Analyzing the Politics of a Trader

The Political Marketplace

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 the government adopts policy goals or public goods that receive the most political capital.
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. This sub module shows how the effective management of the relationships among government, business and public interest groups can contribute to success in the political market place for government policies and programs.

CHAPTER ONE

The Political Challenge of Commercial Diplomacy in an Interdependent World

Trade policy today covers a wide range of domestic policies, not just tariffs. Increasingly, the formulation of trade policy affects policies in areas such as the regulation of banking or accounting; domestic subsidies benefiting farmers; health, safety and environmental standards; competition policy; and intellectual property laws. This has lead to the involvement of a much broader and diverse range of interest groups in trade policy decisions. Decisions in these areas are often highly contested in domestic politics, and as they have become the focus of trade negotiations, trade policy itself has become more political. Trade officials must understand both their own domestic politics and the politics that influence trade decisions and negotiating postures in other countries. Learning to navigate the diverse political and governmental systems in foreign countries is critical to the success of a Commercial Diplomat.

The politics of negotiating tariff reductions was never easy, but was limited to relatively few national players, and to only a few key ministries within the executive branches of these countries. In the world up to, and including the Kennedy Round of multilateral trade negotiations in the early 1960’s, decisions on tariff levels were made by a relatively small number of officials in Trade, Finance, Commerce, and Foreign Ministries. Regulators and other domestic agencies and institutions were seldom involved. Moreover, only a small number of business organizations and labor unions paid much attention to the negotiations, and sought to influence decisions through political activity.This began to change with the expansion of trade agenda in the 1970’s to standards and domestic subsidies, and in the 80’s to services, agricultural policies, and intellectual property. International trade negotiations now involve a larger number of more diverse players, and the politics of trade and politics of domestic policy have become more entangled and interdependent. As negotiations range beyond tariffs, countries increasingly find themselves with conflicted policies within their own administrations. Actors within the domestic sphere that now contribute to the formulation of trade policy include labor ministries, environmental departments, central banks, finance ministries, legislatures, sub-national levels of government, regulatory and standard-setting bodies, and of course, the public through the intervention of a multitude of interest groups, advocacy groups, NGO’s, experts, pundits, the media, and Internet newsgroups. Governments must simultaneously negotiate trade agreements domestically and externally, internally with other government departments and with private entities such as corporations, industry associations, issue-oriented public advocacy organizations, and externally with nations and groups of nations. If anything, the domestic negotiation has become the more difficult, sensitive, and important of the two negotiations.In this manual we attempt to clarify the parameters of the political process, focusing on four main groups of players: trade negotiators and officials; legislators; business people; and NGO’s. We could have included many other players, such as the media, regulators, and sub-national government officials, and indeed we mention these. We also divide the political process into a domestic and an international process. Since trade, by definition, involves economic activity with a foreign entity of some sort, trade actors must be prepared to deal with both domestic and foreign publics and decision-makers. Finally, we distinguish between formal state-to-state trade relations, and the more informal (but still highly organized) processes of brokering, influencing, and shaping trade policy. This manual treats state-to-state trade relations as the end product of a series of interactions among domestic and foreign, executive and legislative, official and unofficial actors.

Implication Of Wide Dispersion Of Responsibility For Policies Covered By TradeAs trade officials are viewed as having the lead role in international trade negotiations, they are expected to take the lead not only on the traditional trade issues, such as tariffs and customs, but to also co-manage the politics of domestic policies with other government departments and agencies (e.g. agriculture, bank regulators, intellectual property enforcement agencies, standards making bodies). This is doubly difficult, because trade officials have to become involved in political arenas in which they are less familiar, but they must lead negotiations in areas where they do not have the domestic decision-making power.

The political challenge for a Commercial Diplomat is to build political support for policy decisions that will advance the interests of the organization he or she represents. Decisions on trade-related policy measures get made in a political environment, where everyone affected by policy decisions seeks to influence the outcome through advocacy, coalition building, and other political activity. To obtain a desired policy decision, a Commercial Diplomat must build a winning coalition among all individuals and groups in society capable of influencing desired policy decisions or negotiating positions. This is constituency politics built around commercial and group interests, which most of the time needs to be viewed independently of party politics. There are times, of course, where decisions come down to party politics and political ideology, but more often than not constituency politics brings together politicians with different political and ideological views.

The purpose of political analysis is to obtain the information needed to influence the political decision-making process. In order to obtain a desired policy decision or negotiating outcome, the Commercial Diplomats must identify all individuals and groups in society who may have an interest and capacity to influence decisions. The Commercial Diplomat must also acquire information about their views and positions on the issues involved, their underlying interests and concerns, the policy outcomes they are pursuing and their means to influence the actions of decision-makers. In order to create a political coalition powerful enough to overcome opposition to the desired policy decisions, the Commercial Diplomat must bring together not only groups and individuals actively involved in seeking to influence a decision, but also those who have a potential interest and could help influence the outcome. It may only be necessary to bring the issue to their attention, or to adjust the desired policy outcome to accommodate their interests. The successful Commercial Diplomat also seeks to weaken the opposition of those opposed to the desired policy outcome. In order to weaken the opposition, the Commercial Diplomat may need to accommodate some of their interests, or to persuade them that they stand more to lose by opposition than by obtaining concessions in other areas. Political analysis thus serves to provide the information necessary for successful political strategy. Political intelligence about personal relationships between stakeholders and key decision-makers, or the ability of particular groups to mobilize voters or to raise campaign contributions for legislative elections provides the basis for assessing the potential political influence of supporters and opponents. Information about interests and positions provides the basis for shaping the message and for fine-tuning the details of a policy decision or negotiating position to make it as attractive as possible to potential supporters and or to opponents who might be persuaded to reduce their opposition.

