ECONOMIC DIPLOMACY IN THE ARMY OF CZECH REPUBLIC

Military Art and Science 147 ECONOMIC DIPLOMACY AND PEACEKEEPING IN THE ARMY OF CZECH REPUBLIC Miroslav KR miroslav.krc@unob.cz University of Defence, Brno, Czech Republic ABSTRACT The article deals with the relationship of diplomacy, economic diplomacy and military missions. It shows the interconnection of military missions with the development of export and import in theater deployment of national troops. Contribution to the analysis of the data follows the development of trade between the countries of the former Yugoslavian and Iraq. Emphasis on military diplomacy is a new phenomenon in the foreign policies of major powers, which may have large economic consequences, but also a political one.examining the impact of military missions on economic development is a part of a new paradigm after the year 2001. KEYWORDS: diplomacy, military diplomacy, economy benefits of peace operations 1. Introduction In recent years, the economic and financial crisis affected all markets of the world, of which up to the present time quite got only a tiny fraction affected. in this time, it was necessary to place increasing emphasis on state-supported export policy and export promotion, as in the current situation were affected by all the entities involved in the exchange market. In the unstable time more emphasis on statesupported export policy and export promotion. The pro-export policy of the state was led by goal: as much as possible to minimize the problems arising. State support is mainly focused on support and assistance in establishing long-term stable business relationship for exporters to the impact of the economic crisis: as much as possible eliminated. In this assay we try to establish joint military peacekeeping mission with the development of foreign trade. 2. Diplomacy and Economic Diplomacy Diplomacy in the traditional, most general and also briefest concept conceived as a tool a means of foreign policy of the state to enforce especially in abroad [1]. Among the many types of diplomacy agrarian diplomacy, security diplomacy, cultural diplomacy, informal diplomacy, parliamentary diplomacy, personal diplomacy, preventive diplomacy, sports diplomacy, transformational diplomacy, public diplomacy,

148 Military Art and Science scientific research and diplomacy, military diplomacy comes to the fore economic diplomacy. The constant linking of international economic relations growing importance of economic diplomacy, as the Š oura ová says: in the current world economic diplomacy are a significant part of the activities of all entities that the foreign policy of the state in some way involved. By her definition: Economic diplomacy is a specific area, or part of diplomacy and diplomatic services, focused: create conditions for the implementation of country s economic interests abroad, fulfilling the economic dimension of its foreign policy in relation to the involvement of the national economy into the world economy, the processes of internationalization, integration and economic globalization (wide conception, macro-view, activities in particular, multilateral diplomacy, concentration on trade policy issues, international contractual arrangements); promotion of trade and investment activities of national enterprises to enter foreign markets, lobbying for their interests, promoting the activities and interests of foreign investors in particular business in the Czech market etc. (narrower conception, micro-view, the prevailing activity in bilateral diplomacy dominance approach in favour of business activities [2]. Foreign authors Saner and Yiu define economic diplomacy: Economic diplomacy focuses on economic policy issues, including co-operate with organizations such as the WTO (World Trade Organization) and BIS (Bank of International Settlements). Economic diplomat also monitors and reports on the economic situation of foreign countries and advises the government how to the best influence. Economic Diplomacy uses economic resourcesas a reward or sanction in order to achieve foreign policy goals. It sometimes calls like economic statecraft [1]. In specialized article: Economic diplomacy and export promotion activities Ministry of Foreign Affairs of the Czech Republic is Economic diplomacy described as: A main role in this process play economic diplomacy as a set of measures aimed at promoting government policies in the area of production, the movement or exchange of goods, services, labour and investment towards abroad and from abroad and also creating a positive image of the country in the world. The macroeconomic view of economic diplomacy, it should lead us to the understanding that it is our use of political influence and relationships that we have to promote international trade and investment, to improve the functioning of markets, to reduce costs and risks of crossborder transactions, to the consolidation of the right policy climate necessary to enable and institutionalization of goals. 3. Economic Diplomacy and Military Mission Economic diplomacy is the unity of economics and policy making and implementation level, which facilitates cooperation and competition in current world and defines the forms and methods leading to the improvement and development of the market economy. Economic diplomacy includes different forms and types. Many experts distinguish these forms: financial assistance, loans and investments. Each of the forms provides a basis for political impacts. However, the technical and military assistance becomes form of economic diplomacy. Currently (times of economic crisis), more attention is devoted to foreign and economic diplomacy. The professional literature suggests that foreign policy used as diplomatic and military instruments to promote national interests. Military diplomacy is growing in importance as a tool to support the security interests of military, but also in promoting the goals of economic policy. We can say that in military diplomacy include military missions.

