Trade Negotiations - 'Toughness' vs Kangaroos (Won't vs Can't)
This is the second post of the ongoing series: "F'kn Trade Negotiations, How do they work?" where I provide a glimpse into the inner workings of trade policy negotiations.
Disclaimer: This post forms part of the series focusing on the tactics of negotiations. It's inherently subjective. Please consider these the musings of one person with one set of experiences and not a definitive or exhaustive guide.
Tough Talk
A key feature of trade negotiation armchair quarterbacking is declaring one's side would have secured far greater concessions if only they were 'tougher.'
This is a great soundbite because it's impossible to disprove. You can't go back in time and re-run a trade negotiation with more negotiators selected from among people who yell, "U wot m8?" at random strangers outside nightclubs.
It's also the kind of thing which can sound like good old fashioned frontier hairy chest common sense until you actually meet a trade negotiator, especially a US one. I welcome corrections but firmly believe no one has ever walked out of a negotiation with USTR and thought, "boy, those folks were a soft touch."
Negotiating with USTR. Artist's impression
This brings us naturally to kangaroos.
A kangaroo can't walk backwards. Its legs don't work that way. If confronted with a kangaroo in a narrow alleyway, no amount of will or machismo will make Skippy walk backwards.
In a discussion of who should walk backward to let the other past, the kangaroo has a stronger argument than a human coming the other way because it is literally incapable of delivering on demands.
On the issues you care about in a trade negotiation, you want the appearance of kangaroodom.
Pictured: A robust exchange of views on language in the intellectual property chapter.
The Kangaroo Argument
By far the strongest approach deployed by trade negotiators when confronted with a demand they want to push back is that they can't make a concession, rather than that they won't.
Either honestly or otherwise, they try to position the demands of the other side in their current form as impossible to comply with due to forces outside the negotiating room.
A typical line might run like this:
“I understand how important what you’re asking for is to you, but it would require a significant change to our domestic legislation and there’s nothing on the table so far I can bring to our lawmakers which would convince them to undertake that process.”
This does three things:
It shows they understand the other side's position and are not dismissing demands out of hand;
It positions the obstacle as outside the negotiating process. It's not about yelling at them and it's not about going over their head to another negotiator; and
It enlists the other side as comrades in arms in trying to overcome this challenge, either by changing their demand or increasing their offer.
There are many variations on this theme, and clever negotiators can often find ways to explain why just about any issue is a Kangaroo for them. Examples include:
"Our regulators can't accept your proposed legal language because it would interfere with their ability to protect the public";
"The particularly industry you want to expose to further competition is highly organized and influential politically";
"What you're proposing would contradict existing commitments we have under international law or treaties with other parties";
"The government made an electoral commitment not to give ground on this issue";
"This was the number one issue raised during domestic public consultations".
Now granted, these aren't magic passphrases which unlock all negotiations. Those on the other side of the table might be unwilling to accept the argument, or accept it but believe you can be compelled to remove the obstacle yourself if sufficiently pressured. In the latter scenario, it's up to you as a negotiator to convince the other side that you simply lack sufficient armaments (in the form of concessions on their side) to win the internal battle on their behalf.
With this blade of your beef tariff concessions and this armor of strengthened investment provisions, I go to battle my regulators in your name.
You can't Kangaroo ALL the things, but you can Wallaby them
There are limits to how often you can pull the Kangaroo Argument and still retain credibility. The one thing which kills your effectiveness faster than anything else is to be seen to be negotiating in bad faith, and overusing this approach can do that.
Swearing up and down that a 2% tariff reduction on a barely traded product violates the secret codes of your religious order and would require the personal intervention of the Archangel Gabriel is not going to win you many friends. It will also undermine your efforts to position other issues of greater importance as genuine Kangaroos you can't retreat on.
What you can do however, is position these issues as Wallabies.
Wallabies are smaller kangaroos which while still incapable of moving backward, one could with some effort pick up and carry out of the way.
Negotiators often talk about 'negotiating coin' as the currency they have to spend. This is shorthand for the concessions they can make to the other side to secure reciprocal requests. Positioning an issue as a Wallaby suggests you might be willing to move on it, but it would be a significant expenditure of negotiating coin on your side. Then you stare at them and wait for them to offer something in return.
My analogies come from a land down under.
So, what's the role of toughness?
There is still obviously a place for being firm in negotiations, especially when it comes down to the final rounds where only a few highly sensitive issues remain open. When a negotiation comes down to the highest levels discussing something one side can't live without and the other side can't put on the table, the character of the two leaders in the room matters.
Even in these circumstances however, personal toughness is simply not the all-defining trait pundits pretend it to be. The way things play out in that room depend on a range of factors, of which Churchillian pugilism is just one:
For whom is conclusion the bigger political win?
It's a simple matter of electoral gravity that the side whose government staked more of their reputation on a swift conclusion to negotiations has more to lose from a non-outcome. This is why negotiators can treat bold pronouncements from politicians about imminent negotiating conclusions with mixed feelings.
A more secure political position can be a double edged-sword here. On the one hand, hanging onto power by a thread weakens ones negotiating position. On the other, if the other side believes your government's days are numbered they may rush to sign an agreement before you can be replaced.
Do both sides have enough to credibly defend the outcome as a win?
This is critical, and often overlooked. If you have been too tough on every minor issue leading up to the final showdown over red lines, you may have actually robbed the other side of a 'package' they can sell domestically as a win. This takes away any political cover they could have otherwise used domestically to justify giving ground on a red line issue.
Is there a way to 'fudge'?
A fudge is a non-outcome outcome. It's when something is put in place which looks like forward momentum but isn't nearly as strong as one of the sides wanted. This can take many forms, from non-binding commitment language to having concessions phased in over a very long time (15-20 years) so no domestic industry has to face the immediate shock of increased competition.
Again, a cooperative spirit throughout the course of a negotiation can make the other side more willing to accept a fudgier outcome on something they deeply care about.
I hope you have enjoyed this opening post in the negotiation tactics part of the "F'kn Trade Negotiations, How do they work?" series. As I hope I made clear, this is just one view on how to approach trade negotiations and you should treat it with all the grains of salt you can negotiate for from your waiter before they start asking hard questions.
Other negotiators will have contradicting or complementary takes, and I would encourage you to read them with interest.
As always, if you have any comments, suggestions or cleverly worded abuse feel free to leave it in the comments below or tweet it angrily at me.