Getting to yes—negotiating final compromises

To appreciate the challenges of getting to yes in a complex, multiparty negotiation, think about trying to order pizza with a dozen people.  The rules of this particular meal require the purchase of only one kind of pizza.  Everyone must eat the final result. 

To make it more complicated (and a little closer to reality), imagine that the pizza is supposed to have 10 different toppings to be chosen from wide menu with different prices for each.  Finally, the dozen people planning to eat pizza have varying abilities to pay for the check.  

Some negotiations are likely to devolve rapidly.  The pizza might end up just having dough, tomato sauce and cheese (by, potentially, ordering “extra” servings of sauce and/or cheese to reach 10 items). 

The Regional Comprehensive Economic Partnership (RCEP) officials are at risk of eating a lot of cheese (or a mountain of dough) on their hypothetical pizza. 

The recent ministerial meeting in Malaysia appears to have resulted in a determination that the negotiations will not conclude this year as planned.  This is actually very good news, since it provides more time for officials to reach consensus and create higher quality final results.  

But the rest of the discussions with RCEP ministers were ominous.  For example, officials are trying to figure out how to order one pizza with different toppings on each side.  India, in particular, is trying to create market access commitments that vary across the 16 parties of the agreement.  South Korea or Singapore might get more liberalization (or pizza toppings) from India than China will receive. 

The discussions in RCEP remain largely stuck on goods, with limited discussions of how this pizza will be delivered to the table.  Unless services (like food and beverage operations) are included in RCEP, the end result will not satisfy.  Investment discussions remain shallow. 

Even an area like e-commerce where Asian economies should be looking for future growth has been relegated in RCEP to a “discussion group” with apparently no concrete outcomes expected.  Yet, in the real world, more and more people are using e-commerce to order and pay for their pizzas.  Having some consistent regulations in place to help reduce uncertainty for local and foreign firms would be extremely helpful in boosting growth prospects for companies.

Another trade “pizza” that has been in discussion for years is the World Trade Organization’s Information Technology Agreement (ITA).  Last week’s blogpost noted delays in reaching an agreement.  This week, however, officials appear to have (almost) gotten to yes.

A draft text is now under discussion in national capitols.  Final work is to be wrapped up on the agreement by the Nairobi ministerial at the end of the year.  (With the added benefit of giving the potentially beleaguered WTO something to talk about in their meetings.)  Implementation is tentatively scheduled for July 2016.

The final deal highlights the challenges of deciding on the last few items.  To get the ITA2 finished with more than 200 tariff lines included, officials had to jettison their aspirations of including some items.  For example, analogue car radios were dropped from the list at the last moment.  In exchange, a specific type of measuring instrument was also taken off the table.  A similar bargain was struck over optical lenses and some types of medical devices.  LCD displays remained off the list, leaving at least one party so deeply dissatisfied with the final result that it may leave the table entirely.

Arguing over analogue car radios is surely the equivalent of fighting over whether the pizza should contain a sprinkling of cinnamon.

Nevertheless, the final list of products to be covered in ITA2 represents an important step forward in updating this trade agreement.  In rapidly evolving industries like information technology, maintaining and updating the list is critically important.

The biggest “pizza” negotiation in the region is about to get underway in Maui.  Chief negotiators for the Trans-Pacific Partnership (TPP) are flying in and preparing for what most want to be their last meeting.  Officials will likely be engaged in furious negotiations over the last few items to be added (or subtracted) from the pizza in the hopes of presenting a completed product to their trade ministers at the end of the month.  Fingers crossed that everyone around the table will be satisfied with the final result.