For purposes of political analysis it is useful to think of all individuals and groups in society whose interests are affected by trade policy decisions and trade negotiations and who have the ability to influence such decisions as stakeholders.Stakeholders may include:

Definition of a stakeholder - Any individual, group, organization, or governmental entity that has an interest (stake) and the ability to influence the outcome of a particular policy debate, regulatory reform, legislative initiative, or negotiating position.

A good example of a group that took the negotiators of the Canada-US Free Trade Agreement (CFTA) by surprise was a group of Canadian women who felt that the CFTA might jeopardize their health benefits, and in particular, their freedom to choose abortion, in light of the growing anti-abortion movement in the United States. These women, urged on by anti-trade and anti-globalization activists, forced Canadian politicians and trade negotiators to spend an inordinate amount of time explaining why the CFTA would not affect Canadian health benefits in any way, shape or form, including the right to choose. The relative influence that each of these stakeholder groups can wield will vary enormously depending on the political and economic context in which the trade negotiation or trade matter is being handled. In a rapidly growing, healthy economic environment, labor groups and unions will have much less leverage on negotiations than in a depressed, slow-growth period. Likewise, environmentalists will have more leverage in negotiations between a country with high-standards and a country with low standards, than between two countries with equivalent, if different, standards. The political and ideological coloration of the administration in power will also tend to support or weaken the standing of specific groups.

CHAPTER FOUR

Understanding the Positions, Objectives, Interests, and Motivations of Stakeholders

If a trade official or Commercial Diplomat is going to try to understand, predict, influence, neutralize or otherwise affect the politics of trade, then he or she must spend some time becoming familiar with the goals, motivations, interests and strategies utilized by the other stakeholders, concentrating, of course, on those that seem to have the most impact on issues that are of primary concern to the official’s country.Most stakeholders who are actively involved in seeking to influence particular policy decisions or negotiating positions of their government have publicly announced positions on the issues involved. These positions are made public through press releases, white papers and other statements produced by the group, and in the day of the Internet, most groups maintain websites where such statements are posted. Such statements may often include not only the position of the organization on the issue, but also what the organization hopes to achieve through the desired action (i.e. their objective). In other cases their objective has to be inferred from the position.In addition to understanding a stakeholder’s position (the policy action desired by the stakeholder) and the stakeholder’s objective (what the stakeholder hopes to achieve through the desired policy action), it is important to understand the stakeholder’s interests and motivations. A position may be only one way of many different policy actions that would satisfy the real interests of the organization. In addition to the interests of the organization, the individual decision makers in the organization may have private motivations that transcend the interests of the organization. The head of an association or non-governmental group, for example, may have a private interest in attracting new dues paying members not only because it would expand the influence the group, but because it would enhance the leader’s salary and social stature. Understanding interests and motivations is important because it offers many new avenues for attracting a stakeholder to join a coalition, or for understanding why a stakeholder may decline offers that are in line with the organization’s publicly stated positions.One of the most important things to remember therefore is that a stakeholder group’s trade objective may be completely tangential to their ultimate goal. Trade policy may simply be a vehicle for achieving ends that are totally unrelated to trade, economic policy, or general welfare. So, unlike the trade official, who would usually be expected to keep his or her eyes firmly on the trade objective, other players may be pursuing a variety of goals totally unrelated to trade, but using trade as a tool to advance their own domestic agenda. Nevertheless, they are on the field, and therefore, they cannot be ignored as irrelevant to the process of winning the game.

One of the critical things that a Commercial Diplomat must understand is that government officials measure their success very differently from business managers, and that corporate managers measure their success differently from the managers of the business associations the corporations belong to. Similarly journalists measure their success differently from politicians or academics.Success in a business corporation is measured by success in enhancing the corporation’s revenues and profits, and its market share. Success in the government is measured by the ability to obtain a decision on a desired policy measure, and that usually means getting a large number of individuals, or in some cases some very important individuals, to agree on the measure. Managers of business associations measure success by satisfying not only the needs of present members, but also prospective members. Their interests in the profits of the industry they represent are only derivative, insofar the policy actions desired by their members is aimed at their collective profits. Politicians are primarily motivated by winning elections, and generally their advocacy of particular policies is explained by the views of their most influential constituencies. Journalists are of course interested in good reporting, but ultimately the test is whether the stories they write attract readers and subscribers. Academics are of course interested in their reputation, and ultimately their ability to attract consulting contracts. The following matrix demonstrates the complexity of interests and motivations that one might expect to find in the context of a typical trade negotiation in the United States.

Complex calculations of personal and organizational gain or loss are only one part of the psychological and political nexus in which the trade diplomat must operate. Inter-agency rivalries, ideological differences between political parties, competition for federal resources among states all add to the brew.Needless to say, a great deal of “horse trading” has always occurred in the political process surrounding the negotiation and approval of any trade agreement. What has recently changed is the diversity of tools and strategies available to the activist or official wishing to affect the outcome.

1This document is derived from the original manual titled "Analyzing and Managing the Politics of Trade" by Colleen Morton and Geza Feketekuty.