Trade deals: Recipe for success

Trade agreement advocates consider the essential ingredients for winning public support in an era of institutional distrust    Shortly after taking office on Jan. 20, President Trump officially withdrew the United States from the landmark Trans-Pacific Partnership agreement. It was supposed to be President Obama’s signature policy achievement in Asia and cement his legacy of economic turnaround from the Great Recession.
   The act was a formality: the massive trade deal laying out new rules-of-the-road for international commerce and investment between a dozen Pacific Rim nations that contain 11.4 percent of the world population, and control 40 percent of global GDP, was torpedoed during 2016 when Congress failed to ratify the deal and Trump won the presidential election on the strength of populist sentiment.
   Trump blamed the decline of industrial manufacturing on the North American Free Trade Agreement and other pacts aimed at lowering barriers to the cross-border exchange of goods and services. He said TPP would further contribute to outsourcing and job losses at home. His message tapped into a growing sentiment—fanned by labor unions, environmental and human rights groups, health and safety advocates, and certain industries—that characterized TPP as a gift to corporations. Opponents said it would drive down wages, undermine food and product safety, let partner nations avoid the same labor and environmental standards followed by U.S. companies, allow foreign corporations to challenge U.S. laws and regulations, and cause a host of other ills for average Americans.
   One of the opposition’s most effective arguments was that corporate representatives helped draft the trade deal behind closed doors, while the public, the press and Congress were mostly kept out of the process. The full text was not publicly released until all 12 countries signed the agreement.
   TPP’s death has trade supporters assessing what went wrong.
   In an acknowledgement the current process is flawed, the Center for Strategic and International Studies (CSIS) recently released a report offering practical ways for the executive branch to improve technical consultations and transparency during negotiations. Meanwhile, industry representatives acknowledge the business community needs to do a better job vigorously marketing how trade benefits working-class families.
   “We’re proposing a new model that develops much deeper and broader public participation,” Scott Miller, the lead advisor on international business at CSIS, said during a panel discussion previewing the report. “Improved consultations would raise the quality of the resulting agreements and their contributions to economic growth, and likely increase public confidence in the outcome.” 
   While public engagement is vital to the system for developing trade strategy, it is equally important that negotiators receive the creative space and flexibility during negotiations to hammer out a deal that accomplishes consensus goals, he added.
  
   Leveraging Experts. It is critical for trade negotiators to involve subject-matter experts and interest groups early in the process because trade agreements are so much more complex today than when NAFTA was negotiated nearly a quarter century ago, according to the report.
   Initially, trade liberalization between specific nations mostly centered on ways to lower tariffs, but today’s deals have to address electronic commerce, data flows, financial services, logistics services, how to apply domestic regulations and many other issues. The concerns of new, Internet-enabled, small and medium-size enterprises also have to be considered, in addition to the interests of multinational corporations. Therefore, negotiators need access to industry sector technical advisers who can provide detailed feedback on how rules changes would impact businesses in the real world. But as tasks become more specialized within firms and organizations, and knowledge more diffuse, getting access to people who can run data systems that support trade decisions becomes more difficult. 
   That’s why the government needs to modernize and streamline how it manages the trade advisory committee system, CSIS recommended. 
   The departments of Commerce, Labor, and Agriculture, along with the U.S. Trade Representative, co-administer 28 trade advisory committees that potentially can include up to 1,000 people who provide detailed policy and technical advice regarding trade barriers, negotiations, implementation of existing trade agreements affecting industry sectors and other matters. Applicants must meet certain criteria and get a security clearance to be selected.

Someone needs to be in charge of renewing a committee’s charter when it expires, appointing new people when members resign or their terms expire, and ensuring that the chairman and the designated federal officer work closely together to keep their respective committees on task.

