04.30.09
Posted in Latin America, Negotiating, Obama Administration, Trade Policy at 4:20 am by Administrator
The recent Summit of the Americas in Trinidad marked a positive change in US attitudes towards Latin America. Much has been made of the interchanges with Hugo Chavez but the real story is that the Obama Administration has decided to approach Latin America as an equal rather than the big brother (bully?) to the north. I suspect that in the long run the new stance will do more to undercut the likes of Chavez than all the bully tactics of the Bush Administration.
The one country absent from the gathering of hemispheric leaders was Cuba. There have been some movements by Cuba on loosening the grip of the dictatorship since Raul Castro took over from his brother Fidel and Obama responded by allowing greater contact between families in the US and Cuba. Obama is wisely playing a shrewd negotiating game by giving small concessions. I think the small steps will lead to wide fissures that will result in a return to democracy. Whenever democracy arrives in Cuba, it take place in a relatively short time and from within (not caused by external pressure). The US embargo policy lost its effectiveness decades ago but it can still be traded away for reforms.
The last important result of the Summit of the Americas was that the Obama Administration placed itself squarely in the camp of preserving free trade. As we face the worst recession since the Great Depression, the lessons of how protectionist measures (Smoot-Hawley bill) prolonged the Depression have not been lost on the Obama Team. USTR Kirk announced that the US would not seek changes in the NAFTA agreement and would push for ratification of the draft Free Trade Agreements with Panama, Colombia and South Korea. These are all good agreements and we should urge our Representatives and Senators to approve the measures. In this global economic downturn, we need to reaffirm the need for open global markets that will promote economic recovery.
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07.02.08
Posted in China, Intellectual Property, Negotiating, Standards, Taxes & Tariffs, Trade Policy at 11:40 pm by Administrator
International Trade is again an issue in the Presidential campaign. John McCain was in Colombia this week and spoke out in favoring the Free Trade Agreement (FTA) with the country, calling Obama and the Democrats “protectionists”. The most famous FTA, the North American Free Trade Agreement (NAFTA) was a major issue in the 1992 campaign. H. Ross Perot pilloried NAFTA claiming there would be a “great sucking sound” as Mexico would siphon off jobs from the US to Mexico. That never occurred, and although there were never the major job gains that the George H.W. Bush promised, the US clearly has benefited from tremendous increase in bilateral trade.
How do FTAs work? The countries involved (this could be bilateral as in the case of Chile-US or multilateral as with Central America and the Dominican Republic –CAFTA-DR– with the US) negotiate on both tariff levels and codes of conduct. Most tariffs are reduced to zero, but inevitably some politically sensitive products are excluded (so most are “Almost Free Trade Areas”). On codes of conduct, the countries negotiate on issues like intellectual property, standards, financial services, etc. using the original NAFTA agreement and the WTO codes as a starting point. The resulting agreements have to be ratified by the respective legislative bodies. (In the US, under the negotiating authority, the House and Senate approve it on an up/down vote (no amendments allowed), as opposed to other international treaties which require a 2/3 vote of the Senate. Once the agreements are ratified the governments must pass implementing legislation to bring national law into conformity with the FTA. The FTAs also provide for consultations and dispute resolution mechanisms to ensure that both sides are living up the bargain.
For the US, the FTA is usually a great deal since the US has relatively low tariffs and already has strong laws that the codes cover. The pending agreement with Colombia is a case in point. Virtually all of Colombia’s exports enter the US duty free and Colombian companies already enjoy all of the protections in terms of intellectual property, investment guarantees etc. On the other hand, US exporters face considerable tariff and non-tariff barriers going into Colombia. Clearly the US has lots to gain from an agreement with our South American partner.
