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PRELIMINARY DRAFT

   

INTERNATIONAL TRADE NEGOTIATIONS
 

Training Manual  
©  
William W. Monning & Geza Feketekuty


I.  Introduction and Purpose
II. The Role and Development of Negotiations in Commercial Diplomacy 
IIIAn Overview of Trade Negotiations
IV. Elements of Interest-based negotiations
V. Identification of Problems and Opportunities
VI.  What Are the Negotiating Goals and Objectives?
VIIExpanding Prospects For A Negotiated Solution
VIIIResearch, Planning, And Pre-Negotiation Negotiations.

IX.  Skills To Employ At The Negotiating Table
X.  Drafting Durable Agreements
XI.   Dispute Resolution Mechanisms
XII.  Simulation Exercises
XIII.   Appendices

 

I.             Introduction and Purpose  

Negotiations lie at the heart of international diplomacy.  Parties (governments, businesses, and nongovernmental organizations) employ the art and science of negotiation to protect and advance their organizational and constituent interests. The skillful use of negotiation can advance a party’s interests and help to avoid a less attractive alternative, e.g., trade wars, litigation, or protracted dispute settlement procedures under the WTO.  

An effective negotiation process can lead to positive outcomes that can result in the promotion of important international objectives including economic development, business interests, environmental protection, labor rights, and political stability, all of which  can minimize the adverse impacts of poverty that can lead to violence and war.  

Even for students and practitioners who may not aspire to the role of negotiator in the heavy stakes arenas of international negotiation, most professionals negotiate frequently in the performance of their jobs.  Whether negotiating for a raise, a vacation, or a promotion with a supervisor or negotiating with peers and subordinates over work assignments, deadlines, or workplace conflicts, we all negotiate all the time.  No training manual can guarantee success in any particular negotiating setting, but everyone can improve their negotiating skills to increase the probability of successful outcomes.  

A first step in approaching the improvement of your own negotiating technique is to develop an awareness or mindfulness of when you are engaged in a negotiation of small or large consequence. Many people undercut their own self-interest by not paying attention to their own role and participation in day to day negotiating scenarios.  

Depending on the subject matter of a negotiation, different skills must be employed and options exercised to achieve agreement between or among parties.  International negotiations in the broad context of trade relations may include negotiations over prices, tariffs, and sales or qualitative negotiations over broad principles related to the environmental, labor, health & safety, or other impacts of trade related agreements.   

The purpose of this manual is to provide the reader and practitioner with the following analytical and practical skills:  

  • Problem identification and development of negotiation goals and strategies
  • Identification of parties (stakeholders) and their respective interests and priorities
  • Development of multiple options (solutions) that will maximize the probability of positive outcomes for all parties to the process

Development of specific skills in the following areas:

  • Negotiation strategy
  • Pre-negotiation research and planning
  • Negotiation skills and technique to be employed throughout the negotiation process
  • Crafting and drafting durable agreements with an emphasis on successful implementation of the agreement  
  •  

This manual includes various examples and simulations designed to assist the student and practitioner in how to adapt the theory of principled negotiation to effective practice and success in the negotiation process.  

While the focus of this manual revolves around trade-related negotiations in the international arena, the applications of these analytical and skills sets may assist  those engaged in a multitude of different negotiation scenarios.  

It is the strong belief of the authors that practice is at the core of an effective negotiation technique.  We believe that the use of simulation exercises can be of great benefit to the student of international negotiation.  As in the practice of any discipline in politics, art, or sports, the most successful players are those who have learned from  repetition of methodical practice.  One can gain only a certain level of understanding by acquiring a theoretical knowledge of any discipline.  The true practitioner perfects his/her skill and expertise through the repetitive drilling that gives meaning to the axiom that “practice makes perfect”.

We share this manual with all interested students and practitioners with the confidence that through the development and practice of the art and science of interest-based negotiations, the world can be made a better, healthier, and safer place to live.

We welcome your comments and feedback, stories of your successes and failures alike. By developing a repository of information we expect that this manual will benefit from revisions, refinements, and the collective inputs of those in the growing community of international negotiators.  

 


II. The Role and Development of Negotiations in Commercial Diplomacy 

Before exploring the other elements of interest-based negotiations, it is essential to describe the range of negotiations that occur in the international and trade arenas.

There are profound differences in the subject matter negotiated in international trade and investment in the character of the negotiations, as well as in the level and formality of various levels of negotiations. These differences have important implications for the optimal choice of negotiating strategies.  

Most international transactions that involve trade and investment are negotiated between private parties: between buyer and seller, importer and exporter, employer and employee, contractor and subcontractor.  The negotiation of international commercial transactions is the substance of international business, and is best covered in business management textbooks. They are not covered here.

