Journal of Teaching in International Business, 23: 46–58, 2012
Copyright © Taylor & Francis Group, LLC
ISSN: 0897-5930 print / 1528-6991 online
DOI: 10.1080/08975930.2012.687999
Teaching Real-World Political Economy: Simulating
a WTO Negotiation
Jeffrey W. Steagall
Department of Economics, John B. Goddard School
of Business and Economics, Weber State University, Ogden, Utah, USA
Timothy E. Jares
Department of Finance, Monfort College of Business, University of Northern Colorado,
Greeley, Colorado, USA
Andrés Gallo
Department of Economics and Geography, Coggin College of Business,
University of North Florida, Jacksonville, Florida, USA
“If free trade is a no-brainer, why isn’t trade free?” Students often express such sentiments at the
conclusion of a typical international trade course, during which they have learned that free trade is
optimal, but that countries continue to restrict trade substantially. This article describes a simulation
of a round of trade liberalization under the auspices of the World Trade Organization (WTO). The
simulation differs from others in the literature in that it represents a substantial component of the
course, but it is not the course’s focal point. Because the simulation has proven beneficial to students,
the article attempts to provide a blueprint that will enable other professors to implement the project
with minimal start-up costs.
Keywords: Simulation, Negotiation, Free trade, Active learning
1. INTRODUCTION
The top three teaching objectives instructors provide for using a simulation or game are to:
(a) give students decision-making experience, (b) allow students to apply theory, and (c) introduce students to planning (Faria & Wellington, 2004). Wolfe and Keys (1997) summarize the
value of simulations as experiential or active learning methodologies whereby learners are put
in fairly realistic, yet psychologically safe learning environments where they can experiment
with new behaviors with immediate, constructive feedback. Extensive business and non-business
Correspondence should be addressed to Timothy E. Jares, Department of Finance, Monfort College of
Business, University of Northern Colorado, Campus Box 128, Greeley, CO 80639, USA. E-mail: tim.jares@unco.edu;
jeffsteagall@weber.edu
TEACHING REAL-WORLD POLITICAL ECONOMY
47
literature1 documents the benefits of simulation and active learning, while Aggarwal and Goodell
(2011) outline the importance of an international business education guided by theory, but
bridled by practical relevance. Ramburuth and Daniel (2011) contend that, due to the geographic, cultural, and cross-disciplinary nature of international business, experiential learning
might be more important for undergraduate international business students than for students
in other business disciplines. This article provides a blueprint enabling other professors to
implement the World Trade Organization (WTO) project in their course with minimal start-up
costs.
The traditional and virtually universal approach to teaching international trade is to describe
its evolution and theoretical optimality. Students learn during the first half of the course that free
trade is a globally optimal solution. During the second half of the course, students learn that trade
remains remarkably restricted in many important sectors, despite the half-century of trade liberalization conducted under the auspices of the WTO and its predecessor, the General Agreement on
Tariffs and Trade (GATT). Even when the instructor incorporates a political economy approach
to explaining the current trading regime by highlighting the role that interest groups play in policy determination, students have difficulty understanding why countries have not achieved the
long-run Pareto improvement of global free trade.
The authors posit that the chief reason for students’ confusion is that they fail to internalize
the incentives that generate the behavior of individual nations during negotiations and the extent
to which those incentives vary across developed and developing, large and small, and poor and
wealthy countries. Moreover, even those students that seem to internalize the impediments to
globally optimal free trade largely fail to understand the broader lesson wherein self-interests
and conflicting incentives prevent globally optimal solutions in myriad economic and political
contexts.
2. THE WORLD TRADE ORGANIZATION
The WTO is the organization under whose auspices the rules of international trade are currently
determined and enforced. The GATT began in 1947 as a multilateral approach to international
economic integration, particularly vis-à-vis trade in manufactured goods. Periodically, the GATT
membership conducted “rounds” of negotiations designed to liberalize trade. In the Uruguay
Round (1986–1994), the GATT expanded its role to address trade in both agriculture and services
and to develop a global consensus on intellectual property rights, among other advances. Because
the new scope of the GATT was so much broader than its original purview, the WTO was created
in 1995 to replace GATT. Despite the failure of multiple post-Uruguay rounds, the WTO currently
1 Gardiner (1998) makes the case for increased student participation and active learning in the classroom. Paul and
Mukhopadhyay (2004) examine various active learning techniques and the associated impact on student learning. Their
article describes a business to business negotiating component they find particularly beneficial in helping students’ overall
understanding in international business issues. Angel (1994), Rodgers (1996), Cooper and Grinder (1997), White (1997),
Gremmen and Potters (1997), Alden (1999), Dwyer and Johnson (1999), Mason (2001), McGuinness (2004), Manuel and
Tangedahl (2009), and Garvey and Buckley (2010) provide just a sampling of the myriad simulations and role-playing
exercises in business and economics courses. Ogden and Benedict (2000), Ponte (2006), and Young (2005) present
simulations and role-playing exercises specifically targeted at improving negotiation skills.