   Someone needs to be in charge of renewing a committee’s charter when it expires, appointing new people when members resign or their terms expire, and ensuring that the chairman and the designated federal officer work closely together to keep their respective committees on task, the report said. Often these advisory bodies dwindle to a handful of members and are not focused, it stated.
   The government also should realign the structure of the committees to reflect current economic trends, based on analysis of its own trade databases, the think tank urged. Other suggested reforms are to allow members from foreign-owned U.S. subsidiaries and more than one individual per firm.
   Additionally, industry trade advisory committees (ITACs) need more structured work programs to keep them busy and take advantage of their expertise, according to CSIS. The advisory committees are only required to write a report at the conclusion of a trade negotiation, but more analysis should be demanded to maintain interest within the committee and establish trust between negotiators and advisers. Miller suggested committees issue reports on the operational effects of NAFTA on their industry, and what would be the priorities and effects of renegotiation. 
   “At minimum, we’re suggesting the committee write an annual report on trade barriers in their sector,” said Miller, a former director of global trade policy at Procter & Gamble who once served as liaison to the ITAC on Trade Policy and Negotiations, as well as the State Department’s Advisory Committee on International Economic Policy. “It could be a contribution to the annual USTR national trade estimate, but something to keep committees active, energized and working with each other.”
   Stephen Lamar, executive vice president of the American Apparel & Footwear Association, strongly endorsed the idea of making advisory committees present their findings.
   “One of the problems you have with trade agreements is that a lot of people will say, it’s all happening behind closed doors,” he said. “Because they themselves are not in that room, and they don’t have any reports about what’s going on in the room, they just assume the worst. 
   “And so if they know that there’s a whole lot of people involved—and not just the industry, but representatives of the public and all kinds of stakeholders—then you are going to have a lot more buy-in into how that process works and then a lot more confidence from the public in general.”
   A former ITAC chairman, Lamar also favored representation from U.S. companies owned by offshore interests, saying the current rule sends the wrong message to foreign investors.
   “Creating an advisory process that better reflects the global supply chains and the open economy that has been the source of our economic competitiveness for years would be really important,” he said.
   CSIS further recommended that trade negotiators prioritize getting advice on fast-moving issues in the modern economy—even use confidential disclosure agreements with corporate experts if necessary—to preserve the United States’ comparative advantage.
   “In addition to reforming the USTR system of ITACs, let’s figure out ways to create new opportunities for input from groups and individuals that are traditionally outside the trade world in D.C.,” said Nicholas Bramble, public policy manager for trade and international relations at Google. “And if a contentious issue arise in negotiations, put that up for public comment.” 

   Engage The Public. The CSIS report does propose creative ways to include the public in formulation of trade policy.
   Ordinary people perceive trade agreements as illegitimate because they feel closed off from them—and without public support it is difficult in a democracy for politicians to vote for trade deals, experts say.
   A vacuum of official information about what a trade agreement is trying to achieve, Miller explained, opens the door for speculation and half-truths, which can then easily spread via social media, and become perceived truth. 
   “The reality is the public is generally uninterested and disengaged,” Andrea Durkin, a former official with the U.S. Trade Representative and an adjunct professor of international trade law at Georgetown University, said during the panel discussion.“ If you look at Pew Research, more than 70 percent of people had no idea what TPP was. Are they mourning the death of the TPP? No, not really, because they don’t actually know what’s in it. 
   “So without knowing what is being negotiated and why, the public loses confidence, and as a negotiator that’s important because it constrains your policy choices. Sure, you could ram it through, but what is the likelihood the outcome will be really well accepted?” 
   Better to engage on the front-end of the process rather than fight for acceptance on the back end, she added.

If you’re not engaged with the public at the point where you’re making decisions about what to negotiate, then how are you going to know what your best policy choices are?

   “Conversely, I would say as a former negotiator, if you’re not engaged with the public at the point where you’re making decisions about what to negotiate, then how are you going to know what your best policy choices are? How are you going to know whether it makes sense to do a deal with Japan or renegotiate NAFTA?” said Durkin, who in 2013 launched Sparkplug LLC, a strategic consulting firm that helps businesses maximize their social impact. 
   She also urged negotiators to stay in touch with businesses of all sorts to understand what import/export barriers they experience and how their industry is evolving.
   “That’s an orientation that we haven’t typically had in the past in trade policy,” she said. “That’s why we’re lagging in trade policy and trying to solve problems after they arise because we’re not asking the question about where is business going? How can we get ahead of the innovation?”
   Bramble concurred that more meaningful and frequent input is needed early in the process, including better Federal Register notices for public comment that ask for feedback on detailed provisions rather than simply asking vague, open-ended questions.
   “In addition, during the long negotiations process there are few opportunities right now to refresh understandings of what our priorities should be around trade,” he said. “When you have a multiyear negotiation process with many rounds you can lose sight of initial input from the public, so there is a need to incorporate public views during a negotiation without interfering with the closed-door place that negotiators do need to resolve hard issues.”
   One way to get public buy-in is using model texts, the report said. These templates help create transparency in the process, and are already used by the U.S. Trade Representative to negotiate bilateral investment treaties with other nations. Bilateral investment treaties are designed to protect investments in countries where investor rights are not already protected through existing agreements. 
   Bramble said model texts can be developed by the government or private entities.
   “There’s really nothing stopping anyone from putting up the text of a previous agreement on a site like Medium or Genius and soliciting feedback, getting input on a red-line version of what that agreement should look like today to reflect modern needs,” he said.
   And during negotiations, detailed summaries of each round could also be posted, Bramble added.
   The European Union, according to a delegation official based in Washington, makes public all texts and position papers, with the exception of tariff lines.
   “There is absolutely no reason why we shouldn’t make them public because there is no confidential business information. This is our starting line. And this has proven very good,” because it clears up any perception that special-interest deals are being cut in secret, he said. 
   CSIS also recommended using crowd-sourcing techniques and third parties to reach more people for their feedback. 
   Crowd-sourcing input should be managed with digital tools, such as Screendoor and web-based collaboration software, and solicitations for comment need to have a clear scope, or agencies will be overwhelmed with unstructured data, Miller cautioned.
   Crowd-sourcing and analytics software could also gather data and predict what new technologies, services and businesses might be developed during the next 15 years, which could then inform future trade policy, Durkin said.
   Digital tools should be used to reach communities of expertise, who may have something to say on trade, in areas where they already interact, Bramble said. Programmers, for example, collaborate to maintain software code through the Internet Engineering Task Force, and environmental groups discuss global policy questions on Wikipedia. Both are forums that would allow a direct line of communication to people who may have good ideas on how to resolve trade and connectivity issues, he added.
   Empowering third parties can lead to constructive policy, because outside organizations can help resolve intra-industry disputes that lead to consensus recommendations being presented to trade negotiators. The National Foreign Trade Council’s mediating role between content providers, Internet Service Providers, and users, for example, led to a constructive government policy several years ago on how the digital economy should be treated in trade agreements, Miller said.