This manual addresses the negotiation of policy measures that affect international trade and investment.  The negotiation of trade-related policy issues primarily centers on the reconciliation of trade-based economic objectives and broader public policy objectives such as health, safety, and the social welfare of disadvantaged groups in society.  These different interests of society are reconciled through a complex negotiating process that takes place within and between domestic stakeholder groups such as businesses, unions, civic groups and government agencies, and ultimately between national governments.   The special character of commercial diplomacy is that it encompasses both private stakeholders and governments, that it addresses both private commercial interests and public policy interests, and that the outcome is arbitrated through both economic markets and political markets.  Negotiations in commercial diplomacy cover business issues, policy issues, broad economic issues and political issues, as well as legal issues.

Negotiations in commercial diplomacy potentially involve a wide range of stakeholders – the groups who represent the commercial interests, policy interests, political interests, economic interests, legal interests and institutional/bureaucratic interests affected by trade and investment policy decisions.  Each of these groups seeks to influence the policy outcome through negotiations.  The most visible negotiations carried out in the trade policy arena are the negotiations carried out between governments, either bilaterally or multilaterally.  Such government to government negotiations, however, are preceded by intense negotiations within the individual countries on the country’s negotiating position.  These internal negotiations often start within the individual firms, industry associations, government agencies, legislative committees, and non-governmental organizations that have a stake, and are followed by the negotiation and formation of policy oriented coalitions  among stakeholders for the purpose of influencing the policy outcome.  The negotiations to form these coalitions can cross national borders, and involve business leaders, academics, politicians, bureaucrats, and leaders of civil society from many different countries.  Coalitions that cross national borders seek to influence the respective governments in parallel.  Private stakeholders, whether acting on their own or as representatives of a coalition, negotiate with the various government agencies and politicians involved in the decision making process and ultimately these government agencies and politicians negotiate with each other to arrive at a negotiating position for their country.  Often these internal negotiations are much tougher and take a lot more time than the more visible government to government negotiations.

Each of the stakeholder groups involved in the trade policy advocacy, decision-making and negotiating process brings their own motivations and interests to bear on the negotiations.  As we shall explore more fully later, these interests and motivations are the key to a structured approach to negotiations that has the highest prospects for a satisfactory outcome.  The interests and motivations that influence the positions of many stakeholders in the private sector are fairly straightforward, and not too difficult to analyze.  The interests and motivations of governments are often much more difficult to identify because governments represent all the various interests of society.  Nevertheless, there is a great deal of consistency across governments with respect to the principal interests represented by government agencies and departments responsible for particular areas of government policy.  The successful negotiator will prepare himself or herself by carefully analyzing the interests and political influence of each of the principal stakeholder groups.

Most negotiations in commercial diplomacy are over the impact of specific policy measures on particular products or industries.  The negotiation of such trade or investment related policy issues typically starts as a negotiation between an affected enterprise or industry and the government responsible for the targeted policy measure. If the issue is  not resolved at that level, the home government of the affected enterprise or industry may step into the dispute by initiating government to government negotiations.  These kinds of negotiations usually go through a number of different phases that call for different negotiating attitudes and tactics.   

The first contact is usually best approached as an informal information gathering effort. After all, the enterprise managers may be ill informed about the specific regulations or laws at issue, or the administrative guidelines followed by the responsible officials.  Conversely, the officials involved may be ill informed about the production methods or business practices covered by the regulations. 

Once the facts have been clarified, and a policy issue has been identified, the negotiation should move into a problem-solving phase.  A problem-solving approach, which suspends value judgments about who is right or wrong, encourages flexibility by the negotiating partners, maximizing the chances that an amicable resolution can be found that simultaneously preserves the policy objectives of the government and the commercial objectives of the enterprises involved in the negotiation.  The best tactics to use in this type of a “win-win negotiation” will be explored later.  Of course, some policy issues raised by exporters or investors are without merit, while other policy actions taken by governments are not very defensible.  In these situations, sometimes the best resolution is a graceful withdrawal before issues of face and prestige make such a withdrawal difficult.

If efforts to resolve the issue through a problem solving approach fail, the negotiations may move into a third, more formal stage of negotiation, during which the negotiators may increase the political and legal pressure on the other side.  There is an increased risk at this stage that the negotiation may turn into a zero sum game type of negotiation, in which one side or the other has to lose in order to secure a resolution of the issue.  As we shall see later, zero sum type of negotiations are more difficult to conclude, and a successful negotiator will keep emphasizing the potential for a win-win outcome.

A negotiation that remains deadlocked may be referred to a dispute settlement process.  Many trade and investment agreements identify a process for settling disputes that cannot be resolved through negotiations.  Some forms of dispute settlement, such as arbitration and mediation, are a structured and assisted form of negotiation.

