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    Business Advocacy: Setting Strategies that Influence Trade Policy

     

     
     
    © International Trade Centre, International Trade Forum - Issue 3/2002

    Businesses in developing countries, not just developed ones, have been able to advocate successfully to improve their competitive position in international markets. This article provides real-life examples and a road map to help businesses shape effective advocacy strategies.

    Business advocacy in trade policy comprises a range of different activities. The following examples show how a "strategic" effort by companies and industry associations can lead to results affecting international trade:

    • The Brazilian Bar's Committee on the General Agreement on Tariffs and Trade was able to influence the Uruguay Round negotiations on trade in legal services by providing intellectual leadership in the debate on the issue and coordinating with other bar associations within MERCOSUR, the South American common market involving Argentina, Brazil, Paraguay and Uruguay.
    • A leading international auditing firm significantly contributed to the brainstorming process preceding the liberalization of trade in accountancy and consultancy services as a result of the Uruguay Round. It also helped fund the work of various private and public bodies worldwide to promote liberalized trade in these services.
    • The Ceylon Chamber of Commerce is involved in monitoring trade policy development of interest to Sri Lanka's exporting companies.
    • A New York-based photo supplies manufacturer gained United States Government support to press for Japan to remove alleged anti-competitive restrictions on film sales, a conflict that reached the WTO dispute settlement body.
    • A small cosmetics producer in Jordan was able to obtain reduced import tariffs on its inputs when it complained to the Jordanian High Office dealing with such matters.
    • The Canadian Dehydrators Association (CDA), operated by 30 firms that export quality feed products for livestock, obtained lower tariff barriers in several countries in Asia and Africa by arguing that CDA's products were necessary for the local livestock industry that intended to export quality meat. To put the point across, the CDA director regularly visited ministers of the countries concerned to present them with the evidence and arguments. The material was presented on a computer diskette, ready for internal use. The ministries used the research in internal government debates on trade policy reforms. The CDA representative would also give presentations to local livestock producers to mobilize their support for tariff reduction. In the event, several countries unilaterally lowered their import tariffs on CDA exports.


    So business advocacy and action to influence trade policy play an important role in most economies - and work. We should not assume that smaller firms are deprived of options to influence the international trade situation. And business advocacy can improve the competitive position of exporters in foreign markets.

    The business-government relationship is of particular relevance now that multilateral trade negotiations, decided at Doha in November 2001, are under way. Obviously, business has to play a role in working out trade strategies and government negotiators need to be in permanent contact with business representatives during the whole negotiating process.

    Advocacy objectives

    Although the activities to achieve them vary, the objectives for advocacy in trade policy of businesses can be classed in the following three categories.

    • Improved competitive position in foreign markets. Firms often push for improved access to foreign markets and support regulations that improve their competitive position in those markets (e.g., rules for the protection of intellectual property rights or mutual recognition of standards). Companies can use direct advocacy abroad, as with the case of the Canadian Dehydrators Association, or request government-sponsored efforts.
    • "Shelter". Companies often lobby for trade policies that protect them from foreign competitors through tariffs, quotas and other protective measures (such as special privileges and government support). WTO recognizes the need for protection through tariffs in certain cases, such as support to an "infant industry", and it allows more generous treatment for countries in early stages of economic development. But companies should note that, over time, WTO rules are becoming more stringent towards these shelter strategies that protect from competition.
    • Defence to limit pressure of other groups. Industry groups may decide to engage in business advocacy to limit or counter-balance the efforts of other interest groups. Firms that are adversely affected can usually present a more effective case as a coalition.


    Questions to shape advocacy strategy

    This leads us to the questions: how can companies and trade associations in developing countries use business advocacy? How can they identify and define their objectives? Who should initiate and who should support the advocacy effort?

    There can obviously be no unique recipe for strategy formulation that guarantees success. Experience shows that it is useful to identify the basic options available.

