The Economic Diplomacy of Small States. A Case Study of the Grand Duchy of Luxembourg: Trade and Services, Official Development Assistance (Oda), Foreign Direct Investment (FDI)

27 Pages Posted: 11 Feb 2021

See all articles by Helen Kavvadia

Helen Kavvadia

University of Luxembourg

Marie Christine Adam

Universite du Luxembourg

Kimberly Clemons

Universite du Luxembourg

Vivien Devenyi

Universite du Luxembourg

Enrico Girotto

Universite du Luxembourg

Yuliya Lisova

Universite du Luxembourg

Fei Mo

affiliation not provided to SSRN

Zarja Vojta

Universite du Luxembourg

Date Written: March 28, 2018

Abstract

In the contemporary globalized, multi-polar and competitive conditions, small states, which count for more than half of the world’s states, through economic diplomacy endeavors aim to position themselves in the best possible way, in order to assure their economic development and political influence. Being constrained by their size, in terms of population and economy, small states follow different strategic choices in different regions of the world. With an area totaling 2,586 km2 and a population of 590,667 in 2017, the Grand Duchy of Luxembourg is one of the smallest countries in Europe, and ranked 179th in size of all the 194 independent states of the world. Despite its size the country has been advocating openness, and enjoys a successful track record in economic diplomacy. There are, however, no in-depth academic studies to take a detailed account of its parameters and to identify its strengths and weaknesses. The present work uses Luxembourg, as a case study for evaluating economic diplomacy of small states. This is the first study of the Grand Duchy’s economic diplomacy. Based on statistical data, it goes beyond a mere account, by critically evaluating Luxembourg’s economic diplomacy in terms of trade, Foreign Direct Investment (FDI) and Official Development Assistance (ODA). While in need of imports in trade and investment due to its limited production possibilities given its size and the consumption needs of its affluent society, we claim that, without shying away, the country dared to compete in the globalized markets using an efficient and effective, well developed economic diplomacy, in order to: a) export its goods and services, b) attract inward FDI, while c) sharing part of its wealth with developing countries through the provision of ODA of 1.06% GNI, outreaching most EU countries and exceeding the UN target of 0.7% GNI by 2015. Based on the results of Luxembourg as a case study, we argue that size is not a determinant of a state’s economic diplomacy success.

Suggested Citation

Kavvadia, Helen and Adam, Marie Christine and Clemons, Kimberly and Devenyi, Vivien and Girotto, Enrico and Lisova, Yuliya and Mo, Fei and Vojta, Zarja, The Economic Diplomacy of Small States. A Case Study of the Grand Duchy of Luxembourg: Trade and Services, Official Development Assistance (Oda), Foreign Direct Investment (FDI) (March 28, 2018). Available at SSRN: https://ssrn.com/abstract=3568999 or http://dx.doi.org/10.2139/ssrn.3568999

Helen Kavvadia (Contact Author)

University of Luxembourg ( email )

11, Porte des Sciences
Campus Belval – Maison des Sciences Humaines
Esch-sur-Alzette, L-4366
Luxembourg

HOME PAGE: http://www. uni.lu

Marie Christine Adam

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

Kimberly Clemons

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

Vivien Devenyi

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

Enrico Girotto

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

Yuliya Lisova

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

Fei Mo

affiliation not provided to SSRN

Zarja Vojta

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

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