ABSTRACT
Helen Kavvadia posits that small states being, by necessity, open economies, due to the absence of self-sufficiency, rely on their economic diplomacy to optimize both the demand and supply sides of their economies. Their international economic relations are of existential significance and are at par with their security needs. European small states, such as Luxembourg, find shelter within the European Union framework, where they simultaneously try to promote their national interests through economic diplomacy. This chapter uses an historical institutionalism perspective in order to better understand the evolution of Luxembourg's economic diplomacy, focusing on when, why and how it developed. The chapter argues that Luxembourg's economic diplomacy strategies and tactics varied at critical juncture points, whereas the country's ‘niche’ economic diplomacy approach followed a path dependence for efficiency-based increasing returns.
