A WORKING PAPER ON MILITARY-POLITICAL CONDITIONS
AND INTERNATIONAL ECONOMIC NEGOTIATIONS
John S. Odell
School of International Relations
University of Southern California
Los Angeles, CA 90089-0043 USA
odell@usc.edu
written for presentation at the University of Chicago
Program in Political Economy Studies
29 May 1997
Please do not quote without the author’s permission. Needs work.
Abstract:
Present knowledge of the international negotiation process is
inadequate both theoretically and empirically. For economic negotiations and
possible military influences on them in particular, we need ideas formulated more
precisely and consistently, as well as a less cavalier attitude toward the evidence
requirements for such claims. Many conjectures have been advanced without
much evidence of state leaders’ and negotiators’ beliefs--which are pivotal in
many interpretations once they have been formulated carefully--or evidence on
any other aspect of the negotiation process, in some cases. We might sharpen
and deepen our knowledge by investing in empirical research guided by
reformulated hypotheses such as the eight presented here, linking security
conditions to the negotiator’s priorities, alternatives to agreement, issue linkage,
and ratification.
2
Present knowledge of the international negotiation process is inadequate, both
theoretically and empirically. Specifically for economic negotiations and possible military
influences on them, we need general ideas formulated more precisely and consistently, as well as
a less cavalier attitude toward the evidence requirements for such claims. Many conjectures
have been advanced without much evidence particularly of state leaders’ and negotiators’ beliefs,
which are pivotal in many hypotheses once they have been formulated carefully. We can deepen
and sharpen our knowledge by investing in research on reformulated hypotheses such as the eight
presented here.
Few would deny that negotiation is one of the most significant processes of international
affairs.
Recent historical trends seem likely, if anything, to increase reliance on it. The
much-noted trend toward opening nation-states to integration with regional and world markets
has, among other things, opened states to new forms of friction and conflict as well.
Negotiations between governments may today cover more aspects of world society than at any
previous time, considering the depth and speed with which their policies penetrate societies
today. This same liberalizing trend has by definition constrained governments’ ability to decree
economic and political outcomes, and it has increasingly empowered actors other than
governments. To the extent that commercial firms, banks, international agencies, and
non-governmental organizations concerned with the environment and human rights, for example,
make effective decisions over sectors of world society or have influence with governments, all
these actors seem destined to be thrown together repeatedly in a multiple, overlapping processes
of conflict and negotiation to achieve their objectives. Whatever structures and institutions
prevail in future world affairs, negotiation will be central in determining what these structures
and institutions mean in practice for states, firms, and people.
Yet, to summarize the English-language literature, we do not understand these processes
well enough. Although much has been written, knowledge of international negotiation as a
process remains inadequate both conceptually and empirically. It remains fragmented, poorly
linked to evidence, and possibly flat wrong in some respects.1 This general conclusion also
applies specifically to our knowledge about possible connections between military-security
conditions and international economic negotiations.
These critical arguments and several positive hypotheses suggested for further scrutiny
are this paper’s main offerings. It is only an exploration in problem definition and hypothesis
generation, in search of honest reactions and advice that might improve a project’s future
trajectory. It carves off one slice of a complex phenomenon, leaving its flanks largely
undefended in many directions.
“Negotiation” and “bargaining” mean a sequence of actions in which two or more parties
address demands and offers to each other for the ostensible purposes of reaching an agreement
1
Other scholars are welcome to proceed on the assumption that this process makes no independent difference in the
end, instead correlating variables that precede and follow it in the causal chain. This is nothing more than an
assumption that has not been proven, however, and it is no more plausible than the opposite assumption, which
guides my own research.
