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The foreign policy of Kazakhstan has always been aimed at creating favorable external conditions for sustainable socio-economic development of the country. Its constant priorities were the development of economic cooperation with neighbors in the region, diversification of export routes, attracting foreign investment and opening new markets for Kazakhstani goods.
The Strategy «Kazakhstan-2050» set the task «to develop economic and trade diplomacy to protect and promote national economic and trade interests.» In his message «Kazakhstan in a new reality: time for action» Kassym-Zhomart Tokayev noted, that in the new conditions, attracting investments into the country and exporting domestic goods and services is a special priority for the government. The new reality is not only masks and gloves, self-isolation and video conferencing. It is also a global economic crisis, a decline in world trade and a decline in foreign direct investment (FDI) flows. In our country, the necessary legislative framework has been formed, program documents have been adopted, institutions for supporting exports and attracting foreign investment have been created.
However, the National Investment Strategy was adopted in 2018, when the United Nations Conference on Trade and Development (UNCTAD) and all international financial institutions expected increased international trade and increased FDI flows, especially to developing countries.
The coronavirus has dramatically changed the situation.
UNCTAD today says that by the end of 2020, the volume of world trade should decrease by 20%, and global volumes of foreign direct investment flows will decrease by 40%. The developing countries will be the hardest hit.
If in 2019 the global FDI volume amounted to one and a half trillion dollars, then this year it will be below one trillion. This is the lowest figure since 2005, according to the UNCTAD (United Nations Conference on Trade and Development) report. Forecasts for the coming years are also disappointing. In 2021, investment flows will decline by another 5-10 percent. Some recovery is expected no earlier than 2022.
The crisis is exacerbated by trade wars and mutual sanctions.
Speaking at the UN Forum «Financing for Development in the COVID-19 Era and Beyond,» held on May 28 via videoconference, Kassym-Jomart Tokayev said:
«The international community must stop imposing new restrictive measures on trade, which have increased almost 10 times from two years earlier. International trade must regain its true role as an engine of development»
It should be noted that trade restrictive measures, more commonly referred to as economic sanctions, did not appear in the era of the coronavirus, but much earlier. One of the first documented decisions to impose sanctions was made by Athens as early as 432 BC, on the eve of the infamous Peloponnesian War. Restrictive measures were taken against Megara, an ally of Sparta, hostile to the Athenians. Megaryans, on pain of death, were forbidden to trade and live in the ports and territories under the control of Athens. This decision became, according to the historian Thucydides, evidence of the trap in which the dominant state and the state capable of challenging this dominance inevitably fall. And also that spark from which the flame of the war suicidal for Sparta and Athens flared up. Historians believe it is highly likely that such restrictive measures were taken earlier, in ancient Sumer and Egypt.
Since then, sanctions have been and remain an invariable element of international relations. Only the sanctions adopted by the UN Security Council on behalf of the entire world community have unconditional legitimacy. However, sanctions are almost always applied to countries that are economically much weaker and dependent on the initiator of the sanctions. That is why the United States most often uses sanctions as an instrument of political pressure. But one can also recall the recent Russian sanctions against Turkey, and the attempted economic blockade of Qatar by Saudi Arabia and its allies.
According to the Peterson Institute for World Economy, out of 174 cases of sanctions in the twentieth century, the US imposed them 109 times, the UK — 16 times, the EU — 14 times, the USSR and Russia — 13 times, and the UN — only 20 times.
American sanctions are based on the overwhelming economic, financial and technological superiority of the United States. At the same time, the sanctions acts adopted by the Congress are usually made up of rather vague wordings that make it possible to interpret them differently, depending on the circumstances. According to experts, within the framework of already adopted laws, it is possible to maintain the status quo, and toughen existing sanctions, and introduce new ones.
In addition, the United States has an effective mechanism for monitoring sanctions regimes, as well as a well-developed system of penalties and fines for their violation.
