This manual provides a conceptual framework for the analysis of a commercial issue, trade problem, or trade policy goal. After completing this module, the student will be able to:
Identify and define a commercial issue or trade problem and assess its relative importance.
Assess whether the trade policy framework, including domestic trade laws and/or international trade rules, can be used to address the problem.
Identify the commercial interests related to the problem.
Estimate the impact of the problem on a firm or industry's revenues, costs, profits, wages, and employment and growth prospects.
Estimate the domestic economic impact of the problem on prices, trade, production, productivity, wages, and consumer welfare using back-of-the-envelope calculations.
Identify the domestic policies related to and potentially impacted by the trade problem, as well as alternative policy measures available to achieve the domestic policy objectives.
Based on the above, identify the stakeholders and their interests in the problem, and the resulting domestic and international politics.
Determine the role of the media and public opinion in influencing the policy decisions.
Incorporate the resulting analysis of the issue into an effective, succinct Decision Memorandum.
Commercial Diplomacy is focused on the resolution of trade-related policy issues. Any policy or government action can become a trade-related policy issue if it impacts on international commerce, i.e., international trade and investment in goods and services. As a result of the globalization of economic activity, the range of issues that can become the subject of attention by Commercial Diplomats is quite wide, ranging from traditional trade policy tools such as tariffs and quotas to domestic policies such as health and environmental standards, agricultural support policies, banking regulations, and laws on bribery and corruption. Commercial Diplomats have the task of resolving such issues through analysis, advocacy, political action, international negotiation and dispute settlement. The purpose of this discussion is to set out a rigorous analytical framework for analyzing any of the issues that become the focus of Commercial Diplomacy.
How do Trade Related Policy Issues Become the Subject of Commercial Diplomacy?
Before exploring the analytical questions a Commercial Diplomat must ask, we should examine how a policy issue becomes the target of Commercial Diplomacy. The initial impetus, more often than not, comes from an enterprise or industry most directly affected by a policy action or government regulation. They can make a policy measure the focus of Commercial Diplomacy by raising it as a trade related policy issue with foreign decision makers, or by enlisting the advocacy support of lobbyists, politicians, legislators and home government officials. Of course, neither the
home government nor the foreign government will accept all trade related policy issues raised by enterprises as legitimate issue for government-to-government discussions or negotiations. In order to persuade government officials to involve themselves in any effort to address a trade related policy issue, Commercial Diplomats representing the enterprise have to be able to demonstrate (a) that the commercial problem they have identified is caused by an identifiable policy action, (b) that the impact of the measure on international commerce is substantial, and (c) that the policy action constitutes a violation of an international trade provision, or at a minimum, that the government could achieve its desired social objective through alternative measures that create less of a burden on international commerce.
Often, trade or investment problems identified by businessmen as trade-related policy issues turn out to be nothing more than a commercial issue, e.g., a lack of sales due to poor marketing or product design, a low level of demand by consumers, poor management or uncompetitive pricing. In order to persuade government officials to treat a commercial problem such as low export sales as a policy issue the business or industry seeking the change in policy needs to demonstrate that the low sales are the result of a policy action such as a burdensome regulation, rather than the result of commercial factors such as poor product design.
A Commercial Problem does not always require Policy Action
Even where a policy measure can be identified as the source of a commercial problem, the commercial impact may be too small to warrant policy advocacy or policy action by officials. Taking time out to investigate an issue, to advocate policy changes and to build the consensus necessary to implement changes can be costly in human resources. Therefore, someone from the private sector who wants to persuade officials to take time out from their busy schedule to investigate a policy issue and if necessary to become an advocate for a change in policy will need to demonstrate why the issue is important enough to warrant a commitment of time and political effort.
Establishment of Legal/Policy Basis
Third, even if a current policy can be shown to have an undesirable impact on international commerce, there may not be a sufficient rationale for changing policy. The targeted policy action could be fully consistent with international rules and there may not be a viable alternative for pursuing a legitimate social objective. In such cases, even if the policy can be shown to have an important impact on international commerce, there may not be sufficient rationale for changing the measure. Advocates for policy change therefore have to establish either a legal and/or a policy basis for such a change.
The Role of NGOs
The impetus for addressing a policy issue through channels of Commercial Diplomacy can also come from an issue oriented nongovernmental organization that believes a trade related action is adversely affecting the achievement of a key social objective. In order to persuade trade officials to initiate discussions or negotiations on such an issue, representatives of the organization have to make the case that the trade measure has an identifiable, adverse impact on a legitimate social objective. In other cases, the nongovernmental organization may wish to persuade trade officials that a trade action, such as the imposition of an import ban on certain goods and services is necessary to achieve a desired social objective.
Foreign/Home Government Initiative
Lastly, the impetus for a change in a trade-related policy can come from either a foreign government or the home government itself. The foreign government may pursue such an initiative as part to reduce barriers to the country's exports. The home government may pursue such an initiative to improve the economic efficiency of its economy or to reduce consumer prices. Officials responsible for implementing the initiative will need to make the case that proposed changes in the policy measures at issue are necessary to achieve the desired trade policy objective, that the proposed changes will not undermine an important social objective of the government, and that a change in the policy can also be justified in terms of good governance and the more effective pursuit of the relevant non-trade objectives.
Analyzing a Trade Policy Issue
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This document is derived from the original article titled A Commercial Diplomat's Brief Guide to Analyzing a Trade Issue authored by Geza Feketekuty. The original article can be found at: www.commercialdiplomacy.org