Military Art and Science 149 Emphasis on military diplomacy is a new phenomenon in the foreign policies of major powers that may have far-reaching economic and political consequences. Since the mid-90 ies, there are efforts to link foreign policy planning in defence spending with the internal planning of defence spending. The result should support macroeconomic policy, or economic policy. We assume that a new phenomenon in the state defence economy is: reduction of military budgets, international economics, economics of terrorism and insurgency theory. Now the international economy requires new tools of economic diplomacy. 3.1. Economics Benefits of Peace Operations International peace operations may have directed (immediate) and indirect (perspective) effects for our country. The activitiesof foreignmilitary operations are generating direct benefits.indirecteffects canpositively influence the economic development ofthe host country and may be beneficial for the country sending its units abroad. Historical evidence speaks about the work of our troops in peacekeeping operations, which raise a number of positive side effects in our country. These effects can make a significant contribution to economic development and they are viewed as a positive externality. Our units are peacemaking in the host country, they are involved in the creating of conditions for troubleshooting host country. It includes internal security, promotion of demographic development and support social and economic development [3]. Purchases of new industrial technologies and products, expert advice and investment units are caused by developing economic recovery plans. These plans focus primarily on the development of agriculture and industry. Development is accompanied by aneed forquality education, health and welfare. Foreign operations make way for theentry of Czech companies to the country and develop mutually beneficial business relationships. Possible indirect benefit of peacekeeping operations is therefore to develop international trade and realization of comparative advantage [4]. 3.2. Direct and Indirect Benefits of Peacekeeping Operation Direct benefits are directly connected with the activities within the foreign operation. These include: Training the armed forces of the host country led by our members using weapons and techniques of Czech production, which may be the motive for orders of Czech weapons and equipment manufacturers, while it may lead to future cooperation within the service and supply of spare parts; As in the previous case, it ispossible to gain some economic advantage over foreign competitors in the event of the sale or un paid leave and transfer of weapons and military equipment to the host country, there is possibility to future supply of spare parts and other materials and services which is necessary to ensure the operation of these weapons and technology; Significant benefit is the acquisition of new combat experience for future operations, effects in the structures of NATO and the sharing of experience. State often promises possibilities of opportunities in the countries where it operates foreig noperations. State encourages domestic companies. For indirect benefits are considered corporate profits from foreign direct investment (FDI). State receives benefits from the investments of domestic firms in the form of income taxes. Opportunity to realize business will depend on many factors, for instance economic level, education level (productivity) of the inhabitants, the degree of development of infrastructure, size of

