Study Of U.s. Financial Diplomacy

As a long-time phenomenon in international relations, financial diplomacy is now an important part in U.S. diplomacy towards China, particularly after the second half of 2003. How does U.S. financial diplomacy towards China become possible? This is the core question of the dissertation. In the case of RMB exchange rate that the dissertation focuses on, the core question develops into a couple of sub-questions. Regarding policy process, why is the RMB exchange rate issue politicalized and how does it turn into part of policy agenda? Why does financial diplomacy on RMB issue resolve itself from special interests into public interests? What are the adjustments in the policy process and how come? In the stage of policy implementation, what are the forms and features of the financial diplomatic activities and why are these policy tools selected? On the other side, starting form issue participants, why do interest groups, who have long been silent in U.S. international monetary policy, participate in the RMB issue agressively? Some congressmen have introduced a large number of RMB-related bills, but none of them has become law with binding force. Then, what role does the congress play? The administration is supposed to be the final policy maker and implementor, but what's the degree of its independence and what are the aims that the administration has achieved and is now striving to achieve. Given the large number of participants in the RMB issues, is it Issue Network or Iron Triangle that decides the establishment and trends of U.S. financial diplomacy?We argue that the reason that the RMB issue has been politicalized and developed into part of U.S. policy agenda lies in the driver and communicator role of interest groups, more exactly, the manufacturing groups. In the discussion of the different roles of various groups in the policy process of financial diplomacy, we find that, the traditional argument that interest groups are hard to take collective actions in the process of U.S. international monetary policy cannot be proven in the case of the RMB issue. Therefore, the approach of dividing trade and money, and the argument that interest groups' influence in international monetary field is far less than that in trade cannot hold water in both theory and practice. The manufacturing groups and labor groups has acted aggressively in the RMB issue; the financial groups participate in the issue out of their own concerns; multi-national corporations and trade liberalists turn a blind eye to the above groups. All these groups have unintentionally joined together to make financial diplomacy melt from special interest to public interest. Then, how does the public interest change into specific policies? Our research showes that the Congress, through its active legislation and supervision, acts as a real doer and communicator. However, it is worth noting that the "cooperative tension" between the asminitration and the legislature, as well as the power structure within the legislature, has posed constraints for the process by which social pressure may arrive at the administration.The U.S. administration has adopted the stratege of persuading China to revaluate the currency by financial diplomacy. The then Secretary of the Treasury John Snow has introduced specific policies of high-level dialogue, multi-lateral diplomay and technical engagement. However, after Henry M. Paulson Jr. assumed office as the Treasury Secretary, the policy makes a U-turn even though the legislature and the manufacturing and labor groups grow more aggressive. As for the seemingly unreasonable adjustment, we argue, when other actors in the issue network remain unchanged in terms of force, or show stronger policy preference, it is the effect of the Wall Street-Treasury Complex that leads to the policy adjustment.Therefore, we believe that the interest group - congress - administration model remains the path of U.S. financial diplomacy, even though there forms a large issue network about the RMB issue. Nevertheless, either Iron Triangle or Issue Network has theoretical or empirical flaws, and a possibly feasible framework is: issue network sets the policy border of financial diplomacy, while an unstable triangle of interest group - congress - administration is the core strucuture of policy-making in financial diplomacy.Regarding forms of diplomacy, personal diplomacy plays a crucial role in financial diplomacy; the brand-new bilateral strategic economic dialogue is developing financial diplomacy into effective institution; the highly globalized market of finance requires the use of multi-lateral model in financial diplomacy. In the times of globalization, financial diplomacy embodies many new features and a striking originality.Under the Obama administration, Chinese currency will probably remain a core dispute in China-U.S. economic and trade relations, and the U.S. is sure to continue its financial diplomacy towards China. Therefore, with the policy of "making great efforts to develop economic and financial diplomacy", China should learn to take advantage of legitimate and institutional measures in the U.S., so as to effectively ward off risks and challenges. In light of the role interest groups play, China must take interest groups as a major variable in U.S. financial diplomacy, and endeavour to form a counter-lobby coalition; China needs to explore the relations with mass media in the U.S.; China has to integrate its resources of financial diplomacy and make joint force of financial diplomacy, which can better serve the country's national interest.