Countries must rethink how they manage their foreign economic relations, reveals new report from LSE IDEAS, The London School of Economics’ foreign policy think tank.
According to the report, authored by Professor Linda Yueh, a leading economist and Visiting Professor at LSE IDEAS, challenges stemming from the changed global economy, US-China tensions, as well as a backlash against globalisation, have made it critical for countries to adapt their economic diplomacy.
Within the report, Yueh says that while the diplomacy part of foreign economic policy doesn’t get as much recognition as the “harder” aspects such as Free Trade Agreements or investment treaties, in an era of Great Powers, economic diplomacy holds the key to not only an effective set of policies for a country, but also to rejuvenating the global economic system.
The report sets out a number of principles that should underpin future economic diplomacy.
According to Yueh, countries will need to craft a set of foreign and economic policies that are consistent and align with the values of their societies. There will inevitably be tensions and competing aims, but a transparent framework would show that decisions and judgements are made based on rules and norms.
Alongside this, Yueh suggests that distinction between foreign and domestic economic policies should become less relevant. Trade and investment policies need to be consistent and enhance domestic economic policies and vice versa.
Professor Linda Yueh, Visiting Professor at LSE IDEAS and Chair of the LSE Economic Diplomacy Commission, says:
“The 21st century global economy offers significant opportunities and also challenges for the conduct of economic diplomacy. It is during such times of upheaval that a new consensus around the principles which should govern a country’s relations with other countries can be re-shaped, which can in turn help enhance the overall international economic system.”