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boasts 153 members and remains the primary mechanism for global trade cooperation. WTO rules
cover more than 90% of global trade.2
When the WTO/GATT functions well, its negotiating rounds provide forums for multilateral
discussions of key trade issues, with the goal of reducing or eliminating impediments to a freefunctioning international marketplace. Existing problems are identified by member countries.
Typically, groups of nations will form alliances formed around one or several of these points. For
instance, during the Doha Round, developing nations formed an explicit bloc in an attempt to
counterbalance the large influence that Europe and the United States had often exerted in prior
rounds. Occasionally, individual nations will identify concerns that they insist be addressed in the
negotiations. France took four such positions during the Doha Round. The simulation described
in this article provides the instructor with the ability to model both of these behaviors.
The WTO framework is a distributed bargaining situation (Aquino, 1998). The goals of the
members are interdependent and attainment of respective goals is often in conflict, or perceived
to be in conflict, with other member nations. Distributed bargaining situations become highly
competitive when resources are more fixed and limited.
3. LITERATURE REVIEW
Simulations provide an effective teaching tool in the classroom and empirical evidence shows
that students prefer experiential learning techniques that foster participation and active interaction instead of being passive spectators (Hawtrey, 2007). This article describes a simulation that
can become a useful tool for teaching International Trade. The literature includes two simulations
of multilateral trade negotiations.3 Truscott, Rustogi, and Young (2000) describe a well-designed,
stand-alone Summit of the Americas4 (hypothetical) regional trade bloc negotiation in which students are given country manuals that provide country-specific negotiating information. Strengths
of the Truscott et al. (2000) simulation include the tying of negotiating outcomes to economic
2 The WTO website (http://www.wto.org) contains an excellent summary of its evolution, membership, and the current
issues with which it is dealing.
3 Instructors may find sufficient time in their course to include some basic principles of negotiation or may provide
their students with tools for self-study. Foundational concepts in the negotiation literature include best alternatives to
negotiated agreements (BATNAs), zones of potential agreement, and framing and judgment biases (Fisher, Ury, & Patton,
1991). A BATNA is the best alternative available to you should a negotiated agreement fail. Identification of BATNAs
forces negotiators to focus on their underlying interests, not the resultant negotiating positions. BATNAs within a given
negotiation are not necessarily static. Moreover, negotiation environments become more competitive and “hard,” the less
desirable the BATNA. A zone of potential agreement is essentially the intersection of BATNAs. Hence, understanding
other parties’ BATNAs requires understanding their underlying interests. The WTO simulation encourages students to
consider those underlying interests in attempting to understand their opponents’ negotiating positions and strategies.
Numerous studies in the business, legal studies, and negotiations literature describe ways to learn the skills and
strategies necessary for successful negotiating. Taylor, Mesmer-Magnus, and Burns (2008) show how negotiation courses
improve at least self-perception of negotiation skills. Instructors may wish to share Balachandra, Crossan, Lee, Leary,
and Patton (2005), Lax and Sebenius (2004), and McClendon, Burke, and Willey (2010) with their student who wish to
improve their negotiation skills. Readers interested at understanding how ethical culture impacts the negotiation process
should refer to Aquino (1998).
4 The Summit of the Americas was a conference at which the process of creating a free trade area, or bloc,
encompassing North America, South America, and the Caribbean was initiated.