   Call To Action. Several industry leaders and corporate officials blamed the business community for assuming citizens understand why trade is important and not doing enough to advocate for TPP.
   “There’s going to have to be a concerted effort by international organizations to market the benefits of trade much more aggressively,” Thomas Vilsack, the new president of the U.S. Dairy Export Council who served eight years as secretary of agriculture in the Obama administration, said Friday. “And I fault the business community, to a certain extent, that we have not done as good a job in this country of explaining to workers in these companies and to consumers that there are benefits that accrue from trade. Farmers understand it because their bottom line gets affected by it.”
   At a forum on EU-U.S. trade relations, he wondered if the manufacturing and IT sectors follow the example of farm bureaus, which frequently invite trade associations and other organizations to speak before them about export opportunities. 
   “I think it’s incumbent upon industry associations, business leaders, company owners, and small business owners to understand exactly how their job, how their business gets affected, positively or negatively by trade, and then be forceful about making sure people understand,” Vilsack said.
   “I mean, I don’t think consumers in this country really fully appreciate the incredible diversity that they have and the competition that is created through trade for their consuming dollar,” he said. “And that they get a benefit from that. There needs to be a much more aggressive effort. Getting down in the grass roots and beginning an education process will over time better educate folks and they’ll have a better attitude about it.”

We have not done as good a job in this country of explaining to workers in these companies and to consumers that there are benefits that accrue from trade. Farmers understand it because their bottom line gets affected by it.

   Michael Smart, managing director of Rock Creek Global Advisors in Washington, agreed the business community needs to find its voice.
   “Individual companies have to speak out more forcefully on these issues that are so important to their long-term interests,” Smart said. “And it’s not a matter of waiting until an agreement is negotiated to make that argument. By then you don’t have the foundation and you’re not going to be very effective.”
   Some companies have begun taking steps to muster their workforces as trade ambassadors.
   In January, the integrated logistics provider FedEx launched an initiative to make the point that all FedEx jobs are trade jobs, Ralph Carter, who heads government affairs for the company, said at a recent event about NAFTA organized by the Washington International Trade Association. FedEx is putting up signs in all facilities showing employees that trade is important to their job and Fred Smith, the chairman and CEO, issued a company-wide letter making the same point.
   And there is a mechanism for workers to contact members of Congress, too.
   “We can’t wait until three months before a big trade vote to start ginning all this stuff up,” Carter said. “We’ve got to do it on an ongoing constant basis to make a change in the debate.”
   Whirlpool, which is a proponent of trade liberalization, is also positioning itself on the side of workers’ interests, Sarah Bovim, vice president of government relations and international trade policy, said.
   The appliance manufacturer has 100,000 employees worldwide, a quarter of them in the United States. Eighty percent of U.S. sales are produced domestically, with the remainder imported from Mexico. Canada is an important export market.
   “As we pursue open markets, we also embrace competition,” she said. “We believe we can compete with anyone, anywhere under the same rule of law. So part of our communication with employees is that we embrace these opportunities to stay integrated as a global economy, but we’re also going to fight for fair trade and make sure that we’re working to protect those jobs so that we’re all playing by the same rules of law.
   “And we have to tell our stories out in the public, not only in ways that resonate with our employees, but in our communities, about the upside of trade” and how to assist workers displaced by outsourcing.
   Whirlpool, like many companies, is now collaborating with community colleges to design technical programs for the next-generation of workers that meet changing industry needs, she said.