Presentation Outline What is Negotiation? What to Negotiate? Who - - PDF document

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Principles, Framework, Strategies and Tactics

Prepared by Wenguo Cai Senior Trade Expert, TPSA The Conference Board of Canada Jakarta, Indonesia September 9-10, 2015

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Presentation Outline

• What is Negotiation? What to

Negotiate? Who Negotiates and for Whom?

• Trade Negotiations: Principles,

Process and Framework

• Trade Negotiations: Strategies

and Tactics

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

What to Negotiate on Trade:

• Individual Trade Issue: Tariff, non-

tariff barriers, services, trade remedies, trade related issues, trade dispute settlement

• Comprehensive Trade

negotiations: WTO, PTA, FTA, Customs Union, Economic Union

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

What to Negotiate: Problem/Opportunity Identification

Key Question: – Is there a problem or an opportunity that can not be resolved or realized

• nly on the basis of domestic action

and that may be amenable through inter-governmental negotiations?

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

What to Negotiate: Problem/Opportunity Identification

• Problem: Countries are protective as regards

international trade

• Opportunity: Liberalization of barriers to trade

and investment can boost economic growth and can facilitate poverty alleviation.

• Problem/opportunity exists
• The problem cannot be resolved and the
• pportunity cannot be realized only through

domestic actions.

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Who Negotiates and for Whom: Interest Identification

• Unlike business negotiations, trade negotiations are

conducted by governments, but for businesses

• Interest identification: Key Question

– Who are to benefit and who are to lose?

• Stakeholders:

– Business – Consumers – Civil society – Labour union – Ethnic groups – Environmental group – Human right group – etc

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Preparation for Trade Negotiations

• Preparation of opening positions
• Problem identification
• Interest identification
• Inter-departmental consultation/coordination
• Public-private consultations
• Political consultations
• Formulation of negotiating strategies and

positions

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Political Consultation: Building Strong Domestic Support

• Assessment of Political Basis for Trade Negotiations
• Strong Political Commitments to Trade Negotiations by Top

Decision Makers

• To Be Convinced about the Benefits of Trade Negotiations
• To Be Sure about the Political Risks
• Identification of Beneficiaries/Losers for Each Component
• f Trade Negotiations
• Establishment of Institutional Mechanism to Facilitate

Consultations Among All Affected Groups

– Purpose: Building Support and Preventing Surprises

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Establishment of the Negotiating Machinery

• Appointment of Chief Negotiator (Head of Delegation)
• Appointment of Negotiating Team Members
• Inter-Agency Negotiating Team

– Ministry of Trade – Ministry of Foreign Affairs – Line Ministries (Agriculture, Industry, Services) – Other Relevant Government Agencies – Others (Parliamentarians, Experts, Advisors)

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Further Consultations for Developing Negotiating Agenda

• Issue Identification
• Analysis
• Consultations with Domestic Interests
• Consultation with Counterparts
• Prepare a Negotiating Agenda

Research: Empirical and Policy Dialogue with Stakeholders and Advocacy

Macroeconomic Regulatory Foreign Policy/ national security Relevant laws, rules

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

• II. Trade Negotiations:

Principles, Process & Framework

• Revisiting General Negotiating

Principles and Requirements

• Summarizing Trade Negotiating

Process

• Highlighting Negotiating Framework

and Ground Rules

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

General Principles and Requirements

• Non-Discrimination Principle

– Most-Favored-Nation – National Treatment

• Market Economy Principle
• Transparency Requirement
• Reciprocity vs. S&D Treatment for LDCs
• Single Undertaking

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiating Process

• Negotiating Concessions (request/offer)

– Goods (tariff and non-tariff barriers) – Services (market access and NT)

• Negotiating Trade Rules (subsidies,

antidumping, S&D, sectoral issues)

• Negotiating Accession to the WTO
• Negotiating a Communiqué
• Participating in Dispute Settlement
• Participating in TPRM

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Negotiating Framework and Ground Rules

• The first step in a trade negotiation is to

set up its framework.

• This entails agreement on what to be

negotiated (mandate/goals) and how it is to be negotiated (modalities).

