Trade representatives face political sensitivities. These mainly relate to the fact that public funds pay for most trade representatives. They are often civil servants, accountable to ministers who, in turn, account to parliament. This influences what trade representatives can do and how they do it.
Martin Tries to Measure Up
Martin was not looking forward to his mid-term review. His country needed to broaden its export base. A new priority indicator had been cascaded to all trade commissioners, measuring the number of new exporters achieving a first-ever export deal.
Martin was posted in the Middle East, and the market presented barriers to exporters with limited resources and experience. It would be normal for new exporters to tackle a familiar, neighbouring market first. As a result, he was struggling to deliver on this new performance indicator.
To make matters worse, his colleagues in his home country had been given the same indicator, and had lost interest in working with experienced exporters. Martin needed their support to inform exporters about the growth opportunities in the Middle East, and prepare exporters for the market’s complexity. Without this support, Martin’s ambitious goal of increasing overall export sales from his home to his host country was also under threat.
Martin was not happy, the large exporters were not happy, the small exporters were not happy, the volume and value of exports was stagnating, and his colleagues at home and abroad were frustrated – all due to one poorly designed indicator.
Inward investments can raise sensitivities, especially when strategic companies are acquired by foreign buyers.
Outward investment can trigger accusations of exporting jobs and may even be banned in some countries, so tread carefully.
Charging can help to ration work, raise quality and increase capacity.
Public support for small businesses is easier to justify than support for large companies, although large companies often value assistance and can help trade representatives with scale, profile and results.
As the benefits of imports are not always well appreciated, help with imports should generally be left to a chamber of commerce.
Checklist: Challenges in charging for services
Charging for services may require changes to the law governing the operation of a country’s network of trade representatives.
It is difficult but not impossible to charge a standard fee when the costs vary depending on the market.
Where should the revenue go? If it is not channelled to you or your teams, there is no incentive for you to do the work, unless revenue generation is one of your goals.
How should revenues be divided for joint activities with the home country, such as trade missions or buyer-seller events? While it is fair to divide revenues based on services contributed, this can be complicated.
Are rent for premises and other costs included in calculating overheads?
There should be a balance between detailed, accurate costings and simplicity.
One easy system is to charge by number of hours, based on an hourly rate.
More complex costing systems are difficult for clients and staff to understand.
There is a risk that the costs of systems for charging fees outweigh the income generated.
It is difficult to become financially self-sustaining by charging for services. There are some activities for which it may be difficult to recover costs.