    • In what areas of trade advocacy are you interested? Is a "shelter strategy" realistic given your country's WTO commitments? What kind of support should you be aiming for? How can access to main export markets be improved? How does the government arbitrate between conflicting interests?
    • How can you build coalitions? Should a specific company, group of companies or larger industry association carry out advocacy? How will the decision alter the campaign objectives, resources and access? Who are other potential coalition members inside and outside the country? What interest groups are likely to oppose your objectives? How can you turn opponents into allies? What should be the major message to your government? What data and analysis do you need to make arguments credible? What resources do you need?


    Actors in trade policy-making

    Apart from business groups, there are several actors in trade policy-making. At the last count, there were more than 35,000 trade and professional associations active in international forums. They range from public relations to labour unions and non-governmental organizations (NGOs).

    • In addition to national chambers of commerce, the Paris-based International Chamber of Commerce, which links thousands of companies and business associations, plays a relatively active role in the WTO network.
    • An increasing number of firms consider public relations as a good investment. Some have developed specialized skills in business advocacy. More and more are establishing themselves in Geneva in addition to Washington and Brussels because of the increasing regulatory role of the WTO.
    • Labour unions are very much part of the trade policy scene, while the goals of professional associations in many ways resemble those of the unions. Many NGOs active in social issues work relatively quietly, while others are more confrontational, but all NGOs are inclined to act on global issues as a complement to activities at the national level.


    Business advocates need to be aware of the standpoints of each of these groups in seeking to broaden their impact on trade policy.

    Interaction with government

    How governments interact with the private sector varies greatly, depending on political systems and history.

    In India, the Ministry of Commerce is assisted in trade policy formulation by advisory bodies participating in the Board of Trade.

    Several sectoral institutes dealing with packaging, diamonds, textiles and chemicals concentrate on industry-specific issues. Statutory commodity boards advise on trade policies for tea, coffee, rubber, spices and tobacco. Industry associations, academic institutions and think tanks also contribute to policy proposals.

    Mexico made a reputation for innovation during the negotiations for the 1994 North American Free Trade Agreement (NAFTA) with its invitation to business to install itself in the "room next door". Business representatives were consulted continually during the negotiating rounds and asked to assess proposals. Nothing about the system was formally enshrined in legislation, but it proved so successful that the "room next door" became a feature of its later trade negotiations.

    Guatemala, by contrast, set up a national commission with a coordinator to get business feedback on its negotiations for a free trade zone with Mexico in Central America. This system, too, has been used in other negotiations.

    (More details of the Mexican and Guatemalan approaches are available from the World Tr@de Net web site, here and here respectively.)

    In Thailand, the Joint Public-Private Consultative Committee constitutes the main formal government-business forum. It deals extensively with trade issues, is chaired by the Prime Minister and includes several cabinet ministers. As a forum for discussion and coalition-building, it is an important player in the trade formation process.

    In Morocco, the National Foreign Trade Council, comprising 30 government officials and 36 business representatives, is responsible for preparing advisory opinions on foreign trade issues and new legislative proposals.

    However, the formal institutional mechanisms that are found in many countries to encourage public participation in trade policy-making may not reflect the reality of how policy is actually made. What matters is: if and how different interests are balanced, and whether all major interest groups have access to the system.

    Checklist for business

    How can business better contribute to trade policy-making?

    No model of business-government interaction can be universally followed in every developing country. The best way of assessing how to intensify the contribution of business to trade policy-making is to identify the major problem areas. Work through a series of questions, such as:

    • Is your industry association or company active enough in:
      • analysing trade policy issues, including developments in the WTO;
      • maintaining contacts and providing intellectual inputs into trade policy decisions;
      • ensuring leadership and giving administrative support to the trade policy debate;
      • participating actively and competently in formal consultations on trade policy matters;
      • improving access to decision-makers through informal initiatives; and
      • speaking out for or against policy proposals that are likely to affect your industry and corporate performance?


    • Do you fully utilize existing opportunities to make representations to your government on your trade policy concerns? In particular:
      • Are your representations to government bodies clearly focused and positioned?
      • Are your arguments well-structured and supported by convincing evidence?
      • Do the people making the representations have the necessary status and skills to optimize influence?
      • Is it necessary to press for improved access?