TEACHING REAL-WORLD POLITICAL ECONOMY
49
variables and the formal acknowledgment that nations must consider more than just trade policy
when negotiating trade agreements. One drawback of this simulation is that students spend little
time engaged in country-specific research, since the faculty-developed country manuals contain
all information relevant to the negotiation. In addition to depriving students of the chance to
learn about international data and information sources, this approach puts a substantial burden
on the instructor to update and print manuals each term. A second criticism of the Summit of
the Americas is that, in order to maximize their grades (equivalent to maximizing overall trade
liberalization), students must find one of the few policy combinations that allow all countries to
sign the final agreement during the single 3-hour session. While this framework retains aspects
of the give-and-take nature of negotiation, it imposes an unrealistic amount of structure on the
negotiations. Finally, the single session devoted to the simulation (with a short debriefing session
during the following class period) has both positive and negative implications. On the one hand,
it minimizes the amount of class time that instructors must forego in order to utilize the project.
However, if one believes the active learning paradigm, then more time devoted to the project can
further benefit students.
Lowry (1999) adopts the latter attitude, outlining an entire course that is structured around a
simulated GATT negotiation round. The course begins with lectures and readings on economic
theory and GATT institutional characteristics and issues. She then requires students to conduct
significant background research on their assigned countries and prepare policy statements and
proposals for the negotiation. Thus, students choose the topics to be negotiated. Lowry then
groups topics into committees and prepares packets for each committee. The negotiation takes
place during an all-day session. Each committee must bring a single item back to the full
conference for discussion and voting. A debriefing session follows. The strength of the Lowry
method is that students are fully immersed in the project, becoming intimately familiar with
GATT rules, procedures, and issues, in addition to knowing their own countries well through
research. A drawback noted by Lowry is that the focus on GATT precludes coverage of some
traditional trade topics.
4. DESIGN OF THE SIMULATION
The simulation described in this article lies between the Truscott et al. (2000) and Lowry (1999)
models. It requires both more class time and more student effort than the Summit of the Americas
simulation. However, it is only one component in a more traditional, junior-level trade theory
course. The authors, as well as several colleagues, have used the simulation in both a 6-week summer course that met 4 days per week for 100 minutes each session and a semester-long (15-week)
course with two 75-minute meetings twice per week. In the course, instructors are still able to
cover most of the tradition material—including mercantilism, the Ricardian and Heckscher-Ohlin
models, the Leontief Paradox, tariff and non-tariff barriers, and new trade theories, in addition to
devoting significant class time to the simulation.
The simulation has four learning objectives. First, students learn about the economic and political goals, including how they affect one another, for both the country they represent and the
other nations. Second, students understand why trade isn’t free, despite its theoretical superiority.
Third, students develop an appreciation for the differences between the goals of developed and
developing countries. Fourth, students get a feel for the complexity of international negotiations.
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TABLE 1
Simulation Activities
Activity
Introduction to GATT/WTO
Country teams chosen
Negotiating strategy paper
Round 1
Negotiation
Subcommittee reports
Country reports
Round 2
Negotiation
Subcommittee reports
Country reports
Round 3
Negotiation
Subcommittee reports
Country reports
Debriefing session
Purpose of Activity
Background information
—
Understand own country well; develop clear negotiating goals and strategies
Discuss issues; learn other country perspectives
Verify current status of subcommittee’s issues
Assess country’s progress on goals; redefine goals/strategies as needed
Discuss issues; learn other country perspectives
Verify current status of subcommittee’s issues
Assess country’s progress on goals; redefine goals/strategies as needed
Discuss issues; learn other country perspectives
Verify current status of subcommittee’s issues
Assess country’s progress on goals; redefine goals/strategies as needed
Project evaluation; emphasize what students learned; relate negotiation
difficulties to real world trade environment
The simulation is integrated as a project that requires student involvement beginning about
one-third of the way into a full-semester course, although only parts of two (75-minute) class
periods are required to conduct the simulation. Table 1 summarizes the activities.
Early in the semester, the instructor breaks with the traditional order of topics5 and spends one
class period discussing the evolution of the GATT/WTO. That lecture introduces students to the
most-favored nation (MFN) principle, institutional aspects of the WTO, and current WTO issues.
While students lack the analytical tools for understanding all of the information at this point in
the course, exposing them to the concepts early allows instructors to refer back to them when
covering analytical tools, helping to keep the simulation in the students’ minds throughout the
term. As Li Ling-yee (2011) finds, it is important that students have confidence in their ability to
succeed, that they understand the relevance of course-specific learning activities to their career
goals, and that they can see how their effort will be rewarded.
