Should US Embassies Go to Bat for US Businesses?
American diplomacy is getting a new emphasis: promoting business. Administration officials talk of "geo-economics" as equal in significance to "geopolitics." In a speech at Harvard University on Jan. 15, outgoing Secretary of State Warren Christopher spoke of a "major cultural change in our embassies," which are now "aggressively supporting American companies in winning and carrying out contracts abroad." Business journals confirm that representatives of US firms receive greater official help abroad than ever before.
In the past many US diplomats made special efforts to help business. But It is true that, especially during the cold-war period, the State Department had other priorities. Business firms themselves traditionally wanted little help from government. Further, for many years Washington discouraged embassies from supporting the sales efforts of an individual company. That is changing.
Reflecting business disappointment with the State Department, in 1979 Congress transferred the responsibilities for business promotion to the Commerce Department. In the Reagan administration, Secretary of State George Shultz intervened on behalf of an AT&T contract with the Indonesian government. The late Commerce Secretary Ron Brown aggressively promoted US business in a series of high-profile trade missions during the first Clinton administration.
Yet many still question how far US officials should go in representing business abroad. Commercial and foreign policy objectives often clash. This is especially true today when the frequent application of economic sanctions involves government curbs on corporate opportunities; US policies toward trade and investment with Iran and Cuba are examples.
US policies on issues of the environment, human rights, democracy, and arms control are often criticized by corporations as counter to business interests. In some countries effective trade promotion risks plunging diplomats into local intrigues and corrupt practices. There are reasons why the British weekly The Economist cautions Cabinet ministers and bureaucrats: "Don't be salesmen."
In America ideology also intervenes. Republicans in the last Congress even proposed eliminating the Department of Commerce. The Export-Import Bank (EXIM), which has provided subsidized credit to US firms competing abroad, has long been a conservative target. Critics have insisted that EXIM competes with private banks and that large corporate beneficiaries do not need the help. Yet many of the major foreign competitors benefit from similar credit subsidies; US corporations would be at a clear disadvantage without such help.
A group of members of the Senate and House in the new Congress are seeking to reduce subsidies to corporations, a practice they term "corporate welfare." Their list includes the Overseas Private Investment Corporation (OPIC) established in the 1960s to provide loans, loan guarantees, and political risk insurance to firms investing in developing countries. Since its founding, OPIC has played a significant role in encouraging US investment in new areas of the world. It is unlikely that companies would have entered the market without such assurances.
Given the competing views of the proper role of the US executive branch in promoting private business abroad, American diplomats may never become "salesmen" to the same degree as some foreign counterparts. Nevertheless, other ways exist by which embassies can support business. Support for trade fairs and exhibitions has long been a function of embassies. Diplomats can watch for and protest discrimination against US firms and ensure that foreign governments understand US laws and regulations. As in China, they can work to protect intellectual property. Access to foreign officials can be facilitated and background provided on local conditions.
Trade is an important aspect of today's foreign policy. Ambassadors and their staffs have a role in that policy. In the US, however, government help to business is likely always to be contained and defined by basic differences over how far that help should go.
* David D. Newsom, former undersecretary of state, is Cumming Memorial Professor of International Affairs at the University of Virginia.