Commercial Diplomacy and Export Performance: The Role of Portuguese Embassies and Consulates

Abstract

Why do countries spend so many resources on embassies and consulates? Export promotion is one answer increasingly given, due to their key role in developing and maintaining export markets. The objective of this paper is to study the relevance of this link. Do export supporting activities developed by Portuguese embassies and consulates around the world in the last decade had any impact on Portugal’s international trade, by helping firms as a whole to add new destination countries or new export products?. Using data for 187 destination countries, for the period 2008-2017, and controlling for other determinants of trade through a standard gravity model, we find that commercial diplomacy efforts seem to only matter for export promotion in low or medium income countries. Complementing the econometric analysis of the macro data set we applied a survey to 238 Portuguese exporting firms. The survey’s resultsevidence that export firms do not attribute great relevance to embassies and consulates in terms of promoting and facilitating their export activities. These results have important implications for the future definition of export promotion initiatives involving foreign representations.