Students then form their own two-person teams. Afterwards, each team chooses one of the
seven nations (Brazil, Chile, China, the European Union negotiating as a bloc—as in the real
world, Japan, India, and the United States (the number of countries used will depend on course
enrollment). This group of nations provides a balance of developed and developing nations, as
well as geographic diversity. Students self-select into the region that most interests them, providing them with more motivation for conducting the research.6 In a class with enrollment of
approximately 36, two student groups select each nation. Then the instructor randomly divides
the class into competing “worlds” of six nations each, generating two sets of negotiations within
5 Institutional aspects of trade typically appear approximately 7–9 chapters into a trade text, with 9–11 chapters
normally being covered during a semester.
6 There has been surprisingly little controversy in the country-selection process.
TEACHING REAL-WORLD POLITICAL ECONOMY
51
each section of the course.7 In addition to keeping the size of each negotiation manageable, this
framework allows for cross-world comparisons that introduce competition and facilitate grading.
At that point, all students in both worlds receive identical, detailed information about the
upcoming negotiation. Table 2 provides the issues to be negotiated, along with point values and an
explanation of those values from a global perspective.8 Each issue has four possible outcomes and
an associated point value. For example, a 10% tariff cut by developed countries is worth 1 point
to the world, whereas a 40% tariff cut is worth 10 points. Assigning point values accomplishes
three goals: providing students with a starting point for the negotiations, providing a concrete
structure upon which the students can develop intuition about the relative importance of the issues
from different perspectives, and facilitating grading. The following one-page handout, Table 2, to
students also includes a brief explanation of how world point values were assigned for each issue.
Although all students receive the same world table handout, each group also receives a second
table with different point values derived from the political and economic impacts of each issue on
the country it represents. That country-specific analog to Table 2 details the point distribution and
offers an explanation for each issue.9 Point values vary significantly by country, though the same
values are used for each project replication. Students are told to keep point values confidential,
since having their opponents know their detailed preferences would put them at a competitive
disadvantage.10 The country tables form the basis for the negotiating strategy papers. Students
must research their countries and provide a more detailed explanation about why their nation’s
point values make sense.11 Moreover, they can be expected to conduct detailed research into the
political and economic rationale for other country’s (unknown) point values. These rationales
must be based upon the country’s economic, political, and social characteristics.12 While instructors should strongly discourage sharing of point values, sharing and discussing of the underlying
economic and political issues is encouraged.13
Table 3 illustrates the diversity imposed through the use of country-specific point values. The
issue addressed in this table is an across-the-board cut in both agricultural subsidies and import
protections by all developed countries. For simplicity, liberalization is restricted to be at the same
rate for both policy tools. Possible outcomes are 0% (i.e., no change in the status quo) and reductions of 5, 10, or 20%. From the world’s viewpoint, the best outcome overall is a 20% cut, yielding
7 It
is strongly recommended that instructors have each world meet in a different room for the negotiating sessions.
order to balance negotiating power, the list includes some issues that are not, strictly speaking, within the WTO’s
sphere of influence. The instructor should identify these issues for students, discuss the appropriate forums for those
issues, and explain the rationale for including them in the simulation. Typically, the rationale involves enabling students
to learn more about issues that appear in the current press, such as the value of China’s currency.
9 A complete set of tables is available from the authors upon request.
10 Interestingly, some students always choose to ignore this warning and both they and their team members pay the
price.
11 The simulation provides initial point values for the world and each country. However, one could allow students to
propose alternate point values for their country if they can justify the structure through their research.
12 Instructors who wish to streamline the simulation can tell students to use the rationales from the handouts, rather
than researching country goals. This has worked well in helping students understand the complexity of trade negotiations,
although they miss the in-depth understanding of their country’s motivations.
13 The point tables help provide students a clarity in purpose and an understanding of how greater effort in research
and preparation will be rewarded in better project outcomes and grades. Li Ling-yee (2011) suggests such a link leads to
greater effort expended and better learning outcomes.
