Alan Beattie, the World Trade Editor for the Financial Times has reviewed Global Trade Advocate. Here’s a link to the non-subscription page version of the review (also over the fold). To make it easier for you to see what Alan is talking about when he mentions the ‘huge rewards’ from trade advocacy described in GTA, I’ve cut the price of the book. I hope you enjoy it.
Beneath the bureaucracy lie rich rewards
By Alan Beattie
Published, Financial Times: September 25 2005 19:30
Lobbying an inter national club made up of 148 fractious governments and suffused with brain-numbing bureaucratic jargon is no one’s idea of fun. But companies and industries that have learnt to press their case at the World Trade Organisation have discovered their efforts can be remarkably fruitful.
The WTO has been in existence for 10 years; its predecessor, the General Agreement on Tariffs and Trade, was around from 1948. Business lobbying was instrumental in getting a succession of trade “rounds” — multilateral agreements to cut import tariffs across a range of sectors — completed since Gatt was founded.
More recently, business advocacy for the current “Doha round” of talks, named after the Qatari capital where it was launched in 2001, has been rather weak. And some experts argue that apart from general lobbying for more openness in trade, businesses are missing the opportunities the WTO’s quasi-judicial dispute settlement system affords them to press cases of particular interest.
One such advocate is Peter Gallagher. Formerly a senior Australian trade official, he makes a living advising companies and business associations on how to get their way in the world trading system.
In a perfect world — as designed by a trade economist such as Mr Gallagher — he would not have to exist. Countries would simply realise it was in their interests unilaterally to liberalise, and do so. Imports such as Chinese textiles would be welcomed and exports, rather than being regarded as a goal in themselves, would correctly be seen as the necessary evil required to pay for them.
In such a paradise, the WTO, trade ministries and the entire apparatus of trade diplomacy, including the reporters that cover it, would cease to exist. In the real world, the trading system is run under the precepts of “mercantilism” — the idea that exports in themselves are a source of strength. Countries regard cutting import tariffs to allow in goods and services from overseas as a concession, not a gain.
It is in such a world that Mr Gallagher’s advice, which he has published as an e‑book, Global Trade Advocate, is valuable. His argument is that compared with other forms of lobbying, companies undervalue the returns possible from trade advocacy, most likely because of the arcane complexity of the system of making and implementing world trade rules. Moreover, unlike traditional lobbying, which generally involves getting a single government or regulator to change its mind, the international and intergovernmental nature of the WTO means persuading one’s own government to stick its diplomatic neck out on behalf of producers.
But the rewards can be huge. He comes armed with examples. The successful Brazilian legal challenge to the European Union’s sugar regime at the WTO, for example, could return as much as $494m (¬£276m) to Brazil itself and the same again to the world’s other sugar exporters. The Brazilian sugar industry and government had to put in a huge amount of work over a number of years to prepare for this and other legal challenges, including hiring experienced international lawyers, working with US-based environmental campaigners and in effect setting up a government-backed think-tank to support its trade advocacy. But the likely pay-off almost certainly dwarfs the cost.
Similarly, the Thai tuna industry, the third largest in the world, successfully halved an EU tariff of 24 per cent on 25,000 tonnes of its exports to the EU by using the WTO’s dispute settlement process, in an effort co-funded by the industry and the government.
Indeed, one of the idiosyncrasies of trade lobbying through the WTO is its legal dispute settlement system, including, if necessary, a judicial panel that rules on WTO law. The advantage is that it allows even the smallest country to take on the largest, as evinced by the recent case brought by the tiny Caribbean country of Antigua and Barbuda against US restrictions on online gambling.
The drawback is the slow and bureaucratic nature of the process: it can take nearly three years from initial complaint to implementation of the decision (which, in any case, only allows the wronged party to impose reciprocal trade sanctions, which a purist trade economist would say hurts mainly itself).
Bringing a legal case, or asking government to lobby during trade talks on behalf of a particular industry, requires careful and detailed preparation, and Mr Gallagher goes into some depth about the process of accumulating data, building business alliances to gain domestic support and approaching governments to take up the cause. Brazil has created a substantial industry in government-backed WTO advocacy that has helped put the country in a pivotal position in WTO negotiations.
A forthcoming book, Managing the Challenges of WTO Participation, edited by Mr Gallagher and others, provides 45 case studies of how companies, industries and governments have coped with the challenges of asserting themselves in the WTO, and emphasises the importance of communication between all interested parties at home before taking a fight into the inter national arena.
Frequently, one industry’s gain is another one’s loss even within the same country: witness the anger of the European retail industry at being outgunned by the relatively small, textile- producing lobby that recently persuaded the European Commission to re impose limits on Chinese garment imports.
Given the hybrid nature of the WTO — part intergovernmental negotiating forum, part court, occasionally arena for political posturing — a wide mix of skills is necessary to lobby effectively.
Good lawyers are essential, not least because the dispute settlement system is a relatively new part of the WTO apparatus and many new cases, such as the successful cases on sugar and cotton brought by Brazil, create fresh legal precedents that can immediately be exploited by other countries.
But lawyers are not enough. While cases are legally technical, they also require political sophistication, not least in understanding the importance of personal relationships among national delegations to the WTO.
From the public interest point of view there can be uncomfortable aspects to company lobbying within the WTO. The subterranean path of mercantilism does not always lead to the light of freer trade. Trade advocacy can be used to distort or even close off the channels of enterprise as well as open them.
One of Mr Gallagher’s own examples is that of the US pharmaceutical industry. Through an intensive lobbying and publicity effort over 10 years, the industry managed to get the international protection of patents and the wider issues of intellectual property rights admitted to WT O agreements, much to the disgust of many free market trade economists.
Mr Gallagher draws a distinction between “trade advocacy” — where a wide range of companies and interests presses for an opening of markets — and “trade lobbying” — where a narrower set pushes for specific interests for themselves. In reality, that distinction may be murky. Advocating for lower tariffs in a bilateral trade deal between two countries, for example, may divert trade from third countries and undermine efforts at wider liberalisation.
Still, whether the public interest is always served or not, the case for businesses to pay attention to trading rules is compelling.