Power Shift: Economic Realism and Economic Diplomacy on the Rise
Empirical research on economic realism and economic diplomacy, based on solid conceptual and analytical foundations, is at an early stage. While economists are making headway with cost-benefit analyses of various economic diplomacy expressions (including the trade-enhancing effects of summitry and diplomatic representation abroad), structured political science research in particular is lagging. A clear analytical framework for research is required, if shifts along the continuum of political and economic instruments and purposes are to be unveiled, and comparisons to be made between countries, regions and industries. This chapter introduces a framework for research and analyses how economic diplomacy is practiced differently by various countries and regions, especially in Europe and Asia, in the strategic competition for global power and influence. It starts from the premise that the use of economic (as an alternative to military and political) means to enhance a country's position in the international system is increasingly prevalent as the potential of China and other (advanced) developing countries to exercise economic power grows and the legitimacy of war as a policy tool has waned. The unfolding reality raises important but complex questions about the role that economic factors play in the way power is conceived by governments of both industrialized and emerging countries, and how economic power is projected and exercised on the international stage. This should urge European countries to rethink the balance between political, economic and military capabilities.