– Agreeing on what is to be negotiated (e.g. Doha Development Agenda) – Agreeing on the ground rules (how the negotiation is to be organized; how long it will last, and who will participate)

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Working for Negotiating Results

• Shaping the Negotiating Framework

– Defining the scope, content and approach

• f the negotiation

– Agreeing on the mandate (the goals) and the modalities (how the negotiations are to be conducted).

• Reducing/Narrowing Differences

– Tabling position papers – Combining position papers into a common negotiating documents – Concentrating on reducing differences

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

• III. Trade Negotiations:

Strategies and Tactics

• What Issue(s) to be Negotiated
• Different Outcomes Possible
• Negotiating Parties Differ on What

Outcomes Should Be.

• One or More Parties Insist that Other

Issues be Included or Excluded in the Negotiations.

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Some Starting Points to Defining the Negotiating Strategy

• Identify the sectors or subsectors

where the country has a strong comparative advantage: those are the priorities, where main national negotiating goals have to be set.

• Focus on markets which offer growth

prospects for exporters, and determine if a better market access could be achieved with bilateral, sub-regional, or multilateral negotiations.

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Some Starting Points to Defining the Negotiating Strategy

• Identify the barriers for domestic

exports in those markets: are they determined by government measures?

• What are the domestic sectors or

subsectors that could be included in the offer list as concessions in exchange of the negotiating goals?

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Establish Priorities
• Assess Value of Trade-Offs
• Manage the Negotiating Process

Non-Agreement Alternatives

• Consequences of Inability to Achieve Agreement
• Estimate for Other Parties
• Changing Non-agreement Alternatives
• Improve Value of Own/decrease Other Parties

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Ranking Issues: Relative Importance

– Less Important/More Important – Estimated Weight (0 – 1)

• For Each Issue

– Maximum Outcome – Opening Position – Reservation Outcome – Bottom Line – Alternative Outcomes for Each Issue

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Broke/mediate a compromise (if your

position falls in between other parties)

• Coalition Building

– Leadership (benefits and costs) – Free Rider (but give up control) – Divide and conquer – Defection

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Competitive Strategy: Convince the Other

Party to Concede

– Arguments to encourage concessions – Firm commitments to demands – Refuse to reveal/share information – Delay or misinterpret – Reject others’ demands – Withhold concessions – Refuse to exchange offers – Threaten walkout or retaliation

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Persuasion

– Develop arguments to persuade other to modify its positions – Firmly commit to your positions (but leave an escape route) – Deny legitimacy of other’s demands – Withhold/delay concessions

• Mislead

– Refuse to state/reveal positions on issues – Misrepresent (but use language carefully to preserve integrity) – Exaggerate the importance of small differences

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Cooperative Strategy: Identify

Possible Outcomes to Satisfy Both

– Problem solving – Signal desire for an agreement – Exchange information about your needs and priorities – Brainstorm options – Jointly assess the needs and priorities

• f the two parties

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Cooperative Strategy: Identify

Possible Outcomes to Satisfy Both

– Problem solving – Signal desire for an agreement – Exchange information about needs and priorities – Brainstorm options – Jointly assess the needs and priorities

• f the two parties

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Reciprocation

– If other adopts a cooperative strategy in response to your competitive tactics, then you should respond by shifting to a cooperative strategy, but only for as long as the other party remains cooperative.

• Concession Making

– After delaying, concessions could be make first on the least important items. – Concessions should be made at a pace that matches the concession rate of the other party, according to the needs and priorities identified earlier.

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Link with other concessions

– Use concessions in other negotiations to extract concessions here

• Avoid stalemate

– Improve your own utility and diminish that of other party – Find new solutions to satisfy the interests of others as well as yours

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Trade Negotiations: Strategies and Tactics

• Avoid the following tactics

– Threats – warnings are better – Broken promises – always honor your commitments – Adversarial stance/confrontation – Anger/belligerence – Lack of respect/professionalism

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Canada-Indonesia Trade and Private Sector Assistance Project (TPSA)

Thank you for your attention For more information, contact: cai@conferenceboard.ca