APCO is a communications and lobbying firm based in Washington DC that represents foreign firms and guides them through the US government maze. With 25 offices worldwide, APCO has high-profile ex-politicians and bureaucrats, including a former chairman of the US Federal Aviation Administration (FAA), to help its clients. It opened its China office in 1997 and has worked with a number of high-profile China companies including COSCO, China's biggest state-owned shipping company. CEO Margery Kraus talked with China Economic Review about how China must shape the trade debate to win in Washington. Excerpts:
Q: Can you talk about lobbying for China in Washington?
A: We have been very involved over the years in a number of trade cases, not just China trade cases, but Canadian, South American and European ones as well. And what we do is try to convert, for example, a US versus foreign interest into a domestic versus domestic interest. So, in the case of Canadian lumber, rather than work for the Canadian government, which we were registered [as lobbyists] to do for that issue, we organized the housing, the distributors, the transport people, and all of the downstream industries that had a stake. That way, when you measure who's involved and you add up all those states versus the lumber-producing states, you really change the political arguments against importing lumber. It's the same thing we're telling the Chinese government on a lot of these cases: what you really want to do is to organize the other US interests – to help them understand that what is being proposed is really affecting their self-interests.
Q: For instance?
A: Well, textiles – to the extent that there are people who would like to see, when [quotas] end in January, something in their place – like safeguards. There would be more people concerned about those safeguards if they were organized to fight them–consumer groups, retailers, shippers, transportation, certain workers' groups. So it's really organizing all those interests in any given situation so that the political environment is shaped and organized in a way that supports the legal dynamics.
Our way of approaching the lobbying issue is to figure out the way in which you can shape the debate. Some of that involves third-party organizing and some of that is direct lobbying.
Q: Are you working for a Chinese textile company now?
A: No, we have been working with COSCO [China Overseas Shipping Corp], so the issues were flags, ports, restrictions and things like that – but this may be a good example. What we did was to use the opportunity to define to a lot of [US] policy people who COSCO is as an enterprise, and explain how well they're run, what they do in terms of bringing products to US markets and who that benefits – the whole package.? I mentioned textiles because I was just in Beijing talking to textile people about the problems they are about to have.
Q: Are they about to have problems?
A: Well, we don't know yet – the question is how many commitments were made during the election and it's pretty hard to tell. Even if [Bush drops his promise to consider industry requests to limit imports], you're going to have noise from these newly elected senators from textiles states. They are going to have to prove that they are interested in their constituents and that they are going to be aggressive on their behalf.
Q: What other China interests have you been working with?
A: The last time I was here I think I did five seminars on either trade disputes or on building global brands – working with some of the associations and Chinese enterprises. We've been in Russia since 1988 and have worked with four or five of the top Russian companies on building brands, the premier of which was Yukos.? The point is, we know a lot about taking companies out in the West and we've been exploring how we can best do that with Chinese companies. What we've been doing is investing time in transferring knowledge about how you build a brand and what kinds of things you have to do to have a high quality reputation outside of China.
Q: Can you give your top five pointers for China brand building?
A: Well, I think it's about building trusting relationships with all the stakeholders you have to deal with. It's about making the necessary connections with third parties who have to understand what you're doing. And it's about being transparent, and making commitments on how far you're willing to go [to improve]. It doesn't pay to go into a society that is going to evaluate their interest in investing in you or taking your product if they only understand certain things about your labor practices or environment, if you're not willing to do those things. So it's understanding expectations and making decisions ahead of time about how you will marry expectations and commitments. One of the things we talk about is "return on reputation". ROR tries to help quantify what investing in brand building and building a reputation can do for your bottom line in terms of sourcing capital and other things and what the requirements for those things are – so you have a sense of how to operate as a serious company in a global economy. We've been taking a first step – talking to MOFCOM, industry associations and some of the intermediary organizations. We haven't exactly gone door to door yet.
Q: How do you see the perception gap between myth and reality in Washington insofar as China goes?
A: Let me use a Russian analogy. Last year we had to help one of the biggest mining companies in Russia [Norilsk Nickel] acquire the only palladium producer [Stillwater] in the United States and it happened to be a publicly listed company and it happened to be in Columbus, Montana [where] people haven't exactly been involved in world affairs. We did a whole outreach program, getting the political leaders on board, and did a lot of grassroots education and had the Russians talk about exchange things in conjunction with this. It was really creating a program and trying to come up with a strategic way to allow people to be educated, because once they were better educated the deal made sense [because] the mines were losing money and needed investment. Part of the challenge is to look specifically at what companies are trying to do and not solve the whole problem of people's attitudes towards, say, China, in one fell swoop, and do it in more direct ways where there is cause and effect. And obviously that gets supported with activities and background noises from think tanks and other groups that drive public opinion.
Q: So how big is the perception gap?
A: When I bring people over from the States to our China office, they're shocked – shocked at our modern facilities, at the level of staff performance, at the intellectual caliber of staff, the modern look of people on the street. But I'm used to dealing with people who don't understand the 'other' place – we wouldn't be in business if everybody did! So do I think that's a horrible thing? No, but I would like to move the needle. China's booming economy will be more and more viewed jealously by the rest of the world. That's a fact of life. If we're really going to have an open trading system, there will be places that won't be able to compete with China, at least in the foreseeable future. So the question is, how do you build relationships that build value both ways? We can either protect these markets against the influx of Chinese products, or figure out how to add value to Chinese products and get money from the fact that those products are coming into a market. There will be a lot of tension, people will take action against unfair trade practices – but people will adjust and figure out how to take advantage of the new reality instead of fighting for an old one. If you look at all these industries over time, the pressures of a free market eventually take over. What I think is important for these first set of Chinese companies that come out and make a splash in the United States is that they do it really right.