3
and changing the behavior of at least one actor from what it would have done otherwise. In
some cases the actions include ostensibly unilateral moves that also send signals to other parties,
and in some cases the outcome is a tacit settlement rather than an explicit agreement. Bargaining
moves are not limited to compromises and concessions; they include threats and manipulation of
information as well. The sequence of observed actions constitutes the outward, behavioral
manifestation. The inner core of negotiation consists of a process of communicating
information, unwittingly as well as deliberately. Each party sends messages or signals and
attempts to influence the meanings others attach to them. My attention focuses on this process,
these action sequences in particular. The subject is differentiated analytically (though not in
practice) from policy making in general, which deserves equal research attention and already
enjoys far more. Nor is the concept of bargaining equivalent to either “conflict” or
“cooperation.” It does overlap each; in fact it forms the central theoretical bridge between the
two.
This study is not about all bargaining but only that which is both international and
economic. "International" here means that at least one party is a national government or an
agency thereof and at least one other party is based outside that country. Excluded here are
negotiations in which no party directly enacts government policies for an entire nation.
Economic negotiations are those in which parties’ actions refer explicitly to the production,
movement or exchange of goods, services, investments, money, or information and their
regulation. The parties’ actions often refer to their own and others’ national policies and to
international rules designed to affect these transactions. All such episodes share a crucial
property that is absent from most armistice, arms-control, or terrorism negotiations: players’
actions are normally sensitive to market conditions and reactions, since influencing markets is a
key purpose (at least in a capitalist world). This market-sensitivity is found in many episodes
that are diverse otherwise. These episodes are important enough for their own study and have
not been viewed together in this light. At the same time, focusing on them need not require us
to ignore the military-political context, nor to ignore parallels we may find with military or other
bargaining.
History supplies abundant examples of international economic negotiations, beginning
long before the cold war of course, and many are well-known. An illustrative and unsystematic
list could include those that led to the following diverse outcomes: the famous 1860
Cobden-Chevalier trade treaty; the 1936 tripartite exchange rate pact; the 1944 Bretton Woods
agreements on monetary, reconstruction, and development issues; the creation of the European
Coal and Steel Community; Japan’s restrictions on its own exports of textiles and apparel
products to the US and European countries during the 1950s and 1960s; the 1959 deal whereby
India and Exxon established a joint petroleum refinery; various GATT trade-liberalizing
agreements; pacts associating newly independent African states with the EEC during the 1960s;
that between Algeria and France over petroleum trade in 1983; those during the 1980s between
international creditors and individual developing countries that rescheduled sovereign debts;
between Japan and the US concerning semiconductor trade, 1986; over Canada-US Free Trade,
1988; and the 1993 settlement of the EC-US dispute over oilseeds.
4
Other economic negotiations have ended in impasses: for example, the 1933 London
Economic Conference; Mexico and the USA over gas trade 1977; IMF members over a dollar
substitution account, 1978-79; Mexico and GATT regarding Mexico’s possible accession
1979-80; and 1980s efforts by debtor countries to form a cartel. A third set of examples might
include economic negotiations in process today whose outcomes are not known--such as those
between China and the WTO over China’s accession; between the IMF and borrowing countries
over credit terms; and between individual firms and states over investments.
Note that this definition of “economic” refers to the issues that parties discuss explicitly
with each other and not to the subjective goals negotiators might have in their minds. Suppose
state A offered state B a trade or financial concession, and suppose one unstated objective was to
make B heavily dependent on A in wartime. This would be described as a security objective or
reason for carrying out an economic--not a military--negotiation.
A particular negotiation could explicitly mix military with commercial or financial issues.
Examples might be a negotiation over diplomatic recognition and initial establishment of
relations between two states, or one between Panama or the Philippines and the United States in
which the issues included military base rights and foreign aid. This study holds such mixed
episodes aside in order to concentrate first on those lacking explicit military-political issues.2
Including them from the beginning and then asking whether security conditions make a
difference might lead to rather obvious conclusions. It seems more sensible to try first to clarify
negotiation over economic issues when the issues are in fact not mixed, as well as purely military
bargaining, separately, and then with those refined ideas in hand to ask whether mixed cases
require additional special analysis.
