Why we are we facing a global trade war and who is responsible for it? Europa United editor Martina Brinkmann gives some simple explanations on the inexplicably destructive negotiating processes of Donald Trump by looking at the art of negotiations.
The basics of bargaining and some pie
Trump, as most of us know, is the credited author of The Art of the Deal, a book that was actually ghost written by a man named Tony Schwartz, who was given access to Trump and wrote based upon his observations. If you’ve read The Art of the Deal, or if you’ve followed Trump lately, you’ll know, even if you didn’t know the label, that he sees all deal making as what we call “distributive bargaining.”
Distributive bargaining always has a winner and a loser. It happens when there is a fixed quantity of something and two sides are fighting over how it gets distributed. Think of it as a pie and you’re fighting over who gets how many pieces. In Trump’s world, the bargaining was for a building or for construction work, or subcontractors. He perceives a successful bargain as one in which there is a winner and a loser, so if he pays less than the seller wants, he wins. The more he saves, the more he wins.
Another type of bargaining exists and is called integrative bargaining. In integrative bargaining, the two sides don’t have a complete conflict of interest, and it is possible to reach mutually beneficial agreements. Think of it not as a single pie to be divided by two hungry people, but as a baker and a caterer negotiating over how many pies will be baked at what prices and the nature of their ongoing relationship after this one gig is over.
The problem with Trump is that he sees only distributive bargaining in an international world that requires integrative bargaining. He can raise tariffs, but so can other countries. He can’t demand they don’t respond. There is no defined end to the negotiation and there is no simple winner and loser. There are always more pies to be baked. Furthermore, negotiations aren’t binary. China’s choices aren’t (a) buy soybeans from US farmers, or (b) don’t buy soybeans. They can also (c) buy soybeans from Russia, or Argentina, or Brazil, or Canada, etc. That completely strips the distributive bargainer of his power to win or lose, to control the negotiation.
Our world revolves around good will and reliable, long-term trading partners
One of the risks of distributive bargaining is bad will. In a one-time distributive bargain, e.g. negotiating with the cabinet maker in your casino about whether you’re going to pay his whole bill or demand a discount, you don’t have to worry about your ongoing credibility or the next deal. If you do that to the cabinet maker, you can bet he won’t agree to do the cabinets in your next casino and you’re going to have to find another cabinet maker.
Integrative bargaining leads to mutual benefitThere isn’t another Canada or EU so when you approach international negotiation, in a world as complex as ours, with integrated economies and multiple buyers and sellers, you simply must approach them through integrative bargaining. If you attempt distributive bargaining, success is impossible. And we see that already.
When Trump has raised tariffs on China, China responded by not only raising tariffs on US goods, but also by dropping all its soybean orders from the US. It ended up buying them from Russia. The effect is that it is not only causing tremendous harm to US farmers, but it is also increasing Russian revenue, making Russia less susceptible to sanctions and boycotts, increasing its economic and political power in the world and reducing the power of his own country and all allies. Trump saw steel and aluminium and thought it would be an easy win, because he saw only steel and aluminium – he sees every negotiation as distributive. China saw it as integrative, and integrated Russia and its soybean purchase orders into a far more complex negotiation ecosystem. And the EU followed up with similar arrangements.
Yikes!Trump has the same weakness politically. For every winner there must be a loser. And that’s just not how politics works, not over the long run.
For people who study negotiations, this is incredibly basic stuff, negotiations 101, definitions you learn before you even start talking about styles and tactics. And here’s another huge problem for us.
Playing chess with a pigeon
Trump is utterly convinced that his experience in a closely held real estate company has prepared him to run a nation, and therefore he rejects the advice of people who spent entire careers studying the nuances of international negotiations and diplomacy. But the leaders on the other side of the table have not eschewed expertise, they have embraced it. And that means they look at Trump and given his very limited tool chest and his blindly distributive understanding of negotiation, they know exactly what he is going to do and exactly how to respond to it.
From a professional negotiation point of view, Trump isn’t even bringing checkers to a chess match. He’s bringing a quarter that he insists on flipping for heads or tails, while everybody else is studying the chess board to decide whether it’s better to open with Najdorf or Grünfeld.
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