8 In
52
0
3
25%
3
0
0%
0
4
0
Open international financial services markets by
Value
5%
0%
25%
2
0
0%
5%
0%
Harmonize intellectual property rights laws according to
Western ideals
Value
Open Japanese markets for rice, beef, and citrus by
increasing quotas from 0% to the following percentages
of Japanese consumption
Value
Across the board subsidy and import protection cuts for
agricultural products in developed countries by
Value
4
0%
Reduce U.S., EU, and Brazilian steel subsidies and import
protection by
Value
50%
5
6
75%
6
10%
4
10%
8
50%
15%
8
20%
6
40%
10
100%
10
10
100%
10
25%
10
20%
10
Eliminate all
25%
5%
1
Across-board tariff cut by developing countries
Value
10%
4
20%
3
10%
1
Across-board tariff cut by developed countries
Value
30%
6
Outcomes and Values
Issue Being Negotiated
Explanation of Value Structure
More open financial markets should increase the sector’s
efficiency, as well as providing loans at reasonable interest
rates in developing countries
Strong cultural disagreements about the appropriateness of
intellectual property rights have kept negotiations bogged
down for years
Despite the tremendous inefficiency of the agricultural sector
of land-scarce Japan, the very strong farm lobby, together
with the cultural memory of WW II vulnerability to cut-offs
of imports have dramatically misallocated global
agricultural resources
Agriculture remains one of the most-protected sectors; only
recently have serious negotiations about agriculture been
undertaken; a substantial reduction now could set a good
precedent; existing subsidies and import protection distort
global prices and make it very difficult for developing
countries with agricultural comparative advantage to
compete & develop
The steel industry seriously misallocates global resources,
because inefficient U.S., EU, and Brazilian steel producers
are kept afloat
Lower tariffs are better; however, developing countries cannot
afford to cut tariffs significantly, since they rely on tariff
revenue to fund 20%–70% of central government operations
Lower tariffs are better; developed countries can afford to cut
tariffs significantly, since they do not have to rely on tariff
revenue to fund central government operations
TABLE 2
WTO Negotiation Project: Values of Possible Agreements for World
53
Open trade in services by reducing or eliminating
administrative barriers to competition
Value
Revalue Chinese currency (RMB) toward its market rate by
this % (note: 100% = market rate)
Value
Create an “open seas” policy, in which the following
percentages of in-country port-to-port traffic can be
carried by foreign-flagged vessels
Value
10%
2
0%
0
4
0
3
40%
0
0%
25%
0%
6
30%
7
75%
6
50%
10
50%
10
100%
10
100%
As developed economies become more service-based, the
importance of opening the market for their consumers
increases; moreover, technology allows even developing
countries to compete in certain service sectors in developed
nations
China’s currently undervalued currency make imports more
expensive in China and Chinese exports cheaper
worldwide, reducing global demand for non-Chinese
consumer products and giving Chinese exports a
competitive advantage worldwide
Transportation costs, and therefore consumer costs, are higher
because current regulations restrict competition in the
shipping sector; this will also help to increase the number
of shipping jobs for developing country merchant marines
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STEAGALL ET AL.
TABLE 3
Point Assignments for Negotiated Agreements for Across the Board Subsidy and Import Protection Cuts
for Agricultural Products in Developed Countries
Negotiated Outcome
0%
5%
10%
20%
World
Brazil
European Union
Japan
China
India
United States
Chile
0
2
4
10
2
4
6
8
10
9
6
2
10
4
2
0
0
3
6
10
0
2
4
6
0
3
7
10
0
1
3
10
10 points. A 10% cut would give the world only 4 points; however, such a dramatic liberalization
is extremely undesirable for the European Union and Japan, which would earn only 2 and 0 points,
respectively. In Japan’s case, any reduction in agricultural trade barriers is significant. However,
the European Union can afford moderate cuts in its tariffs and subsidies.
Students are informed that their grades will be based on the total points their negotiating world
scores and the score they receive for their country. Therefore, negotiating complexities arise not
only from the differing country perspectives on each issue, but also tensions between maximizing
points for the country and maximizing points for the world.
Each team’s research paper should identify its negotiating goals and strategies. Students must
understand that they cannot win the negotiation on every issue. They must determine, using point
values as guides, which issues are most and least important to their country. In some cases, there is
a dramatic change in the point value when a country gives just a small amount in the negotiation
of an issue. In other instances, even a large shift in acceptable outcomes has little effect on a
country’s points. To illustrate, consider the world point values as shown in Table 2. An acrossthe-board tariff cut by developed countries of 30% yields the world only 6 points, while a 40%
cut generates the maximum of 10 points. Complexities quickly arise when multiple issues are
considered simultaneously. As an example, the world should be willing to accept a 5% (4 points)
instead of 10% (6 points) opening of the Japanese food market in order to secure a shift from
30% (6 points) to 40% (10 points) in developed nation tariff reductions, because the world gains
2 net points.