WEAKNESSES IN PRESENT KNOWLEDGE
Our knowledge of international negotiation in general needs improvement both
theoretically and empirically. We have many impressive mathematical models of bargaining,
and model building is a valuable part of the scientific process. While they might identify the right
causal mechanisms, however, we simply do not know in the cases of the many conjectures that
have not passed even weak tests on evidence from international history.3 Some of them may be
untestable in any case. While such scholarship has its recognized place in our collective project,
my own proximate goal is theory that is shown to have empirical validity. One possible way
forward toward that goal--in addition to more sophisticated modeling, on which I hope others
will make progress--is to divide models into basic components such that at least some elements
might be made concrete and even tested. Another is to generate theoretical concepts and
2
Mixed episodes are analyzed in Thompson 1977, Stein 1993, and sources cited below, for example.
3
See Young 1975 for an earlier survey of this issue. Helpful on more recent game theory in economics are Binmore
and Dasgupta 1987 and Kennan and Wilson 1993. For rare, welcome exceptions see Suzuki 1994 and, concerning
military crisis bargaining, Fearon 1994.
5
relationships from field observation more directly, rather than limiting ourselves to what
mathematics can express today. This study moves in both these latter directions.4
Several informal theories developed first in psychology and sociology have also been
suggested for international negotiation and many of these are interesting. Again however, only a
few causal propositions have been specified and confirmed even weakly with historical evidence
from this field.5 Many empirically sophisticated case studies have illuminated particular events
and some express theoretical payoffs.6 Despite their achievements, these case studies including
my own have failed to accumulate into a consistent body of knowledge, or even into several
sub-bodies each internally coherent. They begin from diverse conceptual foundations and most
take few specific steps that would encourage cumulation. Some studies of international
negotiations propose typologies--of components, stages, and influences upon the process--and
show that these concepts can help describe multiple cases in the same language. This work too
often stops short of identifying general links between causes and specific effects and conditions
under which these relationships hold.7
Political science studies of international economic cooperation conducted during the last
decade have generated a new school of analysis and have also achieved much,8 but this literature
too suffers from at least two significant limitations. Most research has effectively restricted
cooperation to regime studies, while regimes are not the only form of international cooperation.
Thus less attention has been given to many bilateral instances of cooperation and possibly the
most consequential ones, for both markets and politics. In fact, bilateral bargaining has been a
prerequisite for, or a dominant component of, many multilateral agreements. Probably the most
consequential international economic regime agreement of the twentieth century, concluded in
1944 at Bretton Woods, was actually negotiated bilaterally by the United Kingdom and the
United States to a large extent, outside any international institution, before they invited other
parties to join the process.9 Furthermore, beginning with the most complex multilateral
negotiations makes it more difficult to isolate central causal relationships empirically.
4
For evidence that such theory might have empirical validity see Odell [ref list]
5
Sample the state of this art in Zartman 1978, Pruitt and Rubin 1986, Thompson 1990, Faure and Rubin 1993,
Zartman 1994, and works cited there.
6
E.g., Wriggins 1976, Winham 1986, Haas 1992, Martin 1992, Part II, and Friedheim 1993. Other case studies are
largely atheoretical, such as those in Clarke 1973, Cohn 1979, Keeley 1983, and Ravenhill 1979.
7
A good example is Sjöstedt 1993.
8
See critical reviews by Haggard and Simmons 1987 and Milner 1992.
9
Gardner 1956.
6
Second, this IPE school has generally attempted to explain regime formation and change
by concentrating on the international power structure--hegemonic and otherwise--and the
institutional framework itself, assuming it will govern subsequent interstate bargaining. A given
power structure, however, is only the bare beginning of analysis; many different outcomes are
consistent with a given structure. International institutions in fact probably have only a small
influence on bargaining outcomes, relative to other influences. Little empirical research, at
least, has demonstrated otherwise. One of the most popular recent theoretical ideas--that high
transaction costs of operating otherwise are what drives states to cooperate via regimes--has yet
to be substantiated or defended against alternatives by means of close empirical research. This
cooperation school, with a few exceptions,10 effectively assumes that the bargaining
process--the parties' strategy choices and the interactions between them--has no significant
effects on negotiation outcomes.
