Wednesday, December 12, 2012

A "Right-On" Blog From the NFTC

Here's a "right-on" blog by National Foreign Trade Council Vice President Bill Reinsch -- who I almost always agree and have since the 1970s.  Jim Berger

December 7, 2012
Fear of Failure

The trade policy community is seized right now not only with Trans-Pacific Partnership (TPP) negotiations but also with the likelihood we will launch an equally significant negotiation with the European Union.

While a U.S.-EU negotiation appears to have significant support at the highest political levels, I detect less enthusiasm among the actual negotiators who would be charged with reaching an agreement. This should come as no surprise – these are the same people who have been beating each other up for more than 20 years on a wide variety of regulatory and standards issues with precious little to show for it. (If you have any doubts about that, I refer you to the infamous chicken episode of several years ago.)

In my view, this time will be different because of the competitive challenge China poses for both of us. If the Americans and Europeans can work together to develop common standards and regulations, our combined market power will help make them global standards. If we do not, then we risk seeing Chinese standards become the de facto global standard by virtue of their market power. In other words, as Ben Franklin said in a different context, "we must all hang together or most assuredly we will all hang separately."

Making progress on standards harmonization is also important because it is where the greatest opportunity for trade gains between the U.S. and EU lies. Aside from some peaks, tariffs are generally low, labor and environment issues are less divisive than with other countries, and, aside from agriculture, access barriers are less onerous than elsewhere. What American companies most often complain about is the thicket of regulations in the EU they must navigate through in order to sell their products and services, and European companies have the same complaint about us. So, progress in this area would have the double benefit of enhancing trade between two very large and highly integrated markets and of pursuing a common policy in dealing with the Chinese economic challenge.

So, what is holding us back? Apparently, it is fear of failure. Negotiators on both sides have said, privately, that these negotiations "cannot fail," meaning that we should not launch them until we are entirely sure they will succeed. Of course, 100 percent certainty is an elusive commodity in the best of circumstances, but in order to approach that in this case both sides have entered into extensive pre-negotiation discussions intended to assess the odds of failure. In the process, they have also settled on some confidence building measures, mostly in agriculture, which, if successfully completed, will presumably demonstrate to each side that the other is not only serious, but that it can deliver.

That may well work, but the process is disturbing nonetheless because it is tantamount to a negotiation before the negotiation. If we pre-negotiate everything, what is left to talk about once the "real" negotiation is launched? More important, the real question is what's wrong with failure? Being afraid to fail amounts to being afraid to risk, an attitude that runs counter to what most successful businesses are doing in today's hyper-competitive marketplace. America has been built on risk and on failure. We fail constantly, pick ourselves up, and try again. It's one of our endearing qualities, and we should remember it as we consider launching new trade negotiations. The price of not trying is far higher than the momentary embarrassment of failure.

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