Consulates can be key to foreign business success

This story was originally published in the Embassy on August 28, 2013. Photo by the Hill Times. 

Diplomatic networks are an important part of economic relations for many foreign nations in Canada. But rather than conducting economic relations through embassies in Ottawa, many diplomatic networks choose instead to focus on extending their economic presence through their consulates.

More than simply visa factories, consulates can act as a key economic hinge between two countries. Much of these economic efforts are focused on encouraging foreign investment in Canada, as well as promoting trade and exports.

Such is the case for a country like Japan. “[Consulates] play very important roles in many areas of economic relations between Japan and Canada, which our Japanese Embassy is not engaged in,” said Japanese Counsellor Keishi Suzuki via email. “Japanese Consulates in Canada have close contact with provincial governments, and Japanese companies located in their own territories,” he said.

Japan has eight consulates in Canada, which can be found in major economic centres such as Vancouver, Calgary, and Toronto.

The Japanese approach is similar to that of the French foreign mission in Canada, which consists of six consulates and 15 honorary consuls—the second largest French diplomatic network in the world.

These diplomatic outposts can be found throughout Canada’s major economic centres, as well as in smaller cities such as Chicoutimi and Rouyn-Noranda in Quebec.

The latest expansion of this network was the French Consulate in Calgary in 2010, which opened around the same time that French investments in the oil sands were increasing significantly.

In addition, the French Embassy has also established a special office for providing advice and assistance to French companies on how they can invest in different parts of the country. “80,000 jobs in Canada depend on French companies investing in this country,” French Ambassador Philippe Zeller told Embassy in October 2011.

Different business models

“A wide range of studies suggest that diplomatic representation abroad, and export promotion in general, increases a country’s exports,” said Dan Ciuriak, a former deputy chief economist at what’s now known as the Department of Foreign Affairs, Trade, and Development.

However, according to Mr. Ciuriak’s own research, the relationship between diplomatic presence and trade varies from country to country. “My own research suggests that the impact of diplomatic representation abroad varies according to the degree of economic freedom in the country,” said Mr. Ciuriak, who is also a research fellow at the CD Howe Institute and director and principal of Ciuriak Consulting Inc.

“Where the government plays a more important role in deciding economic decisions, then diplomatic representation can help a particular country,” he said.

In the case of a country like Canada, his research suggests that, because the degree of economic freedom is high, foreign diplomatic representation in Canada would play a smaller role than it would in other countries that might have less economic freedom.

Plus, while consulates play a strong economic role for some countries, this may not be the case across the board.

“In terms of the respective roles of embassies versus consulates,” said Mr. Ciuriak, “it very much depends on the business model that an individual country has in establishing its presence abroad.”

As a counterpoint to the French model, Mr. Ciuriak gave the example of Germany, which he said has outsourced trade promotion to business associations. This, says Mr. Ciuriak, gives Germany a smaller diplomatic footprint abroad than France.

On a phone call from his office in Montreal, German Consul General Walter Leuchs explained that Germany approaches its economic relations with Canada mainly through semi-public institutions such as the Canadian German Chamber of Industry and Commerce and Germany Trade & Invest, rather than through its diplomatic network.

These institutions, he explained, operate as autonomous organizations, but are subsidized by the state.

“We don’t have any kind of authority over [them],” said Mr. Leuchs. Instead, the Consulate General co-operates with these institutions at a horizontal level in order to help them with networking and other activities, he said.

This type of approach, said Mr. Leuchs, is quite typical for Germany. “We Germans believe in the field of culture that not everything runs through government but through semi-public institutions which have an autonomous character,” he said.

And while many other countries have adopted this approach when it comes to cultural promotion abroad, Mr. Leuchs said that Germany is “relatively unique” in adopting this model when it comes to trade.

One exception to this rule is Japan. While remaining largely focused on consular presence as a main factor in its economic exchange policy, Japan also conducts trade and investment through two semi-public institutions: the Japan External Trade Organization, which has offices in Toronto and Vancouver; and the Japan Oil, Gas and Metals National Corporation, which operates out of Vancouver.

Through these two organizations, as well as through its consular network, Japan has established a large presence in Western Canada, particularly in Vancouver. But according to Mr. Leuchs, the same cannot be said for Germany.

While Germany has consulates established in key locations like Vancouver, Calgary, Edmonton, and Saskatoon, Mr. Leuchs feels that the Canadian West has not yet been fully “discovered” by German business.

A complex relationship

All of this serves to demonstrate the complexity of the relationship between consular presence and economic relations. For Mr. Ciuriak, overall trends are ultimately difficult to identify.

“Because consulates are established for various reasons…and not all consulates have trade promotion mandates, it is difficult to find a clear statistical link between greater numbers of consulates in a country and greater exports to that country,” he said.

Nevertheless, consulates represent important points of contact with different areas of the country, regardless of a nation’s business model.

For new Ottawa-based diplomats, Mr. Leuchs offered the following: “My advice would be to not only focus on Ottawa, but to also travel around…to see the whole country and its diversity.”