Consider the most seminal contribution to this school, Robert Keohane's pioneering After
Hegemony. Keohane selects the multilateral negotiation of the International Energy Agency in
the 1970s as the primary illustration of his theory, which effectively limits cooperation to
international institution-building. Its accomplishments notwithstanding, the book itself
underlines repeatedly how marginal this agency's practical effects were.11 In contrast, the book
does not examine the bilateral bargaining during roughly the same period between Algeria and
France, which led eventually to agreement on a higher price and movement of billions of cubic
meters of gas as well as improved political relations between the two states.12 Nor does it help
us understand why the parallel bilateral gas dispute during the same period between Mexico and
the United States damaged that political relationship and yielded an agreement so small as to
qualify as largely symbolic. Most important, the book does not report a close enough empirical
investigation of the process of negotiating the IEA to show whether the main explanatory
variable proposed--the desire to reduce high transaction costs of future bargaining--actually
influenced any government's behavior. A full and fair evaluation will need to take account of
subsequent studies and critiques, which are still unfolding.13 Institutional studies have taught us
much and the tradition is certainly worthy of further investment. But most leave much to be
done regarding the negotiation process.
What do we know about military-political conditions and beliefs in particular as
influences on economic bargaining behavior? Present research literature includes at least four
types of publication--studies of decisions made in wartime; studies of peacetime economic
sanctions adopted for military-political purposes; theoretical or polemical essays that assert wider
10
E.g., Young [various], Rhodes 1989, and Martin 1992.
11
Keohane 1984, pp. 224-240.
12
Zartman and Bassani 1988.
13
See Finnemore 1993; Haas, Keohane and Levy 1993; Mitchell 1994; Underdal 1992; and Young 1991 as some
excellent examples.
7
positive effects in peacetime but fail to cite convincing evidence; and case studies that present
copious evidence about peacetime financial and trade negotiations and find little or no effect.
The effects of wars and wartime on the basic structure of international politics and on
negotiators’ decisions are probably too well known to need further attention here (e.g., Gardner
1956, Gilpin 1981). Economic sanctions studies are also plentiful and well-known (e.g., Knorr
1975; Hufbauer, Schott and Elliott 1985; Baldwin 1985; Martin 1992). That research helps us
understand variations in sanctions’ effectiveness when used, but often has not asked why
sanctions are used in some situations and not others. [to be developed further]
Others have conjectured that military conditions and motives have influenced past
peacetime economic negotiations more generally but have not provided convincing evidence.
For example, in his influential U.S.Power and the Multinational Corporation, Gilpin (1975, p.
154-55) asserts:
In essence, after 1958, a bargain was struck between the three dominant poles of
the international economy--the United States, Western Europe, and, to a lesser
extent, Japan. Partially for economic reasons, but more importantly for political
and strategic ones, Western Europe (primarily West Germany) and Japan agreed
to finance the American balance of payments deficit. . . . Thus, after the late
1950s the United States in effect ran its foreign policy largely on credit. The
willingness of Europe and, to a lesser extent, of Japan to hold dollars helped make
it possible for the United States to maintain its troop commitments in Western
Europe and elsewhere around the Soviet and Chinese periphery, to finance foreign
aid, and of course to fight the Vietnam War. For its part, the United States, as we
have already pointed out, tolerated discrimination against its exports and
promoted the creation of the European Economic Community even though the
success of the EEC would make it a direct and significant threat to American
commercial interests.
The only source cited is another broad-brush essay. No evidence is presented for the claim that
the most important beliefs or objectives in states holding dollars were political and strategic ones.
In fact many of those dollars were held by private European, Japanese and other banks and
corporations that needed increasing quantities of dollars for doing international business. As for
their governments, surely the chief reason they failed to revalue their currencies after they
developed payments surpluses--which would have reduced the US deficit needing financing--was
commercial, not military. They did not want to see their goods lose competitiveness at home or
abroad.
