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Underfunding the State Department could hurt U.S. exports — and U.S. companies

By Matthew Connelly and Raymond P. Hicks

Secretary of State Rex Tillerson has survived his first year in Washington, but his department remains at war — with itself. The recent budget deal has blown a multibillion-dollar hole in funding for current operations, and the new White House budget proposal would cut 2019 funding by 23 percent. In the face of fierce internal opposition, Tillerson insists that a smaller State Department will “deliver the greatest value and opportunity of success for the American people.”

There are big problems with this approach — particularly in light of President Trump’s hard line on foreign trade. U.S. diplomats point out the cuts have a serious effect on long-standing efforts to promote conflict resolution, environmental protection and human rights. But the State Department also works on a broad range of economic issues. So how will Tillerson’s plan affect a top Trump priority — the promotion of U.S. businesses?

We can now measure economic diplomacy

 Long ago, another Republican president, Calvin Coolidge, famously said that “the chief business of the American people is business.” Now that government archives come in the form of millions of electronic records, we can actually test this proposition. We can measure how much time U.S. diplomats spend negotiating international aid and trade, promoting U.S. companies and gathering information about economic conditions abroad.

[Those empty desks at U.S. embassies and the State Department? They’re a big problem.]

We can’t tally contemporary communications, many of which remain classified. But the recent release of more than 3 million declassified State Department records from 1973 to 1979, the period when the agency first adopted electronic record-keeping, allows us to analyze not just the relative importance of economic diplomacy, but the effect on U.S. exports.

Economists explain that most international trade comes through what they call a gravity model. This says, in simple terms, that countries with bigger GDPs or that are closer to one another will have more bilateral trade. “Closeness” is measured not just by the distance between their capitals, and whether they share a border, but also cultural similarities, such as a common language or a former colonial relationship.

But there is still a lot of unexplained variance, and what governments do to promote trade clearly makes a difference. It turns out that governments, especially the U.S. government, do quite a lot. The message text in hundreds of thousands of these records is still classified, but the National Archives has made all the metadata available, including what the State Department calls “traffic analysis by geography and subject,” or TAGS.

Here’s what we found: If we exclude records with TAGS related to administration and consular affairs — activities that were not specific to any particular policy or subject of U.S. interest — and we add those on military sales and assistance, communications related to economics and business made up 36.9 percent of State Department activity in the years 1974 to 1979.

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