23 August 2020
Business, government must engage on international trade policy
Originally published in The Australian.
In a world reeling from a pandemic, businesses are under such immense pressures that now hardly feels like a polite moment to be telling them they need to re-engage with international trade policy. Unfortunately, they do.
It’s tempting to assume the international trade uncertainty paralysing investment, disrupting supply chains and killing jobs is a temporary anomaly of the US-China trade war, Donald Trump, and a World Trade Organisation (WTO) paralysed by the Trump administration’s procedural blockade of the WTO Appellate Body. If only.
As I argued in my recent analysis for the Lowy Institute, the trade war is just one of the problems with international trade, the WTO Appellate Body crisis is just one of the areas where the WTO is bleeding, and the WTO is just one symptom of a global trading system besieged.
Business has largely given up on the WTO and its rules as a source of solutions. The organisation has struggled to negotiate new rules or even enforce existing ones.
The global consensus, based on the underlying wisdom of sacrificing some sovereign policy space to allow predictable, rules-based trade, has never been weaker.
Done well, trade rules can serve to steer the rampaging bulls of international competition toward sustainable, inclusive growth.
Done poorly, the results can be monopolistic, anti-consumer and rent-seeking, locking new players out of markets and shielding established players from any challenge to outmoded business practices, negligent practices or substandard products. The difference lies as much in who is talking to government as who is running it.
There is a chasm between a Department of Foreign Affairs and Trade negotiator drafting the e-commerce chapter of the EU-Australia Agreement, and a small business owner trying to sell design services online to customers in Estonia. Only by closing that gap can trade policy approach its potential, and governments cannot do it alone.
A common myth is that trade negotiators begin each day with detailed marching orders from slick corporate lobbyists representing all the major multinationals. Frankly, that level of engagement would be a nice change.
The reality is that creating a pipeline of timely, candid and usable business input across the full spectrum of trade policy work has eluded governments.
Free trade agreement negotiations, being higher profile, are the easiest part of trade policy work on which to solicit business views, but results are still middling.
The Australia-UK FTA has, in half a year, received just 16 submissions. Other consultations did better, but even the 100 and 150 submissions received by EU and China negotiation consultations respectively can hardly be said to represent the sum total of potential views on such critical trading relationships.
Outside FTAs the situation is even bleaker.
Australian representatives at the WTO, in bilateral consultations with partners, and at our embassies around the world, often find themselves working with negligible or severely limited input from the business community.
Australia is fortunate to boast formidable international trade capability within its civil service. In the past decade alone, successive governments have completed FTAs with Japan, China, Korea and Peru, negotiated the Trans-Pacific Partnership, helped salvage it following US withdrawal, defeated big tobacco in two international disputes, and led from the front in virtually every WTO negotiation. Yet even supremely skilled public servants can only address the problems they know about.
Trade policy can feel regressive because the firms most impacted by the barriers it can create or fix are often least equipped to navigate them.
Large multinationals facing an unreasonable regulation or a border issue can throw lobbyists at it, sidestep it by altering their corporate structure or supply chain, or simply deploy economies of scale to trivialise its cost impact. Smaller exporters lack such options, and yet it is their voices most often missing from trade policy formulation.
Governments must do more heavy lifting on soliciting consistent engagement beyond the traditional players and familiar voices. From the minister on down, officials must better communicate how trade policy processes, beyond glitzy FTA signing ceremonies, can make a difference to businesses of every size and vocation.
Likewise, governments need to tell a more compelling story about the stability provided by the rules-based system, and how much that stability relies on consistent business engagement and vocal support.
But businesses and their representative bodies must get in the game. The rewards of trade policy engagement may be slow in coming, but the current global uncertainty and fracturing trading system illustrates the price of business absence.
Loath as Australians are to import cultural mores from the US, our businesses could learn from the American tradition of calling one’s congressman when faced with a problem.
In the often uncertain days ahead, I would encourage the Australian business community to invert Reagan’s nightmare. When faced with a trade challenge abroad, pick up the phone and say, “You’re from the government, and you’re here to help. Here’s my problem.” You might be pleasantly surprised.
Dmitry Grozoubinski is the executive director of the Geneva Trade Platform, a former Australian trade negotiator and founder of consultancy ExplainTrade. His paper on the WTO was published by the Lowy Institute.