Aggarwal (1985), as another example, contends that the 1950s and 1960s negotiations to
create international rules regulating trade in textiles and clothing were nested within a “higher
level” international security system, such that states make the former conform with the latter if
necessary. Unfortunately the evidence here is no more convincing. “The best evidence of the
paramount importance of the bipolar struggle” in the formation of US textile trade policy, says
the author (p. 78), is a quotation from a strongly protectionist US senator whose state included a
8
concentration of textile workers. The senator moaned that exporting countries complain about
US measures taken to protect his constituents, and that the State Department is concerned about
their protests. Protectionist representatives always voice their constituents’ complaints that
Washington has done too little; this is hardly convincing as evidence that the Soviet threat or
anything else did restrain US textile negotiators. In fact the textile story is one of ever-widening
application of exactly this type of restriction, against more and more countries and
products--during the cold war and in the face of exporters’ repeated protests. The most thorough
case study of any bilateral trade negotiation ever published (Destler, Fukui, and Sato 1979)
documents, in fact, that in 1971 President Nixon was willing even to threaten to use the US
“Trading with the Enemy Act” to impose economic sanctions on its ally Japan in order to extract
a textiles trade concession. Nixon took this remarkable step right in the midst of his strategic
nuclear negotiations with the USSR--surely a moment when special restraint for the sake of
allied unity would be expected if the security system really was “higher.” The authors of this
study emphasize (chapter 13) that “high policy” arguments failed to keep these allied
governments from engaging in a long and damaging commercial dispute.
A fourth body of scholarship consists of many other thorough case studies of peacetime
economic negotiations in which the parties have not acted in response to security conditions or
introduced military linkages at all, as far as we know. A detailed book-length account of the
GATT’s 1960s Kennedy Round, apart from noting that the parties did not include China and the
USSR, makes no references at all to security conditions or linkages affecting the negotiation of
this major agreement (Preeg 1970).14 The same silence, apart from peripheral references, prevails
in case studies of US trade strategy between 1887 and 1939 (Lake 1988), the 1965 Canada-US
automotive trade pact (Keeley), Japan’s bargaining over exchange rates 1969-1971 (Angel 1991),
the 1970s New International Economic order bargaining between developing and developed
countries (Rothstein 1979), Group of Five monetary negotiations at the Plaza Hotel and the
Louvre (1985 through 1987, Funabashi 1988), and the GATT’s Uruguay Round (Hampson with
Hart 1995). Most of these studies were written by political scientists, who should notice
possible military-political influences sooner than most others, and all these studies resulted from
prolonged, deep exposure to empirical evidence.
Moreover, many of these negotiations took
place during the cold war, and some occurred during hot wars, in fact. If we fail to find such
influence then, are we likely to find it when the risk of war is lower?
Is this impression of insulation due to oversight or biased selection, or does this research
contain clues to valid generalizations (or both)? We do have a sound theoretical reason for
expecting insulation in general--for expecting that, contrary to what north Americans hear so
often from policy advocates, the two will not generally be “inextricably intertwined.” The
notion of using military threats or offers to induce economic concessions, for example, assumes
that such military moves would have no important consequences for the security sphere itself--a
dubious assumption. Presumably security moves will be constrained substantially by security
conditions, goals, and efforts by bureaucracies that embody them. Similarly on the commercial
side, the proposal to bend trade or financial concessions or threats to security goals is likely to
Friman 1993 (p. 404) argues that President Kennedy “played the security card” in US politics, citing the
communist threat as a tactic for generating support for passage of the enabling US legislation in 1962. Preeg makes a
passing reference to this domestic tactic, pp. 46-47.
14
9
meet at least some opposition from the producers, lenders and investors who would pay the price,
except when the commercial moves or opportunities are insignificant economically or when
these constituents believe war is imminent. (This opposition may be weaker or have less effect,
though, in authoritarian polities than in democracies.)