150 Military Art and Science investment in research and development and the degree of economic diversification. Negative experiences play role that affect investors expectations. But even the state guarantees a signature of the contract may not mean success. Another possible indirect benefit is the development of international trade, the realization of comparative advantage, where the benefits are the indirect taxes for the state. It should be noted that export growth in one country can stimulate the growth of exports in the other country and subsequently affect the growth of economic power, respectively economic level of the two countries. It is important to mention that soldiers get salary when participate in international operations. This costs increase consumption in the Czech economy, it affects the quantity of aggre gate spending, which subsequently multiply, and then the end result is the growth of domestic product and indirect taxes. First of all, multiplier of foreign operations has negative effect, because the labor force moves to foreign country. These foreign operations have influence to macroeconomic variables and extent affect the development of the economic cycle [5]. 4. Analysis of Military Missions in Czech Foreign Trade 4.1. Expenditure for Operations of Czech Armed Forces In this section, here are specified expenditure on operations with a focus on Iraq and Afghanistan. As the table shows, the largest part of the expenses attributable to operations in Afghanistan. Individual amounts in the columns of operations in Iraq and Afghanistan operations are the sum of expenditure on operations that took place in the year and in the locality. We deal with data from mission International Security Assistance Force (ISAF) in Afghanistan and contingent ofpoliceandmilitaryfield hospital in Iraq. Table no. 1 The funds drawn on operations in Iraq and Afghanistan in each year2004-2011 (in thousands of CZK) Year Foreign activities Operations Operations in Iraq Operations in Afghanistan 2004 1 843 960 1 117 308 178 660 130 724 2005 2 013 700 1 212 463 200 858 113 404 2006 2 188 539 1 344 044 183 668 226 656 2007 2 163 178 1 348 456 152 481 480 361 2008 3 244 632 2 448 202 97 361 1 801 106 2009 4 272 062 2 986 120 5 886 2 324 701 2010 2 881 962 2 115 285 0 1 692 145 2011 2 227 994 1 809 587 0 1 503 341 Together 20 836 027 14 381 465 818 914 8 272 438 Source: eczech Statistical Office: Státní záv re ný ú et státního rozpo tu kapitoly MO R v letech 2004-2011. Final state account of the MoD budget of the Czech Republic in the years 2004-2011.

Military Art and Science 151 4.2. Military Mission of Czech Armed Forces and Croatia The Republic of Croatia is one of the successor states of former Yugoslavia. Croatia declared its independence on 25 th June 1991; however, the response was not positive. Trade between the Czech Republic and the Republic of Croatia has a persistently high trade surplus in favor of the Czech Republic. Czech exports represent roughly four times bigger account than the Czech imports. In 2009, the trade of goods fell by almost a quarter (22.2 %), exports from the Republic of Croatia decreased slightly more (24.5 %) than imports (by only 11.1 %). In 2010, the mutual exchange of goods returned to growth again. The graph shows that the development of foreign trade in years 1993-1995 had growing trend, but it was limited by military conflict that raged in the territory of the former Yugoslavia. Czech units fulfilled their assigned tasks in these missions: UNPROFOR, UNCRO and UTAES. The Czech units took part in those since 1992 (still as Czechoslovak People s Army), and after its independence in 1993, Czech armed forces did the tasks with their coalition partners until January 1998, when the mission UNTAES was finished. The growth of exports between years 1993 and 1997 was stimulated by the influence of Czech troops in the territory of Croatia. According to CSO statistics, Czech export to the country in this time was steadily increasing despite the fact that the Czech Republic faced the economic slowdownin 1996, which was accompanied by a rise of some unhealthy tendencies, like growing deficit of the trade balance (which in the following decadereached its peak), current account deficit of the balance of payments, faster wage growth than labor productivity and indebtedness of public budgets [6]. The breaking point is represented by September 2005, when the Memorandum of Cooperation between the Ministry of Industry and Trade of the Czech Republic and the Ministry of Economy, Labour and Entrepreneurship of the Republic of Croatia was singed. It happened during the state visit of former President of the Czech Republic Vaclav Klaus. Thanks to the signature of this Memorandum, the unexpected growth in the volume of imports from Croatia reached the maximum in 2006. Figure no. 1 The development of trade between the Czech Republic and Croatia from 1993 to 2010 (in thousands of CZK) of an image with acceptable resolution

