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 1 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 2
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 3 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 only on the basis of domestic action and that may be amenable through inter-governmental negotiations? 4
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 opportunity cannot be realized only through domestic actions. 5 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 6
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 7 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 of Trade Negotiations • Establishment of Institutional Mechanism to Facilitate Consultations Among All Affected Groups – Purpose: Building Support and Preventing Surprises 8
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) 9 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Further Consultations for Developing Negotiating Agenda Dialogue with • Issue Identification Stakeholders and Research: Advocacy Empirical and • Analysis Policy • Consultations with Domestic Interests � Macroeconomic • Consultation with Counterparts � Regulatory � Foreign Policy/ national • Prepare a Negotiating Agenda security � Relevant laws, rules 10
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 11 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 12
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 13 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) 14
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Working for Negotiating Results • Shaping the Negotiating Framework – Defining the scope, content and approach of 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 15 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. 16
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. 17 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? 18
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 19 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 20
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 21 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 22
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 23 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 of the two parties 24
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