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Trump might be hurting U.S. businesses by leaving so many ambassador posts empty

- May 10, 2018
German President Frank-Walter Steinmeier, right, and U.S. Ambassador Richard Grenell meet Tuesday in Berlin. (Michael Sohn/AP)

Wednesday, on his first day on the job, new U.S. ambassador to Germany Richard Grenell sparked a minor controversy after warning on Twitter that “German companies doing business in Iran should wind down operations immediately.” German businesses did not appreciate this threat. The episode further strained already rocky U.S.-German commercial relations.

German businesses and commentators have noted that it’s “undiplomatic” for an ambassador to use such a tone or issue threats to the business community in their host country. Yet as my research shows, Grenell’s intervention was also undiplomatic for another reason. Typically, U.S. ambassadors don’t spend their time quarreling with foreign companies, but rather advocating for American businesses. And though Grenell’s first days since taking up the vacant ambassador posting in Berlin have raised commercial tensions, in general, ambassadors help resolve commercial conflicts, not create them.

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This research has important implications for understanding the vacancies issue at the State Department. There are 55 empty ambassador positions — including 39 posts for which no one has even been nominated. (This excludes six countries with which the United States does not exchange ambassadors: Belarus, Bolivia, Eritrea, Sudan, Syria and Venezuela.)

Filling these ambassador vacancies is important for helping American businesses get ahead — exactly the kind of foreign-policy goal President Trump says is a top priority.

Here’s how I did my research

In new research, I looked at how temporary State Department vacancies affect American commercial interests. The number of ambassador vacancies is abnormally high, particularly this late into a new administration. However, ambassador positions are often vacant for months, at least in part because new appointees must first be confirmed by the Senate. I studied U.S. ambassador vacancies across 136 developing countries for the years 2000 to 2013. Across all U.S. embassies in these countries, there were 595 ambassador vacancies during this period, with the average vacancy lasting about six months. But that varied considerably. One in eight vacancies lasted longer than a year; a similar proportion lasted less than a month.

By looking at this variation, I could test how these vacancies affected U.S. diplomatic priorities.

U.S. businesses rely on American diplomats

I found that State Department vacancies undermine U.S. businesses operating abroad. During temporary ambassador vacancies, U.S. businesses are significantly more likely to file investor-state dispute settlement (ISDS) claims under bilateral investment treaties, alleging mistreatment by the host country’s government. The expected number of arbitration claims filed by American investors in a given country in a given year was nearly twice as high when the position of U.S. ambassador was vacant for 90 percent of the year, compared with when an ambassador was present the entire year. Moreover, these effects are concentrated in developing countries with weak rule of law, places where informal negotiations play an outsized role in government policy.

Why are ambassadors so important to helping U.S. businesses avoid investment disputes, particularly in countries where policies are implemented inconsistently and arbitrarily? Because behind the scenes, ambassadors are working with that country’s government to help settle firms’ problems before they escalate into formal investor-state disputes. They’re helping firms get meetings with foreign government officials. They’re calling up finance and trade ministers, encouraging them to resolve outstanding problems — like delays in getting permits — with U.S. companies. And they’re warning foreign governments that if they mistreat U.S. businesses it will damage their countries’ international reputation and scare off other would-be investors.

These efforts are an important aspect of the day-to-day work of “invisible diplomacy.” When successful, they keep problems from ever reaching public view.

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And though my research focused on investment disputes, other reporting suggests ambassadors also play an important role in additional aspects of commercial diplomacy, like helping firms win procurement contracts. Of course, sometimes that help is controversial, as when a U.S. ambassador allegedly helped Bechtel secure a $1.3 billion contract for a Kosovo highway that, according to reporting, is rarely used — before that ambassador left public service to take a position at Bechtel.

Why ambassadors matter

Of course, even without ambassadors, U.S. embassies treat commercial diplomacy as an important priority. But there are many tasks that lower-ranked officials can’t perform as effectively as an ambassador. Ambassadors have the authority to call meetings with ministers and heads of state, the individuals with the power to make decisions on specific disputes.

Moreover, the simple fact that an ambassador — rather than a lower-ranking bureaucrat — chooses to engage shows foreign governments that this particular issue is a political priority for the United States and worth taking seriously. Leaving ambassadorships empty is a self-imposed penalty in foreign affairs.

This is one reason that, back in 2014, when Congress was holding up a number of ambassador appointments, the State Department warned that these confirmation delays were compromising American economic interests.

An early priority and an easy win

Mike Pompeo, the new secretary of state, has already suggested that filling vacancies will be one of his first priorities. He brought the issue up in his Senate nomination hearing, and told State Department employees that “[t]he United States diplomatic corps needs to be in every corner, every stretch of the world, executing missions on behalf of this country.”

But if he needs help convincing anyone else in the Trump administration of the importance of staffing the State Department, he could point out that these vacancies undermine American commercial objectives. Diplomacy isn’t just about negotiating treaties, advocating for human rights, or tending to alliances, the traditional areas of foreign policy, in which Trump has shown little interest. It’s also about dollars and cents, helping U.S. businesses navigate foreign markets.

Geoffrey Gertz (@geoffreygertz) is a postdoctoral fellow at the Brookings Institution.