152 Military Art and Science Between years 1993 and 2010, one of the most important areas of Czech exports was a group number 6 Manufactured goods classified by material. Since 1993, inter alia, the share of the group number 7 Machinery and transport equipment has grown. Figure no. 2 Export of the Czech Republic to Croatia between 1993 and 2010, according to the commodity structure (in thousands of CZK) Import to the Czech Republic in relation to the total exports of Croatia is almost negligible; however, we can expect increasingtendencies, especially after the entry of Croatia into the EU or the Schengen area). Figure no. 3 Export of Czech Republic in some Balkan countries from 1993 to 2010 (in thousands of CZK)

Military Art and Science 153 4.3. Military Mission of the Army of the Czech Republic and Iraq Units of the Army of the Czech Republic operated in Iraq from 2003 to 2009 in several different operations with different tasks. We can mention tasks of Military Police contingent, the coalition multinational force (MNF-I), field hospitals and training missions. Trade relations between the Czech Republic and Iraq have a long tradition. It has existed since 80 s. Table no. 2 Foreign trade between the Czech Republic and Iraq 1999-2011(in thousands ofczk) Period Export from Import to the Czech Republic the Czech Republic Balance 1999 145 1 739 1 594 2000 7 623 267 741 260 118 2001 1 361 39 1 322 2002 14 682 223 14 459 2003 129 694 90 129 604 2004 531 819 83 531 736 2005 396 404 69 396 335 2006 478 201 29 478 172 2007 1 574 181 2 281 1 571 900 2008 731 241 457 730 784 2009 2 650 620 110 2 650 510 2010 2 589 209 5 205 2 584 004 2011 1 539 254 2 895 1 536 359 Total 10 644 434 280 961 10 363 473 Source: Own model according to the data from CSO. [online][cit. 2013-08-12]. Available from: <http://apl.czso.cz/pll/stazo/stazo.stazo>. Those results were mainly supported by exportedmachines and transport equipment, which were apparently used in connection with the reconstruction of Iraq s infrastructure projects implemented by Czech companies in the field energy, crude oil and water. Another item, which contributes significantly to the volume of export to Iraq, is industrial and manufactured goods. Table no. 3 Structure of export from the Czech Republic to the Iraq2006-2011 (in thousands of CZK) Commodity 2006 2007 2008 2009 2010 2011 Foodstuff and animals 4 5 1 252 33 136 42 745 Drink and tobacco 496 3 7 558 Raw materials 15 2 682 106 3 318 1 347 Crude oil, lube 592 2 817 905 21 5 Chemicals and chemicals product 4 061 98 178 5 614 3 632 28 354 34 604 Market goods according to the material 58 468 234 922 241 131 250 313 187 182 331 953 Machines and transport equipment 390 853 1 040 186 430 443 1 493 055 1 485 779 1 054 746 Industrial goods for consumption 24 212 195 391 52 540 902 364 854 416 66 297 Source: Own model according to the data from CSO. [online][cit. 2013-08-12]. Available on: <http://apl.czso.cz/pll/stazo/stazo.stazo>.

154 Military Art and Science The chart below shows the increasing trend of export of Czech goods and services to Iraq, it is especially noticeable after 2003, when the first Czech military unitwas sent to Iraq. In 2007, we see a sharp increase, which is caused by exported machines and transport equipment evaluatedfor more than 1 billion CZK. In 2009 and 2010, we see a surge in Czech exports. In 2011, statistical data on Czech exports show at a glance a decline compared to year 2010 (about 12 %). Imports from Iraq are negligible throughout the period and the balance of the Czech Republic is highly active [7]. Figure no. 4 Export of Czech Republic in Iraq from 1999 to 2011 (in thousands of CZK) 5. Conclusion Czech Republic is a country with an open economy, therefore, is strongly linked with the economies of its trading partners. After its independence in 1993, the Czech economy went through dramatic changes. In this context, we see the development of foreign trade in the Czech Republic. Since 1993, an increasing trend can be observed in Czech exports to particular countries as well as the import from them. The growth of Czech exports to certain countries has affected the work of Czech military peacekeeping missions in those areas. Historical experience talks about the work of our troops in peacekeeping operations which raised a number of positive effects. Peacekeeping mission can make a significant contribution to economic development. These side effects can be seen from the perspective of economic theory as a positive externality. The work of Czech units in foreign operations contributes to enforcement or peacekeeping in the host country. Thus, it allows participating in the creation of conditions for solving the problems of the host country. Main tasks are internal security, promotion of demographic development and support of Social and economic development. Initiation of developing economic recovery plans, which focus primarily on the development of agriculture and industry, raises the need to purchase new industrial technologies and products, expert advisory services and investment units. This development is accompanied by a need for quality education, health care and social insurance. In this way, foreign operations participate in these processes, preparing the ground for the entry of Czech companies and develop mutually beneficial business