For individual countries, this analysis, hence the negotiations, can be even more interesting,
as some countries get no points from certain issues, regardless of the outcome. For example,
China is not a supplier of rice, beef, and citrus for Japanese markets; hence, it does not care about
opening of those markets. Consequently, China can use its vote on this issue as a bargaining chip.
Teams must classify issues, determine which ones they must “win” and which they can afford
to “lose,” and identify useful bargaining chips. Moreover, the best papers examine the situations
of other countries, in order to predict who will be an ally or opponent in each category. Teams’
performance depends on the development of a successful strategy based on the interaction of the
different points obtained in each issue at hand.
After returning the graded papers, the negotiating sessions begin. Before the first round, each
world is required to group topics into two five-issue subcommittees. One person from each country sits on each subcommittee. The subcommittee structure simplifies the negotiation for the
students, allowing each team member to concentrate on just five issues. Students may confer with
their team members at any time, although they often lose sight of their larger 10-issue country
goals in their enthusiasm to “win” their subcommittee negotiation. If they have not conferred
TEACHING REAL-WORLD POLITICAL ECONOMY
55
with their team members by the 60-minute mark (in a 75-minute class session), it is useful to
advise them to break up the subcommittees and do so. This allows teams to determine whether
they are accomplishing their overall negotiating objectives. It also provides an opportunity to verify that no team member has given away too much. Subcommittees reconvene briefly before the
end of the period to agree on the current status of its discussions. By the next class period, the
subcommittees must have submitted their minutes, which the instructor posts on a project, worldspecific website. Countries then use the minutes to write a brief progress report and identify any
changes in their negotiating strategies.
The second round of the simulation focuses on finding agreements for the unresolved issues,
although occasionally a group will revisit a Round 1 agreement. By this point, it is typically
necessary for students to package two or three issues together to find enough compromise room
to allow the negotiation to be completed. Once all issues have been agreed upon, each world
informs the instructor of its outcomes and computes its country and world point scores. As with
the WTO, the final agreement must have unanimous support. Failure to produce a final agreement
represents a failed WTO round, yielding no points for any country in that world.14 As a result,
there is an incentive for countries to work out their differences and produce a final agreement.
It is useful to devote 10 minutes in the subsequent class period to a discussion of why
international trade remains so restricted.
5. PROJECT EVALUATION
Farrell (2005) argues and Li Ling-yee (2011) finds that students must perceive that simulations
and other experiential learning activities are pedagogically effective in order for them to be effective. Student perceptions influence students’ level of effort and, ultimately, the depth of learning
that follows. Moreover, Ramburuth and Daniel (2011) report that “learning and engagement play
a significant role in explaining student perceptions of teaching performance and quality” (p.).
As Chavan (2011) found with various international business experiential learning activities, student evaluation results of the WTO simulation reflect extremely positive perceptions of its value
and verify that the simulation accomplishes its learning goals. Both objective and subjective
responses overwhelmingly indicate that the exercise enabled students to internalize the difficulty
and complexity of trade negotiation far better than the lecture and reading alone. Upon completing the project, students understood that, although free trade is ultimately optimal, real-world
pressures make it very difficult to achieve. Students consistently and strongly recommend that the
simulation be used in future courses.15 Reasons they would recommend the project include:
14 This has yet to happen. The structure of our simulation parallels the actual WTO as a distributed bargaining situation. Since the world and each negotiating country earns zero points should no agreement be found, the simulation has
effectively eliminated each country’s BATNA. This design helps prevent the students’ cognitive withdrawal during the
simulation and enhances the learning outcomes (Taylor et al., 2008; Stevens & Gist, 1997).
15 As part of a university funded mini-grant, formal evaluations of this project were administered during a fall and
summer term as part of the required course evaluation. Sixty-five of the 66 students taking the course during this time
recommended that the project be used again—the remaining student responded “unsure.” Ninety-two percent of those
students claimed to have learned “a lot” or “quite a bit” about the complexity of global trade negotiations while the
remaining 8% admitted to learning “some.” None of the students selected either “a little” or “nothing” on this question.
