This is an introduction lecture on economic diplomacy that was prepared for the MKO Academy in Hungary. It starts with a case study on access to the US federal procurement market for foreign companies. Then it moves on to basic definitions of economic, commercial and business diplomacy and the relation between the three. They need to be connected for a successful economic diplomacy policies and practices. The presentation finishes with a future outlook.

1. z
Economic
diplomacy
Leveraging political,
economic and business
means to support Hungary’s
economic prosperity
Dr. Huub Ruël, PhD

2. z
To share with you this morning
▪ Setting the stage: Federal procurement market entry in the
United States: success factors and barriers for foreign
companies
▪ Entering the water: Economic diplomacy, commercial
diplomacy, business diplomacy – what are we talking about
exactly?
▪ The final act: The future of economic diplomacy

3. z
Introduction
▪ Huub Ruël – PhD
▪ The Netherlands – University of Twente
▪ MCC Senior Visiting Fellow
▪ Centre of Diplomacy Studies
▪ Linkedin: www.linkedin.com/in/huubruel/

4. z
Federal procurement market entry in the
United States: success factors and barriers
for foreign companies
Setting the stage:

5. z
Federal procurement market entry in the United
States: success factors and barriers for foreign
companies

6. z
Federal procurement market entry in the United
States: success factors and barriers for foreign
companies
▪ The US federal procurement market is the largest in
the world
▪ Attractive for foreign companies to enter
▪ What are the critical success factors and barriers for
foreign companies to acquire federal procurement
contracts?

7. z
Federal procurement market entry in the United
States: success factors and barriers for foreign
companies

8. z
Federal procurement market entry in the United
States: success factors and barriers for foreign
companies
▪ C5: “Building and maintaining relationships is
determining for winning contracts. That is, in
addition to price and quality, but every company
can compete on price and quality, you have to do
more. When you have real good relationships, you
can make sure RFPs are written in a way that the
choice for your company is justified.”

9. z
Federal procurement market entry in the United
States: success factors and barriers for foreign
companies
• P11: “The US procurement market is a global, imperfect
world and most definitely not an open market.
Protectionist regulations of the US are the main barrier
for foreign companies in doing business with the federal
government. Americans are very, very risk-averse.”.
• C5: “Foreign companies have to work much harder and
should cope with the discrimination of foreign suppliers”.

10. z
Federal procurement market entry in the United
States: success factors and barriers for foreign
companies
What can be the role of the Hungarian government in
case of access for Hungarian businesses to the US
Federal Procurement market?

11. z
Economic diplomacy, commercial
diplomacy, business diplomacy – what are
we talking about exactly?
Entering the water:

12. z
Economic diplomacy, commercial diplomacy,
business diplomacy – what are we talking about
exactly?
Economic diplomacy is:
▪ The leverage of political means in international negotiations with the aim of
enhancing national economic prosperity, and the use of economic leverage to
increase the political stability of the nation (Okano-Heijmans, 2010).
▪ For example: the US-EU trade agreement negotiations
Bilateral as well as multilateral
G7, G20, EU, WTO, OECD, Visegrad, WEF, UN

13. z
Economic diplomacy, commercial diplomacy,
business diplomacy – what are we talking about
exactly?
▪ Commercial diplomacy is:
▪ The work of a network of public and private actors who manage commercial
relations and business support using diplomatic channels and processes,
satisfying both public and private needs (Lee & Ruël, 2012)
▪ For example: Chinese businesses in Africa

14. z
Economic diplomacy, commercial diplomacy,
business diplomacy – what are we talking about
exactly?
▪ Business diplomacy is:
▪ Representation and communication deployed by multinational corporations
with host governments and non-government parties to establish and sustain
a positive relationship to maintain legitimacy and a social license to operate
▪ For example: Hungarian companies directly building relations with foreign
governments and civil society abroad

15. z
Economic vs. Commercial Diplomacy
▪ Economic diplomacy and Commercial diplomacy often considered
to be same.
▪ Economic diplomacy is concerned with general economic policy
issues and trade agreements (Yiu & Saner, 2003).
▪ Commercial diplomacy is much more specific, even though both
have an overarching economic objective (Potter, 2004).
▪ The core of commercial diplomacy focuses on business support
▪ (Berridge & James, 2001; Kostecki & Naray, 2007; Mercier, 2007; Naray, 2008;
Okano-Heijmans, 2010; Potter, 2004; Yiu & Saner, 2003).

16. z
Commercial Diplomacy

17. z
Economic diplomacy, commercial diplomacy,
business diplomacy – what are we talking about
exactly?
Science diplomacy
Public diplomacy /
Nation Branding

18. z
The future of economic diplomacy
The final act:

19. z
The future of economic diplomacy

20. z
The future of economic diplomacy
In 2013 I made the following observations:
▪ Global economic power balance is shifting to the East
▪ State capitalism seems attractive to many emerging economies
▪ Emerging economy governments claim their places in multilateral
organisations
▪ Emerging economy multinationals are of growing importance in the global
economy
▪ New diplomatic actors such as multinational corporations (MNCs)
multilateral organizations, NGO’s appeared on the ‘world stage’
▪ Big challenges of the 21st century need business-government collaboration
▪ Information technology challenges governments and traditional channels of
diplomacy

21. z
The future of economic diplomacy
In 2013 I made the following observations:
Consequences:
- Economy and international relations are becoming more
intertwined
- Diplomacy and international business need to rebalance
- From economic diplomacy to commercial diplomacy and
business diplomacy

22. z
The future of economic diplomacy
Now in 2021 I observe the following:
▪ Managing / dealing with climate change and its consequences will
be a leading issue that will impact international relations,
international business and international trade
▪ Fragmentation in value systems that affect international relations,
international business and international trade: a new ‘cold war’
▪ The role of emerging economies as potential economic and political
forces is in decline
▪ New varieties of capitalism are emerging: stakeholder capitalism
instead of shareholder focused capitalism
▪ The role of governments in international trade and business will be
bigger

23. z
The future of economic diplomacy
Consequences:
▪ International relations will dominate international trade and
business relations (and not the other way around)
▪ Economic diplomacy and commercial diplomacy will be very
important (for sure not less than the past 10 years)
▪ The diplomat of the future will need international relations as
well as international business, management and economic
competences
▪ Economic diplomacy and commercial diplomacy policies and
plans will get intertwined with sustainable development and
human rights issues