Why then is there such opposition from groups like unions and environmental groups? The unions may affected by job losses for union members who are protected from international competition. Frankly, with greater and greater trade, the marginal effect of an FTA with Colombia or South Korea on union jobs will be so small that it would be hard to detect by most statistical analyses. Nevertheless, manufacturing jobs are being outsourced (largely to countries with no FTAs, like China and India) and the unions are looking for scapegoats. On the environmental front, there is the concern that increased production will result in increased environmental damage. The FTA’s all contain environmental clauses, not as strong as some enviros would want, but considerably more that there are in the absence of FTAs (again China and India are prime examples.)
We are in an increasingly interconnected world and FTAs increase the interconnectedness. While there are some inevitable unintended results from FTAs, overall the global economy benefits.
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12.20.07
Posted in Negotiating at 5:04 am by Administrator
I was watching a rerun of the Daily Show this evening (still suffering from the Writer’s strike) and Jon Stewart itnerviewed Presidential Hopeful and former Secretary of Energy Governor Bill Richardson. Richardson has been through some of the toughest US diplomatic negotiations, especially dealing with the North Koreans.
Richardson told of his meeting with Sadam Hussein to free two US prisoners in Iraq. Richardson started off the meeting in a relaxed manned and crossed his legs, inadvertently showing Sadam the soles of his feet — a sign of insult in the Arab world and much of the Muslim world. Sadam immediately stood up and left the room. The Foreign Minister explained what had happened and Richardson asked for the meeting to continue. Richardson didn’t apologize but he did watch his feet after that. Richardson was successful in securing the release of the US prisoners.
That incident again highlights the need to be sensitive to cultural taboos. It also highlights the need to be flexible. If you inadvertently make a faux pas, move past it.
Have you any incidents when you inadvertently insulted your host?
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11.16.07
Posted in Negotiating at 10:17 pm by Administrator
Concluding a negotiation is the difficult part of the process. The end can be dictated by either achieving consensus on all points in an agenda (say a contract, shipping, pricing, delivery, etc.) or coming up against a certain deadline (legal or end of fiscal year). Sometimes the end can be decided by the fact that there is agreement on some issues and no likelihood of finding common ground on the remaining issue.
In the cross-cultural context there are some unique challenges:
- Face – Can your counterpart take the agreement back to his/her bosses and still retain their respect. If you have negotiated such a tough deal that the negotiator is discredited, then you have won a short term victory and lost a long-term relationship. Good negotiators leave something on the table for the counterpart to take home.
- Language – if the contract is in two languages, you have to have professional translators conform the two documents. Don’t cut corners on this step – words have exact meanings and mistaken usage can cost you money. Even if the contract is in English, make sure you are using it in the same way. Again certain concepts don’t translate easily and terms have different legal connotations from country to country.
- Country of governing law – Ideally, you want to have any legal issues resolved in your local courts or in a country with a developed legal system. Many companies in the technology space specify California law, even when neither has a home in the State.
- Compliance – You have the ability to set up mediation or arbitration for dispute settlement as a way to avoid taking it to the courts. Many companies choose to use the International Chamber of Commerce arbitration system. It is pricey but is considered more fair.
- Enforceability – You have an agreement now – will the other side live up to it? In some cultures, agreements will only be honored if pressure is applied to enforce it. Cheating a foreigner is not considered “wrong” but allowable. You also have the further problem that agreement does not imply willingness to implement the agreement. Case in point: When I was with the US Trade Representative in the 1970’s, the then-Ambassador came back from Tokyo and announced that with an agreement to allow in US aluminum baseball bats, the Japanese market would now be open to Americans. The actual import of the aluminum bats took place almost a decade later. The Japanese negotiators were saying “Hai” to the point presented. It was translated as “yes” but the context was that “I hear you” not that “I agree with you.” There was a book on negotiating with the Japanese written in 1975 by Masaaki Imai entitled “Never Take Yes for an Answer.” The US negotiators should have read that book.
