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Introduction to Commercial Diplomacy
involves the application of advocacy tools to government policies that
affect international commerce. Since government policy is the province
of government officials and international commerce is province of
business managers, the dialogue between the two is at the heart of
commercial diplomacy. Sound management of the relationship between
government and business is crucial to good trade policy
In recent years there
has been a growing awareness that trade decisions also affect broader
interests of society in areas such as health, the environment, and labor
standards. This non-economic dimension of trade policy has grown
progressively as the trade agenda has expanded from barriers at the
border such as tariffs and quotas to domestic regulatory measures such
as environmental and health measures. These broader interests of society
are often represented by public interest groups, who have increasingly
demanded a role in the trade policy decision making process in their own
countries, as well as globally. Beyond government and business,
commercial diplomacy therefore involves non-governmental organizations
that represent the interests of citizens as workers, as consumers, and
as supporters of social objectives such as a clean environment and a
A study of commercial
diplomacy must there focus on how these three groups in society can
manage their relationships with each other as part of the trade policy
decision-making process, and how commercial diplomats working for any
government, business or public interest group can seek to influence the
attitudes, objectives and actions of decision-makers in all three
sectors, and thereby achieve desired policy outcomes. A key to effective
management of the relationships involved is a basic understanding of the
different roles, values, motivations and objectives of actors in each of
the three sectors. Effective advocacy has to be based on a sound
understanding of potential partners or opponents.
Achieving such an understanding is particularly challenging when
it involves actors whose role and frame of reference is different than
There are considerable
differences in how countries around the world organize their government,
their economic enterprises, and civil society. These differences affect
how much independence business and public interest groups have from the
government, and conversely how much political influence either business
or public interest groups can exert in trade policy decisions.
Notwithstanding these differences, there are many similarities in the
fundamental roles of business, government and public interest groups in
most countries, regardless of their economic and political organization.
This similarity arises from the distinct roles played by each of these
three sectors, which defines their basic objectives, motivations and
The Role of Government, Business and
The key to
understanding the challenge in managing the relationship between
government and business on one hand, and between government and public
interest groups on the other hand is a profound appreciation of the
differences in the respective roles, objectives, motivations and values
of actors in these three sectors. We will therefore focus initially on
the unique mission of each, and how that affects their frame of
The role of business,
i.e. the role of economic enterprises, is to efficiently organize
production. In free enterprise economies, which in different degrees now
encompass most of the world, competition among competing producers is
expected to result in the most efficient production of the goods and
services consumers wish to purchase. Within this framework, business
managers have the responsibility to make decisions on the allocation of
scarce resources to the production of goods and services. Free market
economies are based on the basic economic principle that competition
among enterprises seeking to maximize their own profits will lead to the
most economically efficient use of society’s resources for producing
the goods and services consumers wish to purchase.
In making production
decisions, managers are required to obey the laws and regulations of the
cities, counties, states, provinces and countries in which they live.
They may also choose to consider ethical aspects of their decisions,
over and above the laws they are required to obey. They may do so for
moral reasons, or because they believe that basic ethical values will
shape the attitudes of employees, customers, the community and
government towards the firm. For the same reason firms may choose to
make financial contributions to charities or the arts in the communities
in which they operate.
If decisions made by
business on economic grounds, i.e. if decisions based on the
maximization of profit, result in socially undesirable consequences, it
is the responsibility of government to establish laws and regulations
that will encourage or mandate socially desirable actions and discourage
or prohibit socially undesirable behavior by enterprises. It is thus the
responsibility of government to identify public policy goals in areas
such as the environment or human health which are impacted by decisions
made by enterprises, and to pursue the achievement of such public policy
goals through the promulgation and enforcement of appropriate laws and
regulations. Similarly it is the responsibility of government to
identify public goods such as education, police protection, defense or
medical care for the elderly that society does not wish to allocate on
the basis of an ability to pay, and to provide for the production and
distribution of these public goods.
Public interest groups help to crystallize public policy goals. They bring together private actors united by a common public policy goal. They give private actors the opportunity to exert a greater collective political influence on the public debate over a particular policy issue than they could achieve by acting individually. Public interest groups thus help to focus public policy issues for public debate and speak on behalf of members who share certain values or policy objectives.
Mission, Objectives, Motivations and
mission will inevitably influence the objectives, motivations and values
of its staff and of its leaders.
In the private market
economies, the success of a business is measured in terms of its profits
and/or its growth. It
follows that the performance of individual business managers is measured
in terms of their contribution to profits and/or growth. Business
managers will therefore tend to support policies that advance their
ability to generate higher profits or growth. It is also inevitable that
in such an environment, where success is equated with economic
performance, economic criteria will tend to feature prominently in the
value system of business managers. (In state run economies success is
measured in terms of achievement of the production targets set by the
state, and their mangers will tend to support policies that will
facilitate and enhance their ability to achieve these targets.)
In the government,
success is measured in terms of the successful development,
implementation or enforcement of a government policy or program, all of
which requires the consent and cooperation of a large number of
officials, legislators, and ultimately voters. In other words, the
performance of government leaders is most often measured in terms of
success in building a political consensus in support of desirable policy
goals. Government leaders
will therefore tend to support policy actions that will help them to
achieve this goal. It is inevitable that dedication to public policy
goals and political skill will feature prominently in the value system
of government leaders.
