Weakest diplomatic muscle
The US Embassy in Panama has diplomats focused on trade, which is not surprising given the importance of the canal to global trade. (By major measures, the United States is the main user of the canal, with China second. The canal is so important to Washington that although the US transferred control of the passage to Panama more than two decades ago, it retains the right to take military action to secure it if necessary—a deal well known to Beijing.)
Still, American diplomats in Panama and far beyond say that if any part of America’s diplomatic infrastructure needs help, it’s the US Foreign Trade Service.
The Commercial Service is part of the Department of Commerce, not the State. Her responsibilities include helping to increase US exports and reducing trade barriers, with the goal of leveling the playing field for US companies that must obey US laws, such as the Foreign Corrupt Practices Act. It is present in US diplomatic missions in about 78 countries, including Panama. That’s less than half of the world’s countries, but the Trade Service points out that it’s in the countries that make up the majority of US exports.
In 2014, the Commercial Service had approximately 1,750 employees. In the years that followed, it lost hundreds of employees due to attrition, stagnant budgets and other reasons. With some fluctuations, the number of personnel has come down to about 1,430, of which 250 are Foreign Service officers. Under Biden, it is trying to recoup those losses, according to a Commerce Department official who provided the numbers to POLITICO.
Biden’s team is looking for other ways to emphasize such diplomacy; As part of modernization plans for the State Department, Blinken has pledged to increase the number of diplomats focused on topics such as trade, including “economic officers” whose responsibilities include reporting on business and related activities in other countries. .
During Tibor Nagy’s tenure as assistant secretary of state for African affairs under Trump, he surveyed the embassies under his purview to learn how many diplomats focused on trade issues. “I said, ‘Tell me, how many positions does the Chinese embassy have to promote trade and investment, compared to the U.S. embassy?’ And, overwhelmingly, it was like three or four positions for Chinese to one American,” Nagy recalled. “And then, in Africa, we have some embassies that … their staff is so small that we have someone who might be, say, responsible for trade advocacy, trade diplomacy, but they do visas in the morning. It was absolutely hilarious.”
Wei readily acknowledges that while American diplomats focus on promoting issues such as good governance, democracy and human rights, Chinese envoys are more inclined 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 US private-sector firms overlook bidding opportunities in Panama — “They’re not interested,” Wei said. “They never come.”
Private American businesses consider many factors when weighing overseas projects. Corruption is among them, but it is a problem worldwide, not just in Panama. The FCPA prohibits such firms from engaging in foreign bribery. In a sense, the law offers companies a protective cover when approached for such schemes, but it could also hamper US efforts to compete with firms from countries without such rules.
Other factors include the size of the market, whether the project is large enough to turn a profit, and labor costs. Many countries in Latin America in particular struggle to prove that it is worth the risk and time compared to more populous ones in Asia, where labor costs may be lower.
“Especially in the smaller countries, right, even in Peru and Ecuador, but especially in the Caribbean and Central America, countless government officials told us that we just don’t have any interest from American companies,” said Roberta Jacobson. a former senior State Department official who dealt with Latin America and was the US ambassador to Mexico. Even when American firms were interested, Jacobson added, they risk being outbid by Chinese or other companies whose governments subsidize their work.
Among the US-based companies Feeley said he approached about bidding to build the “fourth bridge” in Panama was Bechtel, the construction and engineering giant. A Bechtel spokesman said that, in moving forward with the fourth bridge project, “we had to prioritize key resources and where we had a higher probability of winning and executing successfully.” The spokesman also suggested that, in the long run, Bechtel was serving US interests abroad by doing high-quality work.
“Bechtel competes for and often wins major projects abroad – but the competition to win is intense, including against state-backed enterprises from other countries, and the risks can be significant,” the spokesman said in a statement.
Some foreign diplomats say the US should offer more incentives to private firms to undertake projects in regions such as Latin America or Africa. But sometimes, US diplomats and US analysts say, the best approach is not to rely on the US private sector. Instead, it is better to push a foreign government to reach out to companies from American allies, such as Japan or South Korea or any number of European countries, rather than China. This is one of the reasons why the Biden administration, which has worked hard to repair relations with allies destroyed by Trump, is pushing multilateral economic initiatives like PGII. But such efforts also require more U.S. diplomatic focus in the trade space.