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• “Because it is a class about international trade, there is no better way to learn about the
subject than actually to participate in exercises with it.”
• “The project puts the entire course into perspective and shows how complex moving to free
trade can be.”
• “It helps in mastering the course and it teaches a lot about global trade and negotiations.”
• “It was hard and overwhelming at the beginning, but it was awesome.”
The experiential component of the project enables students to internalize the basic notions
underlying impediments to any negotiated agreement. First, by actually negotiating issues and
having the grades dependent upon the outcomes of these negotiations, students learn first-hand
the difficulty of the process. Students quickly recognize that simply understanding the issues and
how they relate to their country and to the world is insufficient. The realization that their project
grade is based on the outcome they achieve forces them into the painful process of negotiating
an outcome that is beneficial to all parties. The points that are associated with each negotiated
outcome for each country and the world provide students with something concrete. They can
clearly see the trade-offs that are faced as they give on one issue to gain on another. Because
each group involved in the simulation faces different internal and external constraints,16 many
students learn the broad applicability of the problems faced in this simple simulation. One student
commented, “It is easy to sit and talk about how the world should move to free trade but when you
actually get in there and see how self-interests affect negotiations, you can see why the process is
an extremely slow one.” Another student stated, “It provided worthy perspectives, but also creates
a harsh competitive environment among students.”
6. CONCLUSION AND EXTENSIONS TO OTHER DISCIPLINES
This article describes a simulated World Trade Organization negotiation designed to help
undergraduate students understand the environment in which global trade rules are defined.
If “practical know-how and evolved mindsets” are of central importance for international business education (Aggarwal & Goodell, 2011), the simulation described in this article provides
benefits even beyond the original goals. Although the main focus of this project is to understand
how various incentives have generated a sub-optimal trading environment, students also internalized several tangential, but important lessons, as evidenced by their project evaluations. Students
learn that negotiation and compromise are necessary in politics, businesses, and myriad other
situations. One student commented, “Negotiation takes patience and great effort to achieve . . .
goals.” Another student learned “that when some participants are not willing to budge on negotiating issues, it is often necessary to create secret alliances to exert pressure on those holding out.”
Student response from the project has been overwhelmingly positive, despite the large workload
associated with the simulation.
16 Internal
constraints faced by students arise because they represent countries that are affected differently by the
various issues. Nevertheless, they share a common constraint because all students are subject to how the world is affected
by the negotiations. The students are also affected by personal constraints. Because the simulation is used late in the
course, students will have already earned roughly 50% of their course grades. Those students with high grade aspirations
and those that have performed poorly on earlier exams will have the strongest incentives to achieve beneficial outcomes
for their specific country.
TEACHING REAL-WORLD POLITICAL ECONOMY
57
The framework of the WTO simulation extends easily to other situations in international
economics. Examples include negotiations between developing nations and the International
Monetary Fund (IMF) or the World Bank; international debt relief; the formation of new,
expansion of existing, or merger of two existing regional trade agreements; and negotiations
between oil producing and oil consuming nations. Domestic economics examples might include
negotiations between government and “big oil,” environmental and business concerns, or the
passage of domestic economic legislation. In finance, negotiations on international capital mobility or between government and financial service firms engaged in mergers might be interesting.
Management issues could encompass labor union negotiations or negotiating in a European works
council (see O’Connell, 1997 for an excellent approach).
AUTHOR BIOGRAPHIES
Jeffrey W. Steagall is Dean of the John B. Goddard School of Business & Economics at Weber
State University. He has taught international economics and used the simulation described in
this article in the US, Europe, Latin America, and Asia. His research interests include economic
development, the economics of education, and internationalizing the business curriculum.
Timothy E. Jares is Associate Professor of Finance, Monfort College of Business, University of
Northern Colorado. He teaches investments and corporate finance. His research interests include
experiential learning in business education, asset valuation, and experimental financial markets.
Andrés Gallo is Chair of the Department of Economics and Geography, Coggin College of
Business, University of North Florida. His areas of expertise include International Economics,
Economic Development, Latin America, and Property Rights. He has also published research
articles in areas related to higher education and international programs.
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