The weakest diplomatic muscle
The U.S. Embassy in Panama has diplomats focused on commerce, which is unsurprising given the importance of the canal to global trade. (By key measures, the United States is the top user of the canal, with China second. The canal is so important to Washington that although the U.S. transferred control of the passage to Panama more than two decades ago, it retains the right to take military action to secure it if needed — an arrangement well known to Beijing.)
Still, U.S. diplomats in Panama and well beyond say that if any part of America’s diplomatic infrastructure needs help, it’s the U.S. and Foreign Commercial Service.
The Commercial Service is part of the Department of Commerce, not State. Its responsibilities include helping increase U.S. exports and cutting through trade barriers, with the goal of leveling the playing field for U.S. companies who must abide by American laws such as the Foreign Corrupt Practices Act. It is present in U.S. diplomatic missions in around 78 countries, including Panama. That’s fewer than half of the world’s countries, but the Commercial Service stresses that it’s in the places that account for most U.S. exports.
In 2014, the Commercial Service had around 1,750 employees. In the years since, it lost hundreds of employees due to attrition, stagnant budgets and other reasons. With some fluctuations, the staff numbers have come down to around 1,430, of which 250 are Foreign Service officers. Under Biden, it is trying to recover those losses, according to a Commerce Department official who laid out the numbers to POLITICO.
The Biden team is looking at other ways to emphasize such diplomacy; as part of the modernization plans for the State Department, Blinken has pledged to increase the number of diplomats focused on topics like trade, including “economic officers” whose responsibilities include reporting on business and related activities in other countries.
During Tibor Nagy’s stint as assistant secretary of State for African affairs under Trump, he surveyed the embassies under his purview to learn how many diplomats focused on commercial issues. “I said, ‘Tell me, how many positions does the Chinese embassy have to promote trade and investment, as opposed to the U.S. embassy?’ And, overwhelmingly, it was like three or four positions for the Chinese to an American one,” Nagy recalled. “And then, in Africa, we have some embassies that … their staffing is so small, that we have somebody who might be, say, responsible for commercial advocacy, commercial diplomacy, but they do visas in the morning. It was absolutely ridiculous.”
Wei readily acknowledges that while U.S. diplomats focus on promoting issues like good governance, democracy and human rights, Chinese envoys are more keen to promote economic ties. “A good trade relationship is one of the foundations, or the most important foundations, for a bilateral relationship,” Wei said. He marveled at how often U.S. private sector firms skip bidding opportunities in Panama — “They’re not interested,” Wei said. “They never come.”
U.S. private businesses consider many factors when weighing overseas projects. Corruption is among them, but it’s a problem worldwide, not just in Panama. The FCPA bars such firms from engaging in bribery abroad. In a sense, the law offers companies a protective cover when approached for such schemes, but it also can frustrate U.S. efforts to compete with firms from places without such rules.
Other factors include the size of the market, whether the project is big enough to return a profit, as well the costs of labor. Many countries in Latin America in particular struggle to make the case that they are worth the risk and time as compared to more populous ones in Asia, where labor costs may be lower.
“Especially in the smaller countries, right, even sort of the Perus and the Ecuadors, but especially in the Caribbean and in Central America, countless government officials told us we simply don’t have any interest from American companies,” said Roberta Jacobson, a former top State Department official who dealt with Latin America and was U.S. ambassador to Mexico. Even when U.S. firms were interested, Jacobson added, they risk being under-bid by Chinese or other companies whose governments subsidize their work.
Among the U.S.-based companies Feeley said he approached about bidding to build the “fourth bridge” in Panama was Bechtel, the construction and engineering giant. A Bechtel spokesperson said that, in passing on the fourth bridge project, “we had to prioritize key resources and where we had a higher likelihood of winning and executing successfully.” The spokesperson also suggested that, in the long run, Bechtel was serving U.S. interests abroad by doing high-quality work.
“Bechtel competes for and frequently wins major projects abroad—but competition to win is intense, including against state-backed enterprises from other countries, and the risks can be significant,” the spokesperson said in a statement.
Some foreign diplomats say the U.S. needs to offer more incentives for private firms to take on projects in regions like Latin America or Africa. But sometimes, U.S. diplomats and American analysts say, the best approach is not to rely on the U.S. private sector. Instead, it’s better to nudge a foreign government to turn to companies from American allies, such as Japan or South Korea or any number of European nations, instead of China. That’s one reason the Biden administration, which has worked hard to repair relationships with allied countries frayed by Trump, is pushing multilateral economic initiatives like the PGII. But such efforts, too, require more U.S. diplomatic focus on the commercial space.
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