and implementing practices and risk assessments. Two Track Diplomacy is especially significant in situations where two governments experience tensions. In this approach, the involved governments come together to engage in discussions and collaboration on issues of mutual benefit. On the other hand, practices and risk assessments are crucial for companies operating in regions marked as conflict-sensitive. A proper understanding of the business practices of the country, and an awareness of the political landscape become important for companies, thus, a risk assessment must be made to determine the potential challenges and opportunities.
While the USIP specifically mentions five ways through which businesses can foster peace, additional research from other organizations such as the The United Nations Institute for Training and Research (UNITAR) emphasizes the role of the private sector in building peace. The main argument of the study argues that firms can effectively contribute to economic development and stability initiatives in precarious environments by means of deliberate engagement and proactive dialogue. Similar to the USIP’s report, UNITAR mentions the important role of the private sector in the creation of jobs and investments, both vital to a country’s economic stability and security. The report mentions an important point that “economic development does not automatically lead to peace; rather it takes unconventional approaches from economic actors to contribute to peace and it takes collaboration from a variety of actors to make this link work.” This is particularly important to remember when researching and analyzing how the private sector can foster peace, there are many factors to consider and various ways through which economic tools can contribute to peace.
UNITAR further highlights the importance of balancing risk-opportunity to promote long-term success. Indeed, many regions present challenges for companies that they must be able to navigate, this includes weak infrastructures, geo-political tensions, or even opaque power structures. Emerging markets and developing economies are central to global trade, development and economic well-being. However, these countries often face political and economic instability, creating a hostile environment for conducting business. It becomes imperative for the private sector to effectively navigate the intricacies of these markets, to engage with diverse stakeholders and to use appropriate economic tools. This approach is essential to promote peaceful conflict management and uphold the principles of good governance as part of their core business practices.
Although there is no right answer as to how economic diplomacy can foster peace, there are a number of ways, as highlighted by the USIP, through which companies can utilize economic tools to promote peace. This research provides a good starting point for companies seeking to promote ethical, sustainable, and responsible business practices, while learning how they can – as large corporations – contribute to peacemaking. In the pursuit of peace, highlighting effective communication and fostering robust relationships is crucial. This emphasis serves not only to facilitate dialogue but also to work towards achieving the ultimate objectives of all parties involved.
While this article focuses primarily on the role of the private sector in promoting peace, the important role played by the government in economic diplomacy should not be overlooked. Governments have the power and ability to control various aspects of the economy, including regulatory frameworks, trade policies and international agreements. In addition, governments have the ability to take action to tackle socio-economic disparities, promote growth and create an environment conducive to stability. Moreover, government efforts in sensitive regions (those often faced by geo-political tensions) can extend beyond simple economic considerations to include diplomatic efforts such as peace negotiations and the establishment of international partnerships. In these contexts, governments tend to act as mediators in establishing diplomatic relations that contribute to global stability, and foster peace.
Economic diplomacy as a means of mitigating conflict and fostering peace cannot be achieved without the strategic partnership of governments and the private sector. As the private sector drives economic growth, innovation and job creation, governments are responsible for providing the overall framework and strategic direction, aligning economic interests with diplomatic objectives. Recognizing and leveraging the two sectors' strengths is a key part of promoting sustainable peace and economic prosperity. Further research should be conducted to analyze case studies in which economic diplomacy has effectively been used as a means of fostering peace or mitigating conflicts in hostile regions of our world. In the future, it will be interesting to look at how international organizations will take into account economic diplomacy and business as a means to promote peace, shifting away from classic diplomatic tools.
The rise of geo-political tensions poses a big challenge for nations seeking to promote peace, especially because corporations have a tendency to focus on their own best interests, often disregarding the needs of communities. It becomes important for governments to make companies aware of the positive ways through which they can contribute to diplomacy, focusing on peace, stability, and trust over profits. In a highly competitive landscape, working together to achieve strategic goals becomes more than crucial; collaboration is the key driver of promoting peace.