    • Is your association or company properly organized for business advocacy? For example:
      • Is there a special unit in charge of monitoring trade policy developments of interest in export marketing?
      • Does the unit report directly to the person in charge of the organization?
      • What is the degree of staff empowerment in the unit?
      • Do you have the full support of the top management for your activities?
      • Are the advocacy activities properly controlled and evaluated, and how is their success measured?
      • How is the staff contribution evaluated and what is the link between that evaluation and motivation schemes?
      • Are there sufficient resources attributed to advocacy activities?


    • Do you exploit synergies among the various institutions that conduct business advocacy activities?
      • With those that share similar concerns, such as NGOs, trade unions, specific government departments?
      • With academic institutions and research facilities?
      • With political parties and other interest groups?


    • Do you network internationally to make the global web of trade policy actors work for you?
      • Through interest groups in other countries?
      • Through joint ventures within international institutions with which you are involved?
      • Do you know how to benefit from the assistance of international organizations such as ITC, UNCTAD, WTO, World Bank and other agencies?




    Four lessons

    For business advocacy to work, submissions must be intellectually coherent, demonstrate a public interest dimension and be in tune with prevailing government trade policy. Submissions should specify the "added value" of a strengthened public interest in the proposed trade policy reform. Indeed, decision-makers are unlikely to concede advantage to vested interests and leave themselves open to easi-ly mounted criticism in the mass media or in political debate.

    Lessons drawn from case studies and discussions with business advocacy experts suggest four recommendations for companies and associations that want to make better use of this tool for trade policy development:

    • Focus on a limited number of well-defined trade policy issues.
    • Maintain a formalized process of strategy formulation in relation to the Doha Development Agenda and encourage the participation of external experts to ensure sound professional judgement and objectivity.
    • Don't hesitate to revise your advocacy strategy in the light of new experiences and negotiating opportunities.
    • Make sure your strategies effectively guide your advocacy. Most issues affect the public at large through their effect on consumption, employment and social welfare. So far as possible, make your strategy public. Build the widest possible support for your representations.


    Tips for advocacy

    We can conclude with some practical tips for business advocacy in trade negotiations.

    • Follow the calendar of the trade negotiations, e.g. through the World Tr@de Net Newsletter (available from ITC's web site).
    • Coordinate your position with that of the business groups in your region. The World Tr@de Net web pages present summaries of progress in the multilateral trade negotiations and review the negotiating positions of major trading nations.
    • Explore reciprocity in international business-to-business relations to gain support for your interests.
    • Try to understand the tensions inside government.
    • Promote issues management through industry associations.





    Bulgaria: competitiveness requires effective dialogue

    There are patterns of ineffective dialogue and effective dialogue. Ineffective dialogue is characterized by individual companies approaching government with ad hoc complaints involving problems at the operational level. Effective dialogue is characterized by industry-wide approaches with a comprehensive vision at the strategy level.

    Ineffective dialogue focuses on concessions rather than co-responsibility. Ineffective dialogue produces "laundry lists" of undifferentiated complaints based on anecdotal evidence. Effective dialogue, however, approaches the government with a few key priorities based on good data, sound analysis, concrete proposals and estimates of the costs and benefi ts of implementation.

    Ineffective dialogue is characterized by business, labour and government being on opposite sides of the table. Effective dialogue is characterized by a realization that they are on the same side and facing competitors "out there" and not amongst each other.

    One way to promote effective national and regional dialogue regarding competitiveness is through the creation of a National Competitiveness Council. Such a council, typically composed of representatives from the public, private, academic and labour sectors, works to analyse internal and external obstacles to the development of national competitiveness and to present plans on how to resolve these obstacles. The council works independently of any one sector to provide objective views on the state of competitiveness within a country.

    The council can provide a catalyst for genuine dialogue between stakeholders of the competitiveness process. It can also provide a base for regionally centred groups in order to promote a stronger voice in the dialogue process.

    Source: Extract from the Bulgarian team paper on Creating Value: Moving from Comparative to Competitive Advantage, presented at the Executive Forum 2002.




    Michel M. Kostecki (Mkostecki@compuserve.com) is Director of the Enterprise Institute, University of Neuchâtel, Switzerland and a World Tr@de Net consultant. This article is based on a study he conducted for ITC on business advocacy and trade policy-making, to be published shortly.


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