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11.14.07
Posted in Negotiating at 5:19 am by Administrator
Negotiations have their own pace — and part of it reflects cultural aspects. The successful negotiator understands how the counterpart sees the negotiation and adjusts strategy to achieve the win-win situation. Here are some questions to think about:
- What is the expected distance between the various offers? In the markets of the Middle East, it is expected that the seller will ask a price many times the perceived value and the buyer will similarly give a very low counteroffer. In Germany, opening offers and responses are expected to be fairly close. If you begin a negotiation expecting a “reasonable” offer and receive a high one, that can be taken as a sign of bad faith. Similarly, if one is negotiating in the market place and come in at the “reasonable” level, the buyer will think you weak and will push for even greater concessions.
- When are the concessions made? The Soviets were particularly effective in negotiating with the US during the Cold War. The Soviet style was to have prolonged discussions and save any concessions (all of which had to be approved by the Kremlin) until the end. The US negotiators, expecting a series of mutual concessions throughout the negotiations, frequently arrived in the final sprint with only major concessions left to give, while the Soviets had many.
- How much authority does the counterpart negotiator have? In very hierarchical societies (and sometimes companies), the negotiator frequently has little room to deal at the table and most decisions have to be referred back to the home office. I ended up being in that position once — the US proposed an “open skies” civil aviation treaty for Central America and my instructions were no negotiating, i.e. take it as is or leave it. My Salvadoran colleague really wanted to deal but I couldn’t do anything. That wasn’t the most pleasant setting that I was in.
Leave a comment with your stories!
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11.09.07
Posted in Negotiating at 12:27 am by Administrator
As part of my teaching and consulting work, I have given a workshop on cross-cultural negotiating many times. The most fun part is talking about the many things that can go wrong when negotiating with a person from another culture. Here’s part of a checklist that I give out. We’ll talk more about the details in a later blog:
–body language–
hands (where do you keep them – on the table? ; do you use them for gestures? what should you avoid –the OK sign for Americans is an obscene gesture in Brazil).
feet (putting your feet on the table in most of Asia is an insult)
eyes (do you look the other person in the face?)
physical distance (“invisible bubble” how close or distant do you stand? can you touch them. George Bush giving Angela Merkel a shoulder rub is very un-German!)
hierarchy – (many cultures get offended if you forget them. The Austrians love Herr Doctor Doctor (2 PhD’s)
formality (can you use first names; some languages have informal “you‘s — can you address someone in the informal voice?)
“face” (Can you point out a shortcoming? How about an assertion that you know to be untrue?)
food how to eat (can use your hands? The left hand in many cultures is considered unclean. And then there is the dilemma of the local delicacy that you may consider inedible — what if you are offered the camel’s eye? My diplomatic trainers told me to gulp it down and say how wonderful it was.)
drink (how, when and to whom do you make the toasts. The Japanese are very proud of their tea ceremonies.)
taboos (what can’t you talk about)
roles for men and women (How does the western woman do business in a traditional male dominated society?)
I’m sure you have your own examples, so use the comment box!
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11.07.07
Posted in Negotiating at 4:52 am by Administrator
Negotiating is a strategic game like chess and international negotiating is three dimensional chess. As with all negotiations, the best results are win-win outcomes. Your job as the negotiator is to figure out what motivates your counterpart and craft a strategy that helps him/her to achieve his/her goals. The challenge is what is a successful outcome in one culture may not be considered so in another.
Let’s first of all talk about culture. There are two levels to consider. First of all, there is what you think of as the traditonal ethnic culture — Japanese, German, Mexican etc. Note that I talk about specific countries — if you approach it as an area – Asian, European or Latin American – you’re going to miss important differences and make some major mistakes. You may even have to be more specific – I would approach a Catalan differently than a Madrileño.
There are also corporate cultures. I was talking to a German manager who worked in Germany in integrating HP and Compaq. I asked him about the German and US business styles and he told me that was an easy issue to deal with. The real challenge for him was melding the corporate cultures. HP was used to integrative teams and open work spaces. Compaq worked in individual spaces and interacted less with co-workers.
Step one in the negotiating process is to understand the motivations as understood in the cultural contect of your counterpart. That means understand both ethnic and corporate cultures. I’ll talk next about some questions to ask to help you understand the cultures
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