Analysis | A new economic diplomacy
The United States should put businesses — small and large — at the core of its economic diplomacy.
Puru Trivedi and Maggi Chambers
Diplomacy: Historically viewed as an exclusive circle which only invited diplomats and global elites to the conversation.
In the past, business and academia typically stood on the sidelines as government officials told them what to expect or engaged them only under desperate circumstances.
In today’s global economy, this practice is no longer feasible. The international exchange of ideas and information involves complexities — from disinformation to blockchain technologies — that few reckoned with even a decade ago. Diplomacy today includes all of us and requires specific participation from the business community.
Economic diplomacy is not only a necessary part of international negotiations, but also a tool to stabilize the United States’ global relationships. Specific instances include suspending Airbus and Boeing tariffs, global vaccine distribution through Pfizer and Moderna, and environmental action from major emissions contributors such as Ford and General Motors. Each of these corporate decisions exemplifies how cooperation through economic channels can help solve global challenges.
The government and the private sector must work hand in hand. Although multinational corporations hold a significant amount of influence and capital, they are unable to handle all the responsibilities and duties that come with laying the foundation for a resilient global economy. The beauty of economic diplomacy is that it plays a role in various facets of the business community. It requires more from large corporations than simply executing corporate social responsibility projects.
The small business community is also an integral part of the international economic system, stimulating growth and generating wealth in local areas. Small businesses contribute overwhelmingly to U.S. GDP and the country’s international standing. In 2019, small businesses accounted for 44 percent of percent of GDP, creating over two-thirds of the net new jobs in the country. U.S. citizens are not only employed by local businesses, but they buy imports sold within the country. Therefore, increasing international appeal and enticing foreign governments to invest and partner with the United States is crucial.
Understanding the intersection of multinational corporations and small businesses in economic diplomacy is critical to the future of economic relations worldwide. Countries have begun to compete in spaces like technology and supply chain management. Incorporating strong economic policies domestically will influence corporate and local business profits and scope internationally.
In addition to the push for substantial small business involvement in 21st century economic diplomacy, foreign affairs practitioners generally must push for standards and regulations across the board to better prepare business entities for the shift in practices. Multinational corporations’ portfolios span borders and continents worldwide, and if restrictions and rule changes are on the horizon, companies must be aware of how those dynamics may affect their consumer and the global economy.
Secretary Janet Yellen has called for a 21% global minimum corporate tax rate and many of her European colleagues have agreed to work alongside her. In early April 2021, the EU affirmed Yellen’s efforts and called for talks to be held in the OECD. This major monetary shift will affect a company’s bottom line, and it may also affect the ability and flexibility of developing countries attempting to reform and accelerate their individual economies. It is crucial that corporations, small businesses, and governments alike are all a part of this economic conversation to ensure consistency, sustainability, and transparency.
As the world enters the post COVID-19 era, it is essential that, as a global community, we reprioritize and renew our commitment to strengthen economic resilience. No specific agency, country, or international organization has the answer, but in this interconnected 21st century world, it will take multilateral collaboration. There is no greater time to embrace economic diplomacy than now. Quite frankly, the world is counting on us, as international affairs specialists and scholars, to make the right pivot before another crisis strikes again.
Puru Trivedi is a vice president with the Meridian International Center, where he manages all aspects of economic diplomacy and corporate affairs for the institution. Puru has worked with the U.S. Chamber of Commerce and in the private equity industry in Boston, New York, Riyadh and New Delhi.
Maggi Chambers is a recent graduate of Howard University, and the recipient of the Scoville Fellowship and Rangel Fellowship.
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