Military Art and Science 155 relationships with companies of the host country. Therefore, develop international trade and realization of comparative advantage is a possible indirect benefit of peace operations [4]. The statistics above show that participation of Czech military units in peacekeeping missions contributed to the growth of Czech exports to the country of employment. A relatively new phenomenon of economic diplomacy shows that states, regardless their size, make the prosperity thanks to the support of private businesses abroad. There is a process of economization of diplomacy. The obvious example may be represented by military peacekeeping mission. REFERENCES 1. J. Urbanovská, Participace stát v operacích OSN na udržení míru. P ípad eské republiky, Slovenska a Rakouska. (State Participation in UN operations peacekeeping. The case of the Czech Republic, Slovakia and Austria. Brno: 2012. IN: http://is.muni.cz/th/79161/fss_d/disertacni_prace_urbanovska.txt. Diserta ní práce. (Dissertation) 2. J. Štoura ová, Ekonomická diplomacie eské republiky.(economic diplomacy Czech Republic) 1. vyd. (Praha: Professional Publishing, 2008). ISBN 978-80-7431-081-2. 3. Vladimír Šnídl, Zapomenuté vojenské mise. (Forgotten Military Missions) EKONOM.IHNED.CZ [online]. 19. 7. 2011 [cit. 12.01.2015]. Dostupné z: http://ekonom.ihned.cz/c1-52293190-zapomenute-vojenske-mise 4. L. Štancl, Harmonizace hospodá ské a obranné politiky jako p edpoklad zvyšování efektivnosti zahrani ních misí Armády eské republiky. (Harmonization of economic and defense policy as a precondition for increasing the effectiveness of foreign missions of the Army of the Czech Republic). Ekonomické aspekty zahrani ních misí A R: sborník ze VII. mezinárodní v decké konference 1. vyd.: UO Brno: 2009. s. 158. ISBN: 978-80-7231-691-5. 5. V. Hynková, Vojensko-ekonomická analýza jako metoda hodnocení hospodárnosti a efektivnosti zahrani ních misí A R. (Military-economic analysis as a method of assessing the cost and effectiveness of foreign missions ACR). Ekonomické aspekty zahrani ních misí A R: sborník ze VII. mezinárodní v decké konference 1. vyd.: UO Brno: 2009. s. 158. ISBN: 978-80-7231-691-5. 6. Chorvatsko: Vztah k eské republice. (Croatia: Relationship to the Czech Republic). BusinessInfo.cz: oficiální portál pro podnikání a export [online]. 2012 Dostupné z: http://www.businessinfo.cz/cs/clanky/interaktivni-exportni-profil-zajmovych-zemi-chorvatsko. 7. Irák: Obchodní a ekonomická spolupráce s R (Iraq: Trade and economic cooperation with the Czech Republic). In: BusinessInfo.cz: Oficiální portál pro podnikání a export [online]. 25.04. 2014 [cit. 2015-01-12]. Dostupné z: http://www.businessinfo.cz/ cs/clanky/irak-obchodni-a-ekonomicka-spoluprace-s-cr-19345.html

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