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Managing domestic differences in international negotiations: the strategic use of internal side-payments

Published online by Cambridge University Press:  22 May 2009

Frederick W. Mayer
Frederick W. Mayer
Affiliation:
Assistant Professor of Public Policy Studies at The Institute of Policy Sciences and Public Affairs, Duke University, Durham, North Carolina.
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Abstract

When nations negotiate, often the toughest bargaining is not between nations but within them. The reason is simple: proposed international agreements, no matter how much in the “national interest,” inevitably have differential effects on factional concerns, threatening to make winners of some and losers of others. Potential losers often have the power to prevent agreements not to their liking, thereby limiting what is possible in international negotiations. This article uses a negotiation analytic framework to analyze the consequences of such limits. It argues that limits need not be a liability for a divided country—under some circumstances they may provide a bargaining advantage—and demonstrates circumstances under which intracountry differences are desirable and undesirable from a national perspective. More specifically, the article shows that the effect of domestic differences on international negotiations depends on the configuration of domestic interests, on the nature of domestic political processes, and on characteristics of the international bargain. It then explores a particular dimension of the domestic process: the ability to link issues which allow factions to make internal side-payments. It demonstrates that internal issue linkage can have profound effects on the external bargain and explores the strategic implications of side-payments for those who would manage domestic differences in international negotiations.

Type
Articles
Information
International Organization , Volume 46 , Issue 4 , Autumn 1992 , pp. 793 - 818
Copyright
Copyright © The IO Foundation 1992

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References

I am grateful to Arthur Applebaum, William Ascher, Robert Bates, Phillip J. Cook, Joseph Grieco, Stephan Krasner, Peter Lange, David A. Lax, Howard Raiffa, Thomas Weeks, and the anonymous referees for comments and suggestions on earlier drafts.

1. See, for example, Morgenthau, Hans J., Politics Among Nations: The Struggle for Power and Peace, 5th ed. (New York: Knopf, 1973)Google Scholar; Waltz, Kenneth N., Theory of International Politics (Reading, Mass.: Addison-Wesley, 1979)Google Scholar; and Keohane, Robert O., ed., Neorealism and Its Critics (New York: Columbia University Press, 1986)Google Scholar . For an overview of the international relations literature, realist and nonrealist, see Grieco, Joseph M., “Anarchy and the Limits of Cooperation: A Realist Critique of the Newest Liberal Institutionalism,” International Organization 42 (Summer 1988), pp. 485–507CrossRefGoogle Scholar.

2. There is a considerable literature on the effects of domestic politics on foreign policy. See, for example, Allison, Graham T., Essence of Decision: Explaining the Cuban Missile Crisis (Boston: Little, Brown, 1971)Google Scholar; Katzenstein, Peter J., ed., Between Power and Plenty: Foreign Economic Policies of Advanced Industrialized States (Madison: University of Wisconsin Press, 1978)Google Scholar; Krasner, Stephen, Structural Conflict: The Third World Against Global Liberalism (Berkeley: University of California Press, 1985), especially pp. 38–53Google Scholar; McKeown, Timothy J., “The Limitation of ‘Structural’ Theories of Commercial Policy,” International Organization 40 (Winter 1986), pp. 43–65CrossRefGoogle Scholar; Ikenberry, G. John,“Conclusion: An Institutional Approach to American Foreign Economic Policy,” International Organization 42 (Winter 1988), pp. 219–43CrossRefGoogle Scholar; and Milner, Helen, Resisting Protectionism, Global Industries and the Politics of International Trade (Princeton, N.J.: Princeton University Press, 1988.)Google Scholar

3. Waltz, Kenneth, “Reductionist and Systemic Theories,” in Keohane, , ed. Neorealism and Its Critics, pp. 52–53Google Scholar.

4. See Schelling, Thomas C., The Strategy of Conflict (Cambridge, Mass.: Harvard University Press, 1960)Google Scholar; and Raiffa, Howard, The Art and Science of Negotiation (Cambridge, Mass.: Harvard University Press, 1983)Google Scholar.

5. See Walton, Richard E. and McKersie, Robert B., A Behavioral Theory of Labor Negotiations (New York: McGraw-Hill, 1965)Google Scholar.

6. See Putnam, Robert D., “Diplomacy and Domestic Politics: The Logic of Two-Level Games,” International Organization 42 (Summer 1988), pp. 427–60CrossRefGoogle Scholar. See also Mayer, Frederick W., “Bargains Within Bargains: Domestic Politics and International Negotiation,” Ph.D. diss., Harvard University, Cambridge, Mass., 1988Google Scholar; Tsebelis, George, Nested Games: Rational Choice in Comparative Politics (Berkeley: University of California Press, 1990)Google Scholar; and Mayer, Frederick W., “Domestic Politics and the Strategy of International Trade,” Journal of Policy Analysis and Management 10 (Spring 1991), pp. 222–46CrossRefGoogle Scholar.

7. This point was first made in Schelling, The Strategy of Conflict. Its importance for international negotiations has been repeatedly remarked upon. See, for example, Raiffa's discussion of the Panama Canal Treaty Negotiations in Raiffa, , The Art and Science of Negotiation, pp. 166–86Google Scholar; and Putnam, “Diplomacy and Domestic Politics.” For a further discussion of this point as it relates to international trade games, see Mayer, “Domestic Politics and the Strategy of International Trade.”

8. These categories are similar to those suggested by Putnam, but they differ in one important regard. Putnam includes the first two of these factors in his taxonomy of factors (he calls them “Level II coalitions and preferences” and “Level II institutions”, but he does not include the third—the nature of the game between nations.

