What is an Economic Engagement Network and why is it important to your business?
I am a policy wonk. And the idea of designing a framework to explain the economic value that could be gained from interplay between various international agreements is one that I have been toying with since 2017.
I recently expanded on the idea in the following article: Building an Economic Engagement Network Between Africa and the Caribbean but in a very policy wonky way with a focus on nations and not business. This is all about to change.
I have been on a personal and profession drive to shift my focus to being more pragmatic. This means not just include business in my policy wonk thinking but to beyond policy.
Here we go.
One of the things that only recently came to me, though it should have been painfully obvious but wasn’t at the time, is that businesses would find this framework of interest. Dah! Come on Ainsley how could you have missed this one?
Well the answer is simple. As a policy wonk I lost sight of some basic fundamentals. Hey, it happens to the best of us from from time to time.
While its true that nations trade between each other, trade in fact consist of individual transitions conducted by individuals, be they persons or companies.
The Economic Engagement Network, as I have called it, explains how the interactions between various international agreements could be combined to deliver value to nations. It is inter-national or between nations after all. However, I was seeing the forest but not the the trees that made it up – business.
What is an Economic Engagement Network?
An Economic Engagement Network is the series of international agreements that a nation or bloc of nations has entered or seeks to enter into that will benefit its economy by creating the platform for more significant trade and investment. Central to developing a Economic Engagement Network is facilitating inter-connectivity to the rest of the world, allowing for the freer movement of goods, services, people, capital and data.
An Economic Engagement Network is about how nations can improve their competitiveness by finding and creating value through the complex interplay between the various agreements (e.g. trade, investment treaties, double taxation agreements, air service agreements, standards mutual recognition, etc.) that they enter between each other.
I know, I know, very policy wonky. But this is in fact where things get interesting for business.
Countries enter agreements between each other all the time for a variety of things. A burning question businesses frequently ask is how do they impact (positive or negative) me?
Economic Engagement Network: the value is in the connections
In order to leverage this network and create value or mitigate any negatives for your business requires a total mindset change. Rather than viewing these agreements in isolation and disconnected I invite you to start viewing these agreements as networks and platforms that support global value chains. As the economist Richard Baldwin reminds us:
As such, leveraging an Economic Engagement Network has to place within the context of modern production practices factoring in:
- Globalization
- The vertical fragmentation of production and the rise of intermediate goods trade; both of which have resulted in the creation of global value and supply chains
- Multinational inter-related company trade and the resulting transfer pricing schemes
- The ever-blurring lines services and manufacturing
- The ever-blurring lines between trade and investment.
- The 4th Industrial Revolution
A nation’s development and prosperity are increasingly joined to its connectedness to the rest of the world. And so to businesses.
In today’s world of globalization, it is not sufficient to have market access or attract foreign direct investment (FDI); it has become necessary to turn that market access into market presence and use FDI to “catalyze or facilitate the accumulation of capabilities” within an economy; this is where an Economic Engagement Network comes in handy.
Yes, I know: policy wonky.
However, the participation of businesses in global value chains, especially if they leverage Economic Engagement Networks, is not only real but substantial. For business this translates to, among other things, greater labor productivity, access more markets and opportunities to tap into new capital and know how to grow.
Economic Engagement ‘Business’ Advantage
Properly understood, an Economic Engagement Network is not simply a collection of agreements between nations. Instead, it is how the interaction between various types of agreements can be leveraged to benefit the signatories and their businesses.
This is what I call the Economic Engagement Advantage.
Figure 1 below sets out three Economic Engagement Advantage examples, in a very policy wonky way, making a clear link between investment treaties and double taxation agreements for example that combine to provide investors with commercial certainty and enhance investor confidence, resulting in greater foreign direct investment (FDI).
For simplicity sake I have set out the connections in a binary way however, a Economic Engagement Network in its truest of sense is a ‘network’ and would include all the agreements listed and more. An Economic Engagement Advantage can, of course, be forged not just between two agreements but between multiple agreements. The point here is that each agreement if used properly creates Economic Engagement Advantages or Economic Engagement ‘Business’ Advantage by enhancing and re-enforcing each other.
Figure 1 – Examples of Economic Engagement Advantage
| Agreement | Economic Engagement Advantage | Agreement |
| Trade Agreement | Both support the movement of goods and services (e.g.e-commerce) Result: Greater trade | Air Service Agreement |
| Investment Treaty | Both provide investors with commercial certainty and enhances investor confidence Result: Greater FDI | Double Taxation Agreement |
| Standards Mutual Recognition Agreement | Both allow for greater trade facilitation by addressing non-tariff barriers and technical barriers to trade Result: Greater global value chain participation and export diversification | Customs to Customs Agreement |
Figure 2 below sets out three Economic Engagement ‘Business‘ Advantage examples. As we already know there is a clear link between investment treaties and double taxation agreements that combine to provide investors with commercial certainty and enhance investor confidence, resulting in greater foreign direct investment (FDI). However, the Business Advantage of enhanced ability to attract international joint venture partners is a clear win for business.
Figure 2 – Examples of Economic Engagement ‘Business ‘Advantage
Conclusion
How did I do?
Was my approach pragmatic enough? Was it business focus enough?
Or was I still too policy wonky?
Please leave me a comment and let me know how I did?
*This article was originally posted on my LinkedIn.
