A Renewed Commitment to American Commercial Diplomacy

The United States is the world’s leading exporter, the world’s leading importer, and the world’s primary source and destination of funds for foreign investment. Our position as the best place in the world to do business—the most reliable in which to buy, the most lucrative in which to sell, and the safest and surest in which to invest or to raise capital—is the cause, not an effect of American global leadership. Protecting and expanding the US role as the world’s supplier and customer of choice for goods, services, ideas, capital, and entrepreneurial energy should be a foreign policy objective second only to securing the homeland.”

That statement is as true today as when it was written in the 2004 book Commercial Diplomacy and the National Interest, a publication authored by Harry Kopp for the American Academy of Diplomacy (Academy) and the Business Council for International Understanding (BCIU). Over these last ten years, however, the global marketplace has undergone a fundamental transformation. The speed of change has intensified despite the disruptive impact of the 2008 global financial crisis and the subsequent Great Recession. This slower growth has intensified the global competition for sales and investment opportunities and the employment creation they can generate. Furthermore, the consensus on the accepted “rules of the game” developed in the post-World War II period has broken down, with the emergence of alternative approaches that have yet to fully mature into next-generation rules to guide trade and investment. The only consensus is that the relentlessness of the competition and the speed of change will be even faster and more disruptive over the next 20 years.

Concerned about the continued effectiveness of our traditional Commercial Diplomacy programs, the Academy and the Una Chapman Cox Foundation joined forces in 2015 to identify requirements for a renewed American commitment to Commercial Diplomacy. With the encouragement and support of the senior executive leadership teams of the Commerce and State Departments, we interviewed over 50 experienced corporate executives of globally active US companies. Our report findings and the six core recommendations to modernize and improve our programs can be found in our May 2016 report, Support for American Jobs: Requirements for Next-Generation Commercial Diplomacy Programs.

The report’s principal finding: United States commercial diplomacy programs must adapt urgently to confront the challenges of today’s global marketplace. Today’s successful American companies, large and small, do business in fundamentally different ways they did even five years ago. Their operations are driven by global value chains andintegrated global production networks, with relentless pressures for ever-greater efficiency. These components are now core contributors to business success internationally and thus to the creation of new jobs at home. As for the need for consensus on the new rules of the game, we found that intellectual property rights, copyrights, trademarks, designs, and trade secrets will be crucial to maintaining America’s competitive edge, yet they will only work if our economy has skilled workers and creative entrepreneurs who are supported by the right policy environments. New, reinvigorated commercial diplomacy programs that support US jobs and our national competitive position in this evolving marketplace must become a core tenet of our foreign policy.

Within this overall finding, we were able to identify four cross-cutting require­ments that will be vital to satisfy as we renew our commitment to commercial diplomacy. These are:

• Policy Framework: Our current policy framework is still anchored in the second half of the last century with its focus on the export of physical products. Future success will be measured by increasing exports from all sectors, attracting and retaining investment, and generating support for strategic imports and outward investment. All of our major competitor nations in recent years have reviewed their commercial diplomacy programs and made them central to their foreign policy strategies.
• Programs and Services: Core business requirements going forward will reside in sophisticated information on industry sectors and in the development of policy advocacy guidance.  Of particular importance is the assistance needed to help firms identify opportunities created at the intersection of public policy and the market­place. Our Ambassadors and their teams can provide crucial insights to and advocacy for US firms in this particular market segment. In a world where business operates on a 24/7 basis, government programs need to be equally responsive, innovative, and flexible.
• Professional Development: Most urgent for immediate impact, however, was for the State and Commerce Departments in particular to revamp human resource programs that recruit, develop and align commercial and economic expertise. The success of the renewal of Commercial Diplomacy rests on the Foreign Service Officers, Civil Service professionals, and their extremely knowledgeable, locally engaged staff.  A new, collaborative approach to these programs should address the entrance examinations or processes used to bring new talent into the agencies, assess the most efficient way to expand and deepen training and education programs, and create new career development paths and alignments up through the most senior levels of leadership.
• Training and Education: An urgent requirement exists for customized commer­cial training on emerging, cutting-edge issues. Delivering this training through innova­tive public-private partnerships will address resource constraints and help ensure that training evolves to reflect changes in global markets. 

Before briefly presenting the report’s six recommendations and follow-on activity, it is worth sharing in more depth two cross-cutting comments that relate to the need for a new policy framework and also to the development of new more sophisticated and valued added programs and skills for our diplomatic corps.