Numerous studies indicate a rather low effectiveness of sanctions in terms of achieving political goals. Thus, many years of economic sanctions against Cuba, Sudan, Iran, North Korea and a number of other countries did not lead to a change in the ruling regimes. At the same time, humanitarian costs, such as hunger and disease in countries under sanctions, as well as a negative impact on world trade, in the eyes of many countries, devalue any result obtained.
Today, the aim of sanctions is increasingly to contain the technological development of a rival country.
By the beginning of the 21st century, the world economy had developed norms and rules based on the experience of liberal democracies (USA, Canada, Japan, Australia, European countries). This experience assumed that the interaction of the economy, where the key players are private companies, and foreign policy, where the key players are sovereign states, is one-sided. It was formulated in the famous statement of the president of the American automobile corporation: «What's good for General Motors is good for America.»
When Chinese companies became major players in global markets, it turned out that they were playing according to WTO (World Trade Organization) rules, but at the same time proceeding from the principle «What's good for China is good for CNPC (The China National Petroleum Corporation)/ ZTE / Huawei».
This drew harsh criticism of China, and then the introduction of restrictions on Chinese investment in high-tech sectors of the economy.
So, in early August, US President Donald Trump signed an executive order «On Combating the TikTok Threat», prohibiting any transactions with the owner of this application, ByteDance. TikTok is accused of collecting personal data for blackmail, conducting industrial espionage, and organizing disinformation campaigns in the interests of the Chinese Communist Party.
Under the same pretext, the tightening of sanctions against Huawei continues, which the Americans are squeezing not only from their market, but also from the markets of their allies. At the same time, sanctions are imposed on all companies cooperating with Huawei.
«The Trump administration is looking at Huawei for what it is — it is a government surveillance agency of the Chinese Communist Party, and we have taken appropriate action,» said Secretary of State Mike Pompeo.
Economic sanctions have never been applied as often and as widely as in the past five years. And most importantly, never before have these sanctions touched the national interests of Kazakhstan so much as now. The targets of these sanctions are our two largest trade and investment partners, Russia and China.
It should be assumed that sanctions against Russia and China are not a short-term phenomenon that can be waited out. Unfortunately, they have become the new normality. The interconnection of the Kazakhstani economy with the Russian and Chinese is very high and is unlikely to decrease, given the vector of Eurasian integration and the conjunction of Kazakhstani state programs with the Chinese Belt and Road Initiative.
Therefore, sanctions should become a factor that we must take into account in our medium and long-term plans and forecasts. Additionally, measures to reduce the negative impact from them should become a mandatory element of strategic planning.
The key goals of Kazakhstan's economic diplomacy are:
• support of Kazakhstani companies in foreign markets;
• attracting foreign investments to Kazakhstan, contributing to the transfer of technologies and the creation of new jobs;
• harmonization of the rules and regulations of the WTO and the EAEU (Eurasian Economic Union) with the economic interests of Kazakhstan.
The success and effectiveness of economic diplomacy is determined by a combination of three factors — diplomatic, economic and legal factors.
A strong and effective foreign policy department with a network of foreign missions abroad, endowed with the necessary powers to coordinate the foreign economic activities of state bodies and to negotiate foreign economic issues, ensures the protection and promotion of the economic interests of the state using a wide range of techniques, means and methods of classical diplomacy.
The presence of an export potential that meets the needs of world markets, a favorable investment climate, the necessary labor, financial, scientific and technical resources makes it possible to fill the agreements reached by diplomatic means with practical content.
To allow to build a long-term strategy for promoting national interests, norms and rules of international trade and investment have to be accepted at the global and regional level, as well as international organizations that ensure compliance with these rules and regulations (WTO, EAEU).
The Ministry of Foreign Affairs, in cooperation with other government agencies, is able to create favorable conditions for Kazakh exporters in foreign markets, for expanding the range of exports through non-raw materials with high added value, for foreign investment and transfer of new technologies.
At the same time, economic diplomacy and the economization of foreign policy cannot substitute for economic development, cannot solve the issues of diversifying the national economy, expanding the export nomenclature, the willingness of domestic exporters to work according to international standards, increasing labor productivity and qualifications of the labor force.
Nikolay Kuzmin, political scientist
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