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Government: ECONOMIC DIPLOMACY
PEDDLERS IN PINSTRIPES
Frank G. Wisner, U.S. Ambassador to India, had a crisis on his hands. Authorities in the state of Maharashtra were threatening to cancel a $900 million electric-power-plant contract with three American companies in March. Although his expertise is political security, the career foreign service officer had to play commercial broker. "At every step of the way, Frank has helped keep the project on track," says R. Michael Gadbaw, a vice-president at General Electric Co., which is supplying power-generation equipment along with Bechtel Group Inc. and Enron Corp.
Welcome to the New World of Diplomacy. The State Dept. still calls its foreign outposts "embassies," but it's treating them increasingly like a chain of business-promotion centers called Exports `R' Us. Ambassadors long steeped in arms-control arcana and political problem-solving are now unabashed peddlers in pinstripes, vigorously lobbying local officials on behalf of Corporate America. "State deserves high marks for its engagement," says Leslie G. McCraw, CEO of Fluor Corp. "The depth of involvement and the level of coordination is better than what we've seen from previous Administrations."
It's about time. Europeans and the Japanese have never been shy about using a little diplomatic arm-twisting to win deals. State's economic diplomacy drive is part of a coordinated, high-profile Clinton Administration campaign to boost U.S. business overseas. The Commerce Dept. has the lead on commercial advocacy. While State's diplomats help close deals, their chief contribution is to push for structural changes in foreign markets that improve the climate for U.S. business. A recent example is a new State-led economic partnership with India aimed at eliminating barriers to its huge infrastructure market.
DRAMATIC SHIFT. The business-friendly emphasis is largely the work of Joan E. Spero, Under Secretary for Economic, Business & Agricultural Affairs. The former American Express Co. executive vice-president is expanding on a theme launched by the Bush Administration, and her modest success to date reflects the dramatic extent to which the focus of foreign policy has shifted since the end of the cold war. "It's no longer just about war and peace," she says. "We have new constituencies, and business is one of them."
Spero argues that boosting trade and investment buttresses U.S. strategic goals by promoting stability in hot spots such as the Middle East, Russia, and Haiti. "Unless the Palestinians feel their lives are improving, they're not going to support the peace process," she says. With foreign aid dwindling, Washington must rely more on the private sector to ensure U.S. influence around the world. And a few successes helping business win orders and create jobs could stave off GOP budget-cutters' knives.
GE's experience in India, and similar tales from dozens of grateful executives of companies such as American International Group, Texas Instruments, and McDonnell Douglas, shows that Foggy Bottom's probusiness campaign is starting to pay off. More foreign service
officers are studying economics and getting pointers on trade-negotiating tactics. The Secretary of State now bestows a $5,000 annual award on the FSO who does the most to advance U.S. commercial interests. "You get brownie points if a letter comes in from a CEO saying, `We couldn't have done it without you,"' says one diplomat.
"DEAD END." But tradition dies hard. Unlike the Commerce Dept., whose No.1 client is U.S. business, State must balance security, political, and economic interests. Too often, though, business' views aren't sought when policy hands make decisions with major economic consequences. Case in point: State's push last year to link renewal of China's most-favored-nation trade status to improvements in its human-rights record. During the MFN debate, Winston Lord, the Assistant Secretary for East Asia and architect of the policy, met often with rights activists but shunted business representatives off to a lower-ranking aide. "It was a dead end, so we quit going," gripes an industry official.
More recently, State policy wonks didn't bother to consult with energy-company representatives before President Clinton's Mar. 15 executive order tightening the trade embargo on Iran. Only two days after the policy was announced did the industry get a chance to make its counterargument: The move will have little impact on Tehran because European players will rush to fill orders U.S. companies must forfeit.
Spero is trying to bring business to the table and change State's mind-set. In January, she recruited another former AmEx exec, David Ruth, to be State's liaison to the business community. She has launched business advisory panels to provide State with practical advice on foreign economic initiatives, such as how to pry open Asian markets. Spero is also making sure top policymakers, especially Secretary of State Warren M. Christopher, meet regularly with CEOs. On Apr. 6, for example, Christopher discussed further loosening controls on high-tech exports with Michael C. Armstrong of Hughes Aircraft Co. and Michael J. Jordan of Westinghouse Electric Co.
The most encouraging changes for business are occurring in State's global network of field offices. When Malaysia decided to buy Russian MiG fighter jets, intensive lobbying by U.S. Ambassador John Stern Wolf persuaded the defense minister in 1993 to reopen the bidding to American suppliers. McDonnell Douglas Corp. officials credit Wolf with helping the St. Louis company land a $600 million order from Kuala Lumpur for eight F/A-18 jets.
Even in the home office, there are signs of change. In March, Deputy Secretary of State Strobe Talbott followed Commerce Secretary Ronald H. Brown's lead by taking a planeload of American executives on a two-day trade-and-investment mission to Haiti. And officials at economic agencies say State has become more cooperative on financial initiatives, such as lobbying foreign capitals to back a regional development bank for the Middle East.
SNICKERS. Still, many Washington trade hands remain skeptical that State will change fundamentally. While Talbott shared his plane with a posse of CEOs, he didn't schmooze with them. "They just don't get it," snickers one Commerce Dept. official of State's efforts at economic diplomacy. And political officers still tend to dominate the regional bureaus that are the heart of the department's policymaking apparatus. "The institution can't change its spots just because the people at the top call for change," says Greg Mastel, an analyst with the Economic Strategy Institute.
But in the New World Order, national security increasingly is being defined in economic terms. Like it or not, America's diplomatic corps will have to adjust with the times. Spero and her team of pinstriped peddlers are trying to make sure their realpolitik-minded colleagues get the message: Today, the driving force in foreign policy is econopolitik.By Amy Borrus in Washington, with Eric Schine in Los Angeles and Sharon Moshavi in New Delhi