Does Commercial Diplomacy Overcome Impediments to International Economic Flows? The Case of Australia

Abstract

This article empirically examines the effectiveness of commercial diplomacy in contributing to Australia’s merchandise exports and inbound foreign investment with 181 countries over the period 2010-2015. The combined effect of diplomatic entities increases Australian exports by 12.9 per cent and increases inbound foreign investment by 16.1 per cent compared to countries without representation. Commercial diplomacy is effective when there are impediments to exporting, such as markets being outside the region and having low economic freedom. Commercial diplomacy substantially boosts inbound investment from countries outside and within the region, from emerging and developed markets, and from countries with high levels of economic freedom.