In public interest
groups, success is measured in terms of success in focusing public
attention on a public policy issue and/or success in achieving a
political consensus in support of such a goal. An organization’s
ability to accomplish these goals is a function of the number of its
supporters/members and/or the size of the financial contribution made by
its supporters/members. The performance of public interest advocates
therefore is usually measured by the members and money they can attract,
which in turn is a function of success in attracting attention to an
issue or bringing about desired policy outcomes.
Like government officials, public interest advocates live in an
environment that values public policy and social goals, and these ideals
are likely to feature prominently in their value systems.
Leaders in all
institutional settings also have many things in common. They tend to
value power, both as measured by the number of people or the amount of
money under their stewardship and by the impact of their decisions on
society. Bureaucratic turf is a fairly standard measure of status in
The implication of the
link between organizational mission and private motivations and values
is that successful advocacy in commercial diplomacy depends on a sound
understanding of the different missions, objectives, motivations and
values of the different actors. In order to persuade a business leader
on a course of action, one needs to emphasize how the desired action
will enhance economic opportunities for the enterprise or industry (or
minimize the economic losses that are likely to be incurred by the
enterprise or industry.) In
order to persuade a government leader on a course of action, one needs
to emphasize how the desired action will strengthen political support
for a policy outcome favored by the leader involved.
In order to persuade a public interest advocate on a course of
action, it is necessary to emphasize how the desired policy action will
lead to increased public awareness and/or support for the desired cause.
In summary, business,
government and interest groups are necessary for the smooth functioning
of society. Both private and public goods and services are necessary for
society to function and achieve the well being of its members.
All three therefore often play a role in the trade policy
decision-making process, and commercial diplomats must be able to
understand the contrasting missions, objectives, motivations and values
of leaders in government, business, and interest groups.
The Political Market Place
By its very nature,
policy actions by governments are the result of a political process, in
which actors in all three spheres of society – business, government
and public interest groups, seek to shape the outcome. There is no way
other than politics by which the government can make decisions on policy
goals and government programs. This is true regardless of the political
philosophy and the political organization of a country. Even dictators
need bureaucracies to administer the government, and all decisions
within such bureaucracies involve politics.
In any political
process, all actors impacted by a government decision will seek to
influence the outcome through persuasion and the exercise of political
influence. Some have likened the process to a political market place,
within which advocates for alternative public policy goals and public
goods compete for political support among the relevant decision makers.
Everyone who wants to influence the outcome of a policy decision or the
procurement of a public good has to allocate political capital to that
objective, and policy goals or public goods that receive the most
political capital are adopted by the government.
The advocacy tools used by commercial diplomats to advance a particular organization or country’s interests can be seen as the means for participating in the political market place for policies and programs. Effective management of the relationships among government, business and public interest groups is essential for commercial diplomacy in achieving success in the political market place in influencing government policies and programs.
Commercial Diplomacy and Managing
involves the application of the tools of diplomacy to policy issues that
affect international trade and investment, or to policy conflicts
created by international trade and investment. The tools of commercial
diplomacy include operational documents such as briefing memos, advocacy
letters, policy white papers, press releases and public testimony. It
also includes consultations, negotiations, public speaking, and oral
briefings. Commercial diplomacy requires analytical skills in economics,
politics, law, public policy, and public relations.
targets all policy measures that affect the flow of goods, services,
information, people and capital across national and regional borders.
Policy measures addressed by commercial diplomacy include not
only measures at the border such tariffs, quotas and visas, but also
internal regulatory measures in policy areas such as labor standards,
environmental issues, health and safety matters and competition policy.
Today’s international conflicts and issues are related to how
different nations view each other’s use of subsidies, industrial
policies, industry standards, intellectual property practices and laws
and similar issues. These
regulatory issues are often deeply embedded in a country’s public
policy goals in sectors such as telecommunications, transportation,
pharmaceuticals and medical equipment. The modern day treatment of trade
policy thus goes far beyond the landing dock for imported goods and well
into the heart of he institutional, regulatory machinery of nations.
In today’s rapidly
converging world economy, commercial diplomacy is an activity that is
essential to the smooth functioning of economic activity and the
resolution of policy conflicts among nations. International trade is
well over 40 percent of the world’s gross domestic product, and the
sales of the foreign affiliates of corporations have exceeded that of
world exports by 90 percent. In light of this high degree of economic
interdependence, policy conflicts could prove highly disruptive. By the
same token, achievement of desired public policy goals requires an
increasing degree of cooperation on social issues such as the
environment and health.
Commercial diplomacy makes an important contribution to continued improvements in international trade, foreign direct investment, and solutions to international non-market conflicts. These improvements are contributing to the achievement of world economic development.
The Commercial Diplomat
The commercial diplomat
is a professional skilled in advancing the interests of an organization
in international trade and investment-related policy issues, in
developing agreements on international commercial issues, and in
resolving policy conflicts among nations over commercial issues.
Commercial diplomats can acts as representatives of business,
government, or an interest group. Practitioners of many
professions—lawyers, economists, political analysts, accountants—all
deal with some commercial diplomacy activities, but not on an integrated
basis. The commercial diplomat devotes his or her energies to the
integration of all of these areas of knowledge to address policy issues
that affect international commerce. Although commercial diplomacy
activity has existed from the earliest time of trade, only in the last
ten years has it been recognized that this field requires professionals
who have received education and training specific to the field. Prior to
this time, commercial diplomats learned their skills on the job. Today,
however, professional training focused on the requirements of commercial
diplomacy is finally being developed.
In fact, the policy process works best when all three sectors
field representatives with good commercial diplomacy skills.
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