9. My approach differs from that of Putnam in the following ways. Putnam's approach concentrates on the size of the “win-set,” what I am calling the “bargaining set.” I find the term “win set” a bit misleading, as is the exclusive focus on its size rather than on its location. First, an agreement in the bargaining set as it is determined by domestic interests and institutions must be a “win” (better than no agreement) for some critical number of empowered domestic factions, but it need not be a win for the nation as a whole, as I demonstrate later in this article. Second, it is not clear what difference the size of the bargaining set makes. By implication, Putnam suggests that the bigger the size, the greater the probability of agreement but the less leverage Level I bargainers have. Neither of these propositions necessarily holds. A large bargaining set can be a hindrance rather than a help in reaching agreement if both parties are intent on securing the most advantageous outcome within a large set of possibilities, whereas a small bargaining set, whose location is well known, may facilitate quick agreement, since there is little advantage to additional bargaining.

10. In negotiation analysis, a reservation value is the minimum value a party needs to obtain in the negotiation to reach agreement. A reservation curve is defined as those resolutions of the issues that are of equal value to the best alternative to a negotiated agreement.

11. The bargaining set consists of physically possible outcomes that are Pareto-improvements on the no-agreement alternative. It is equivalent to what Raiffa calls the “zone of possible agreement” (ZOPA). See Raiffa, The Art and Science of Negotiation.

12. For a discussion of the sources of joint gain in negotiation, see Sebenius, James K., Negotiating the Law of the Sea (Cambridge, Mass.: Harvard University Press, 1984), pp. 113–81Google Scholar.

13. See Nash, John F., “The Bargaining Problem,” Econometrica 18 (04 1950), pp. 155–62CrossRefGoogle Scholar; and Nash, John F., “Two-Person Cooperative Games,” Econometrica 21 (01 1953), pp. 129–40CrossRefGoogle Scholar.

14. For a discussion of the Nash solution and other fair division schemes see Raiffa, , The Art and Science of Negotiation, pp. 235–50Google Scholar.

15. Note that once we introduce internal division within A, there arises a question of what constitutes A's interests. We will assume that A's interests are based on the Kaldor-Hicks potential compensation criterion.

16. A's preference for the bargain with internal division will be particularly strong if the parties were more concerned with relative gains than with absolute gains. For evidence that nations are primarily motivated by relative gains, see Grieco, Joseph M., Cooperation Among Nations: Europe, America, and Non-tariff Barriers to Trade (Ithaca, N.Y.: Cornell University Press, 1990)Google Scholar.

17. The distinction between “distributive” and “integrative” bargaining is taken from Walton and McKersie, A Behavioral Theory of Labor Negotiation.

18. For an introduction to the literature on strategic trade policy, see Grossman, Gene M. and Richardson, J. David, Strategic Trade Policy: A Survey of Issues and Early Analysis, Special Papers in International Economics, no. 15, Princeton University Department of Economics, Princeton, N.J. 1985Google Scholar; and Krugman, Paul R., ed., Strategic Trade Policy and the New International Economics (Cambridge, Mass.: MIT Press, 1986)Google Scholar.

19. Talbott, Strobe, Deadly Gambits (New York: Random House, 1984)Google Scholar.

20. The parallel between a unitary actor and a divided actor with perfect internal markets is not complete. As discussed below, the existence of a second level of bargaining, even if it does not ultimately distort the external bargaining set, may alter the behavior of actors and thereby affect the expected outcome of the negotiation.

21. The effects of issue linkage on the bargaining set are explored in Sebenius, James K., “Negotiation Arithmetic,” International Organization 37 (Spring 1983), pp. 281–316CrossRefGoogle Scholar.

22. See Lax, David A. and Mayer, Frederick W., “The Logic of Linked Bargains: The Relationship Between Internal and External Negotiations,” Harvard Business School Working Paper No. 89–012, 1989Google Scholar. In Lax and Mayer's experiments, the internal negotiation was completely hidden from the external party. Had the internal negotiation been more transparent, the divided party may not have been able to use internal differences as effectively in claiming value.

23. Sato, Hideo and Curran, Timothy J., “Agriculture Trade: The Case of Beef and Citrus,” in Destler, I.M. and Sato, Hideo, eds., Coping with U.S.-Japanese Economic Conflicts (Lexington, Mass.: Lexington Books, 1982), pp. 121–83Google Scholar.

24. For a description of some of these side-deals, see Winham, Gilbert R., International Trade and the Tokyo Round Negotiation, (Princeton, N.J.: Princeton University Press, 1986), p. 250Google Scholar. In one example, concerning tobacco and rice, “the EC offset external concessions with changes in internal restitution procedures which indemnified domestic producers whose interests were affected.” In another, to liberalize trade in prunes, “an EC official visited the [French] prune growers and worked out a deal whereby those producers would receive benefits from changes in EC restitution procedures equivalent to what they would lose on concessions to the Americans.”

25. With other assumptions about the contours of the factional constraints, the problem may more closely resemble the prisoners’ dilemma. The distinction hinges on whether the payoff to you of the “both-defect” option (i.e., neither side employs side-payments) is superior to your payoff when you cooperate and your adversary defects.

26. Levine, Michael K., Inside International Trade Policy Formulation: A History of the 1982 U.S.-EC Steel Arrangements (New York: Praeger, 1985), p. 39Google Scholar.

27. See Newhouse, John, Cold Dawn: The Story of SALT (New York: Holt, Rinehart, and Winston, 1973)Google Scholar; and Smith, Gerard, Doubletalk: The Story of the First Strategic Arms Limitations Talks (New York: Doubleday, 1980)Google Scholar.

28. Newhouse, , Cold Dawn, p. 246Google Scholar.

29. Vernon, Raymond and Spar, Deborah, Beyond Globalism: Remaking American Foreign Economic Policy (New York: Free Press, 1989), pp. 196–202Google Scholar.