With respect to policy, it was clear that the new degree of global integration and its impact on corporate strategies has had a profound impact on how business assesses and takes advantage of global opportunities. In addition to manufacturing, we also heard considerable discussion about the challenges and opportunities of designing and managing global supply chains, investment, services, trade, and protections for intellectual property.  Many of the traditional government programs that focus on providing basic information and contacts now appear redundant given the evolution of interactive web-based platforms.  Furthermore, criteria to evaluate and make national interest determinations for government advocacy have become far more complex than the traditional 50 percent United States content rule of thumb. Finally, US business faces new competitive forces in many regions of the world that are no longer constrained by the same rules-based, level-playing field competition established by multilateral and bilateral free trade agreements.

With respect to programs and services, one issue we encountered in our research with some regularity was the need for US commercial diplomacy support to be available to all companies, large and small, across all sectors of the economy.

For a variety of well-founded and substantive political and budgetary reasons, many programs have been focused on or limited to small and medium-sized companies or new-to-market firms. While smaller companies clearly need more support to succeed internationally, large global firms also face considerable challenges in today’s competitive global markets. And when large transnational companies succeed internationally, their networks of smaller suppliers and service providers also win. One of the best ways that the government can help small and medium-sized companies is to help US transnational firms succeed internationally.

The most commonly identified future requirement was for in-depth company-specific or sector-specific strategic advice and information-sharing by Embassy teams. Companies now require more customized, higher-value-added, and flexible responses to real-time problems in individual or regional markets. The impact of govern­ment policies and regulations on marketplace development is a critical area for US global companies and one in which Ambassadors and Embassy teams are well placed to provide fresh perspectives and to potentially serve as credible and effective advocates.

Obviously, Ambassadors play a key role in effective Commercial Diplomacy in support of US business and our broader economic national interests. Ambassadors set the tone for their Embassy teams. They also can command attention and support among key Washington agencies on important challenges. We heard example after example from the business leaders we interviewed of US Ambassadors, whether career or non-career appointees, showing leadership, creativity, and persistence to help get deals done or critical policy problems addressed. A key effort for the Departments of State and Commerce going forward will be capturing, sharing, and replicating best practices from Embassies and especially from Ambassadors personally.

Other than counseling, participants spoke most often about the need for diplomatic programs and services to advocate on behalf of US firms or associations that are concerned about the policy environment for their sector. In our report, we have chosen to label this “policy advocacy.” It is a broad and elastic concept, referring to a requirement for firms to be allowed to participate in the pre-regulatory and standards-setting process as well as support for particular policy issues that establish a level playing field for future market development. Much like counseling, policy advocacy has no defined program area, service standards, or outcome metrics similar to those that exist for project advocacy. Given the impact of technology across the global marketplace, and the anticipation of even more disruptive technologies in the future, it is not surprising that the requirement for policy advocacy support is at the top of the priorities list.  In addition, with future rules governing trade and investment in a state of flux, it is vital to support the development of industry sector policies that promote innovation and entrepreneurship as well as global supply chains while allowing market access to US firms.

Our six recommendations are focused on the setting of policy that will govern a whole-of-government and whole-of-society approach to commercial diplomacy and that will more strategically coordinate programs and human resource talent management policies, with an initial focus on customized training programs on current industry sector and specific business issues. It is our belief that existing resources can be more effectively allocated and leveraged in new, innovative public-private partnerships. The six recommen­da­tions are:

• Develop, as rapidly as possible, a new policy framework to guide Commercial Diplomacy programs going forward. This framework should include the policies and tools to make national interest determinations on commercial interest questions that include exports, outward and inward investment, and intellectual property.
• Review existing programs to identify programmatic and personnel capacity gaps and to present solutions to Ambassadors and their teams so that they will be fully equipped to advance our national interest.
• Set up a private sector collaborative mechanism to ensure systematic oversight of commercial diplomacy programs in a collaborative way with the private sector.
• Assess new collaborative programs and partnerships with private enterprises to advance national economic and commercial interests across the global marketplace.
• Create a formal cooperative mechanism to oversee human resources talent-management systems for economic and commercial officers and local employees, so as to enhance successful outcomes in recruiting, retaining, and developing the strongest possible team to execute our programs across the Embassy platform.
• Build a formal mechanism to coordinate economic/commercial training and educa­tion programs, with a particular focus on creating new partnerships with private partners to meet the priority business requirements of short customized courses on cutting edge issues, many of which are vastly complex in the emerging technology sector.

While only a first step, implementing these recommendations will break new ground in generating a renewal of our Commercial Diplomacy. By acknowledging changes in the global marketplace and fostering stronger public-private collaboration and partner­ships, we can renew our long-standing and successful commitment to advancing our commercial interests. At the request of the Commerce and State Departments, the Academy and the Cox Foundation are further developing specific proposals to execute these recommendations. They will be ready in the Spring of 2017.