Negotiation in the News: When “Mini-Deals” Are the Easy Way Out

With numerous complex negotiations failing to pan out, President Trump has been reaching narrow trade deals to score short-term political victories—at the risk of long-term success.

By — on / Dealmaking

Donald Trump campaigned for president in 2016 as the consummate dealmaker, vowing to renegotiate a new nuclear deal with Iran, forge new trade deals with countries ranging from China to Mexico to Japan, and reach creative agreements with the U.S. Congress. Nearly three years into his presidency, few of these promises have come to fruition. The White House reached a new North American Free Trade Agreement with Canada and Mexico, but Congress hasn’t passed it. Contentious negotiations with China have escalated into a lengthy, unpopular trade war. Trump pulled the United States out of the Iran nuclear deal and the Trans-Pacific Partnership (TPP) but hasn’t negotiated deals to replace them. His meetings with North Korean leader Kim Jong-un have produced little more than photo ops.

Lacking big negotiation wins, Trump is trying a new strategy: negotiating so-called mini-deals—preliminary agreements that focus on just a couple of issues. In September, the White House reached a trade pact with Japan limited to a few industries; the president is aiming for a similarly targeted deal with India. And on October 11, Trump announced a “phase-one deal” with China, which involves removing the threat of further U.S. tariffs (but not past ones) in exchange for promises from China to purchase U.S. agricultural products.

“Mini-deals are becoming something of a trend for Mr. Trump ahead of the 2020 election,” reporters Ana Swanson and Vindu Goel concluded in the New York Times. In the short term, the modest breakthroughs have buoyed financial markets, appeased U.S. farmers, and occasionally distracted from the House of Representatives’ impeachment inquiry. But according to negotiation theory, such “early-harvest” deals—ones aimed at setting the table for more comprehensive agreements—are generally a suboptimal strategy.

The richness of complex negotiations

When asked whether it’s better to discuss easy or difficult issues first, negotiators—including highly experienced ones— generally say it’s best to aim for easy wins. “According to this logic, starting with easy issues allows negotiators to build trust and gather momentum toward an agreement,” write Harvard Business School professors Deepak Malhotra and Max H. Bazerman in their book Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond (Bantam, 2007). By comparison, people tend to reason, “if you start with a difficult issue, you might derail a negotiation from the start.”

Yet Malhotra and Bazerman advise against trying to settle a small number of easy or pressing issues first before moving on to thornier ones. Nor do they advocate for negotiating difficult issues first or even varying your strategy based on the situation. Rather, they argue that putting all issues on the table at once is the best strategy, primarily because it allows for maximum logrolling—that is, trades across issues that capitalize on parties’ different preferences. To take a very simple example of logrolling, imagine friends who are trying to agree on evening plans. If Jane really wants to eat at a particular restaurant, and her friend Maribel is dying to see a particular movie, they should each be able to get what they want, rather than settling for compromise choices.

Negotiations get infinitely more complex when dozens of issues are up for discussion among numerous parties. This complexity is almost always a plus in negotiation: The more issues you have to consider, the more creative trades are available, and the less value you are likely to leave on the table.

Walling off valuable issues

International trade deals generally follow this model of putting all issues on the table simultaneously. “In the past, nothing was agreed to until everything was agreed to, and you had these broad, comprehensive agreements that covered whole swathes of issues,” trade lawyer Stephen Claeys told the New York Times. Speaking of the Trump administration, he added, “I think they’re purposefully breaking from that model.”

Mini-deals allow participants to resolve pressing crises and claim short-term victories. But because such negotiations don’t allow for logrolling across all the issues relevant to negotiators, they are likely to be inefficient.

Consider the recent trade negotiations between Japan and the United States. The White House was eager to unload corn that was supposed to have been sold to China but instead has been “piled up in American silos” due to the trade war with Beijing, according to the Times. Trump reportedly persuaded Japanese prime minister Shinzō Abe to buy hundreds of millions of dollars of the corn—despite the fact that Japan already had sufficient stocks of American corn. Why did Abe agree to take the unwanted corn? To return a favor to Trump, who had agreed to delay trade negotiations between their countries while Abe campaigned for a parliamentary election this summer, the Times reports.

Rather than exploring a trade that could create value for both sides, Abe and Trump inefficiently dealt with the unresolved U.S.-China negotiations. The fact that the United States and Japan limited their talks to a narrow set of industries, namely agriculture and machinery, likely kept them from making tradeoffs that would have benefited both sides.

Trump may have viewed the trade as a victory over Japan, but limiting the scope of negotiations is more likely to weakenone’s bargaining power. For example, in the recent Phase 1 deal with China, the United States refused to discuss China’s desire to remove telecommunications giant Huawei Technologies Co. from a U.S. government blacklist. When you refuse to negotiate an issue that’s important to your counterpart, you’re squandering a bargaining chip you could be using to gain leverage on the issues you value most.

Procrastination versus determination

Theoretically, a successful mini-deal could build goodwill between parties and boost their confidence heading into tougher negotiations. But after reaching agreement on immediate concerns, it’s more likely that negotiators will put off tackling tougher ones indefinitely. Beyond negotiation, we’re all familiar with the habit of procrastinating on difficult tasks once we’ve dispensed with simple ones.

Indeed, seeming to fear the Trump administration could indefinitely postpone further talks with Japan, U.S. trade groups representing manufacturers, filmmakers, pharmaceutical companies, life insurers, and other industries whose interests were ignored in the recent mini-deal asked the White House to work toward negotiating “a comprehensive, high-standard trade agreement with Japan and ensure this initial package does not impede momentum toward such a broader accord,” according to the Times.

What about Trump’s argument that trade deals negotiated by his predecessors have disadvantaged the United States? Negotiating a wide array of issues doesn’t guarantee success; negotiators also need to work hard to claim as much of the value they’ve created as they can. Agreeing that nothing is decided until everything is decided will help you avoid committing prematurely to trades.

When a potentially promising negotiation collapses, parties may be quick to blame its complexity and aim for something simpler. But it’s typically lack of trust, dysfunctional competition, or other interpersonal or cognitive barriers that prevented them from viewing complexity as an opportunity. Such barriers can be addressed in part by building rapport before discussing substance and agreeing in advance to take a collaborative approach to the negotiation. To better juggle multiple issues, create a scoring system that lists each issue and allows parties to assign values to them. With a little patience, even the most intricate negotiation can be broken down to size.

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