While most day-to-day negotiations between governments on international commercial issues focus on specific commercial problems created by specific policy measures, the negotiations that get the most attention are comprehensive government to government negotiations that cover a wide range of products and policy issues.  Examples are bilateral free trade negotiations aimed at removing most barriers to trade and investment between countries, or the multilateral rounds of trade negotiations carried out under the auspices of the world trade negotiations.  These negotiations typically address both the reduction and elimination of a wide range of trade barriers and the negotiation of trade rules.  These negotiations by their very character have to be approached as win-win negotiations, because no deal is possible without each party agreeing that the proposed agreement is in its interest.  Rules-based negotiations, in particular, have to start from the identification of common interests that might be advanced through the adoption of the rule

Another type of negotiation in commercial diplomacy is one in which one government seeks to eliminate, or at a minimum to moderate, a restrictive trade policy action by another government.  On its face, this kind of negotiation is set up as a zero sum game type of negotiation, and it takes extraordinary skill to convert it into a win-win negotiation.  Assuming that the proposed measure has some degree of merit in light of the economic circumstances faced by the country involved, the trick is to show that negotiations can lead to a more balanced consideration of the interests of all parties involved. 

Another type of negotiation might be one between a stakeholder left out of an agreement and the parties to a negotiated agreement.  The aggrieved stakeholder could be a country adversely affected by a bilateral agreement between two other countries, or a non-governmental organization that believes its policy interests have not been adequately considered by the government and business representatives that worked out the deal.  Commercial diplomats representing parties not invited to the negotiating table need to consider what tactics might get them invited to the table.  Ultimately, this means, that they need to consider how they might identify and mobilize potential allies with the necessary political influence.

Each of these various types of negotiations call for a different negotiating style, and different negotiating skills.  Negotiations aimed at defining common interests – whether that involves the negotiation of a coalition, the negotiation of a common course of action or the negotiation of common principles or rules, requires a soft sales approach that emphasizes common interests and engenders  a great deal of mutual trust among negotiators on the genuine commitment of the negotiating partners to the advocated goals.  Negotiations over tariffs and quotas requires a more hard-nosed approach that demonstrates to all stakeholders that the negotiated outcome was the best that could be achieved under the circumstances.  Problem solving negotiations fall somewhere in between. Each side to the negotiations must defend its interests, but also has to be able to demonstrate that both sides can gain from both the policy and the commercial aspects of an agreement.

Understanding the nature of the parties and the subject matter of the negotiation is critical to the process of planning and preparation for a formal negotiation session. 

Terminology and descriptions of the various types of parties and form of negotiation follow:

    1)      Inter-governmental negotiations – between governments the government of Pakistan negotiates with the government of India

    2)      Intra-governmental negotiations – within and among one government, usually between government agencies, political parties, or with constituent groups.

    3)      Commercial negotiations – between businesses, companies, corporations. This may include business negotiations related to contracts, sales agreements, investments, joint ventures, etc. Or, may involve negotiations within a business or trade association.

    4)      Internal business negotiations – Within the business organization,                         company  or corporation. Examples: management –labor negotiations, human resources, inter-departmental, union negotiations, etc.

    5)      Nongovernmental Organizations (NGOs)-business associations, trade associations, environmental, labor, human rights, development, etc.)

    Intra-group (within the NGO )

    a)      Inter-group – between and among other NGOs

    b)      NGO-business organization

    c)      NGO-governmental organization

    d)      NGO-international governmental body (WTO, UN, WHO, ASEAN, etc)

  

Differences in Players, Resources, Styles, and Motivations

With each identified type of negotiation and potential interest group involvement there will emerge different negotiating styles, techniques, and cultures.

It stands to reason that groups of like-function (government to government) will employ more similar negotiating styles and protocols than groups that cross functional, experiential, and interest-based lines of demarcation. 

As groups cross from negotiations with familiar counterparts to dissimilar counterparts, the cadence of the negotiating dance will more likely be dissonant. In other words, people feel more comfortable negotiating with counterparts performing a similar role and dealing with like subject matter than with those representing different subject, professional, and cultural differences.

It is one thing to acknowledge the differences inherent in a cross-over in negotiating with a group of different interest and professional focus—it is quite another to adapt one’s negotiating style and technique to accommodate or at least function with negotiators of diverse interest groups.

As discussed, supra, a diplomatic culture exists among officials representing various governments.  While language, background, and cultural differences may exist, the diplomatic culture plays upon common experience, educational training, and acceptance of protocols developed over decades so that negotiators can work with one another in an atmosphere that is predictable and based upon certain accepted norms, routines, and behaviors.

While the subject of a trade dispute may not change, the parties to negotiations may vary from governmental representatives meeting with each other one day and those same representatives meeting with a cast of business or NGO representatives the next.    While the differences should not be ignored, they can perhaps be minimized by planning and charting the divergent interests, histories, goals, and objectives.