Managing government affairs in times of turbulent trade

This was a great question and brought me back to one of my earliest Talking Trade posts, “Ode to Lobbyists.”  In that piece, I lamented the missing or incomplete transmission belt in Asia between firms and governments that often left officials crafting policy in the absence of important information about what companies needed or wanted (or did not need or want) and left firms blindsided by unfolding events. 

Almost exactly three years later, the situation is slowing improving.  Firms have begun hiring more individuals in government affairs or corporate affairs roles in Asia.  These individuals or teams have done a better job working directly with officials in the region.

But as trade policy heats up, and especially as the threats to the global and regional system escalate on a near-daily basis, most firms are frankly not ready to respond effectively. 

For firms to do a better job managing their businesses in Asia, government relations (GR) people need to do at least six things.

First, recognize that the region is changing rapidly.  Many companies have gotten complacent.  Firms in Singapore or Southeast Asia, for instance, do not appear to recognize or take seriously the risks coming from a potential trade war between the United States and China.  New manufacturing or services technologies can be highly disruptive to business models and supply chains in relatively short order.  New trade agreements, especially the Comprehensive and Progressive Trans Pacific Partnership (CPTPP), will change competitiveness for companies overnight in markets before the end of this year.

Second, the individuals in these roles need to personally understand these changes.  It is not enough to say that risks could be coming from markets overseen by someone else.  In a globally or regionally connected world, it is critically important for a good GR person to look above and beyond the local market and think about the implications of changes in other markets as well.

Third, no firm has a GR team in Asia with a big enough budget or sufficient staff to effectively manage the whole range of issues effectively on their own.  It is necessary to leverage on others to help solve problems collectively.  This may mean working with firms in the same industry or with companies in completely different sectors to resolve or head off future challenges. 

At a time of tight budgets, association dues are particularly under threat.  This has the situation exactly backwards.  An effective association or collaborative platform can be viewed as a force multiplier, allowing GR staff members to more efficiently tackle issues in concert with others.

Fourth, GR staff can help drive the internal processes of scenario planning.  Especially in large companies, it is often assumed that someone else, in some other department or unit, has thought about things like how to shift suppliers or handle the impact on packaging from new regulations. 

The types of large scale trade challenges now, however, often fall outside the specific remits of any one department.  They require someone to help drive a set of scenarios or solutions.  The GR person or team may be well positioned to manage this task.  If tariffs are likely to rise on a key set of inputs to the manufacturing process, what options are available?  How quickly can new sourcing be found and delivered?  What is the impact to the bottom line?  How quickly will the change in input prices show up in customer prices?  What new options are available?  What are competitors likely to do or avoid?

Effectively managing the process and delivering a concrete set of options or scenarios to senior management also helps reinforce the relevance of the GR role. 

Fifth, GR teams do need to do what they have always done—effectively and efficiently manage the company’s interests in local markets.  This means developing and managing relationships with government officials.  But perhaps more important now than ever is engaging with policymakers on the connections between the firm and the local market.  How many jobs have been created in the market by the company?  What sort of jobs?  What skills have been taught or communicated?  How many ancillary positions depend on the company?  What actually is done by the firm and how?

In addition to these issues, GR staff should also discuss broader challenges as well.  What might happen to the firm and the local economy if the situation in the local market shifts?  What if global changes alter existing trade patterns for the firm?  Will local jobs grow or shrink?  Will the entire operation shut down?  Why?  This sort of education function is ever more important.

Finally, the GR team needs to help solve problems for government officials.  This means asking questions about the reasons behind specific policy ideas.  It means working together to try to craft solutions that are mutually beneficial. 

This is a tough set of objectives and a hard set of deliverables.  But the GR role--done well--is more important than ever in times of turbulence.