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Economic Diplomacy

Václav Kopecký Václav Kopecký / Ed. 25. 5. 2017
Economic Diplomacy
photo D.HURNYTSKIY / FLICKR

Activity:                          C

Impact:                            C

Normative aspect           C-

Final mark:                    C

An abatement in competence disputes between the Ministry of Industry and Trade and the Ministry of Foreign Affairs benefited economic diplomacy. Nevertheless, financing via the Czech Export Bank (CEB) and the Export Guarantee and Insurance Corporation (EGAP) continued to be a highly problematic element in the support of exports. An update of the Export Strategy of the Czech Republic, which was an opportunity to respond to new trends, only really offers a general description of how export policy is already managed. It is also becoming increasingly apparent that marginalising value-based principles in foreign policy does nothing to help exporters or attract investment.

Due to an update of the Export Strategy, last year saw a chance to reflect on how economic diplomacy works. Some individual changes for the better emerged, albeit without a longer-term strategic vision. Conversely, undermining the value framework of Czech foreign policy by prominent political leaders did nothing to help Czech exports. Furthermore, economic diplomacy was shadowed by graver conflicts on financing export support compared to the previous two years, which were calmer.

The division of competencies in the sphere of export support maintained the course charted by the framework agreement between the Ministry of Foreign Affairs and Ministry of Industry and Trade, and consequently there were few, if any disputes between these two ministries. The Foreign Ministry also continued to develop its own activities, which complemented existing Trade Ministry vehicles (CzechTrade and CzechInvest): it boosted financing for projects in support of economic diplomacy at embassies and consulates and, in cooperation with the Chamber of Commerce, staged regional export conferences. The third edition of the Map of Global Sectoral Opportunities, prepared by the Ministry of Foreign Affairs in conjunction with the Ministry of Industry and Trade, contained a new segment on development assistance.

Nevertheless, the strife between economic diplomacy stakeholders did not vanish altogether. In the first half of the year, for example, the Chamber of Commerce strongly criticised CzechTrade for its lack of efficiency, and consequently relations between these two entities remained strained. There was more serious disagreement between the Ministry of Industry and Trade and the Ministry of Finance regarding the Czech Export Bank and the Export Guarantee and Insurance Corporation, which provide loans and insurance to Czech exporters for risky exports. Minister Andrej Babiš appointed Pavel Kysilka as the Chairman of the CEB Supervisory Board and tasked him with the preparation of a plan that would streamline debt recovery and the operation of both companies. The resulting proposal to merge the CEB and EGAP did not find the necessary political support and Kysilka stepped down. As the convoluted financial situation at EGAP and CEB continued to deteriorate, both companies’ capital had to be increased, which seriously dented the central government budget. However, no better system for financing export was found in 2016.

In December, the government approved an update of the Export Strategy of the Czech Republic, prepared by the Ministry of Industry and Trade in cooperation with the Ministry of Foreign Affairs. It contained several snippets of good news: first and foremost, it dropped the rather unsuccessful concept of non-EU priority and special interest countries and reinforced the sectoral search for trade opportunities. The previous emphasis on export diversification to selected non-European territories had not led to an increase in their share of Czech exports (with the exception of the more advanced economies of North America, certain South American countries, Israel, and Japan). However, the strategy’s authors passed up the opportunity to develop specific visions and objectives for economic diplomacy, so, for the most part, the document simply echoes the changes that had been made.

The political dimension of economic diplomacy remained problematic. The denial of value-based principles and human rights policy in favour of trade in dealing with authoritarian Azerbaijan, Belarus, and Kazakhstan brought little benefit to Czech exports. In the previous year, there had been a palpable downturn in exports to these markets as their economies slowed down. With this in mind, the key to Czech companies’ success is plainly not the quality of political relations, but economic stability and competitiveness.

 

 

 

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