Analyzing the Issues
Analyzing Trade-Related Domestic Policy Issues

Commercial Diplomacy focuses on the resolution of trade-related policy issues. Any policy or government action can become a trade-related policy issue if it affects 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 broad, ranging from traditional trade policy tools such as tariffs and quotas to principally domestic policies such as health and environmental standards, agricultural support policies, banking regulations, and laws on bribery and corruption. Commercial Diplomats must resolve these issues through analysis, advocacy, political action, international negotiation and dispute settlement. Trade policy generally involves state-to-state or government-to-government bargaining and negotiation. Domestic policy actors and institutions play important roles in the policy process affecting trade relations, too. The purpose of this note is to provide a rigorous analytical framework for analyzing the issues that become the focus of Commercial Diplomacy. The thorough analysis of a trade-related policy gives Commercial Diplomats a solid basis for developing a strategy to successfully address the issue.

Traditionally, trade policy was all about tariffs and quotas, and these policy instruments remain an important, though much less dominant, aspect of Commercial Diplomacy. Increasingly, however, the government policies that are the subject of Commercial Diplomacy today are aimed at a wide range of domestic social objectives such as health, safety, environment, consumer protection, stability of infrastructure networks, and so on. The policy issues that arise with respect to tariffs and quotas are relatively simple compared to the policy issues that arise with respect to complex domestic regulations. The policy issue with respect to tariff and quota decisions usually comes down to a trade off between the protection of certain domestic economic activities from international competition and the economic efficiencies and new growth opportunities that can be derived from increased trade. It also involves a redistribution of domestic income between shareholders and workers in protected industries on one hand and consumers as a whole and producers in export-related industries on the other hand.  

DOMESTIC POLICY ISSUES –- QUESTIONS TO ASK

- What policy areas would be affected by any actions to solve the trade problem?
- What specific policy objectives would be impacted?
- How do policy objectives relate to trade rules?
- What are objective performance measures?
- What alternative policy measures are available to achieve the desired policy objectives?
- What combination of measures would solve the trade problem and preserve other legitimate policy objectives?


Analyzing Impacts on Related Policies

When the policy issues at stake involve domestic regulations, the Commercial Diplomat's challenge is to identify alternative policy actions that will achieve the same social benefits as existing policy instruments, while reducing or eliminating adverse effects on international commerce. This can be accomplished by identifying the social objectives served by the targeted regulation and describing how policy action might achieve the same objective without impeding trade.

Identifying the desired social objectives may require extensive legal analysis as well as an interactive dialogue with regulators. We need to know what legislators had in mind when drafting the laws underlying the regulations involved, and we need to know how the perception of the social objectives may have evolved over time. Understanding how the regulation in question achieves the desired social objectives, and how alternative policy actions could be crafted to meet the desired objective may require the collection of a considerable amount of technical or scientific knowledge. For example, a range of issues in trade policy involving food and agriculture fall into the area of phytosanitary standards or environmental regulation. The trade analyst may need to draw on expertise related to biology, chemistry or physics in order to analyze the factors underlying a regulatory issue.

The key challenge in analyzing trade related domestic policy issues involves identifying other potential policy options that might achieve the same policy objectives through other means. The policy analyst's job is to identify a range of possible (and feasible) alternatives and then to assess the impacts each is likely to have on other policies.

To summarize, officials responsible for implementing the initiative need to make the case that:

-proposed changes in the policy measures at issue are necessary to achieve the desired trade policy objective,
-the proposed changes will not undermine an important social objective of the government, and
-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.

All of these factors suggest that one of the central tasks of the effective Commercial Diplomat is to analyze trade-related policy initiatives and provide a thorough and informed assessment of the policy maker's options and what will be necessary to achieve his or her desired objectives for any recommended alternative. This is the heart of policy analysis.

TRADE-RELATED POLICY AREAS – QUESTIONS TO ASK

- What policy areas would be affected by any actions to solve the trade problem?
- What specific policy objectives would be affected?
- How do policy objectives relate to trade rules?
- What are objective performance measures?
- What alternative policy measures are available to achieve the desired policy objective?
- What combination of measures would solve the trade problem and preserve other legitimate policy objectives?

This document is derived from the original article titled Policy Analysis co-authored by Leslie Eliason and Geza Feketekuty. The original article can be found at: HYPERLINK "http://www.commercialdiplomacy.org"