CENTRAL QUESTIONS, ASSUMPTIONS, AND CONCEPTS
To summarize, what is lacking most today is theoretically-framed, comparative empirical
research outside the laboratory on the international negotiation process. This paper and a planned
book15 are steps in that direction. They assume that a simplified framework or theory can
improve both research and actual decision-making on these complex events, and that the same
framework can be useful in many countries. One central question for any comprehensive theory
is what shapes negotiations’ outcomes, in the sense of the value of the agreement or settlement
for each party and for the set of parties. In particular, do governments gain more or lose less in
some episodes than in others, and if so, why? Why do economic disputes and negotiations turn
out as they do, and by extension, can parties do better? This central question can be approached
best by dividing it into several component questions.
This theory concentrates on the negotiation process, rather than concentrating on the
international power structure or international institutions that may be present. It begins with
individuals making decisions using bounded rationality. It assumes the individual brings a set of
policy values and beliefs to the current situation but lacks perfect information. The theory is
partly subjective in that it assumes that information regarded as objectively valid by the observer
will be relevant only to the extent that it influences the subjective beliefs of the negotiating
parties. An appendix provides responses to some common academic concerns about subjective
theories.
This theory does not assume that individuals will necessarily strive to maximize benefits
fully relative to costs. Instead the individual is assumed most likely to choose the course of
action that offers the greatest subjective probability of achieving the values that seem most
salient at the time. Many negotiators choose strategies at the beginning of the process, strategies
that often do not specify exactly how the party will act in all conceivable future contingencies.
Furthermore, the individuals of interest to us are situated in institutions, which are likely to
influence both the selection of incumbents in the first place, their negotiating objectives in a
given instance, and how they frame and react to information arriving during the episode. The
objectives on their minds need not be limited to issues under negotiation; for example, the
negotiator’s own relative political influence at home may be effectively engaged as a limiting
value or explicit goal. While simplifying reality is one of any theory’s purposes, for me
15
My book in progress (progress measured on the glacial scale) is tentatively entitled Washington and the World
Economy: A Theory of International Economic Negotiation. My thinking builds espeically on Walton and McKersie
1965, Raiffa 1982, Lax and Sebenius 1986, and Walton, et al 1994, among others.
10
simplicity or parsimony does not have higher priority than empirical validity. (Making precise,
accurate forecasts is not a realistic aspiration for any bargaining theory today.)
Given these assumptions, then, let us consider using the following conceptual building
blocks, which have proven useful in interpreting the process and in conducting actual
negotiations:
party: an entity engaged in a negotiation, one whose actions are recognized by other
entities as part of the process in question;
objectives and weights: values or states of the world the negotiator wishes to achieve or
preserve by means of negotiation; if more than one concern is engaged, the weights attached to
each value. If weights were precise, they would sum to one hundred percent by definition. In
practice they are only approximate; the concept represents any sense of priority attached to
multiple objectives. Values need not be limited to those normally expressed in money terms;
they may include human rights, environmental conservation, and national security.
To substitute the concept “interests” for “objectives” would endow the notion with a
veneer of objectivity that may or may not be valid. Rather than assuming that certain “real
world” conditions will necessarily create corresponding subjective negotiating goals in leaders’
minds, we will get closer to empirically valid theory by making such assumptions explicit as
hypotheses to be investigated. That way, both author and reader will find it more difficult to
escape the need to seek at least indirect evidence for the subjective beliefs and weights. Thinking
this way rather than in terms of “interests” also probably will save practical negotiators from
inaccurate speculations by focusing them on variables that really will determine their immediate
results--the subjective goals and perceptions on the other side of the table.
policy belief: a proposition in the minds of a negotiator representing connections she
believes obtain or will obtain between actions and reactions, or between fixed underlying
conditions and the process or its outcome, or between actions and goals;
issue: an agenda item or discrete matter on which parties speak or otherwise act and
which constitutes an element of their requests, demands or offers;
best alternative or “batna: a party’s best alternative to an agreement with the other parties
in this negotiation; a course of action that, in the case of impasse, would be the best alternative to
follow, as judged by the deciding party itself;
resistance point (or reservation value): the value of the worst potential deal a party will
accept, or the value beyond which the party would prefer no agreement in this negotiation; for a
buyer, the maximum price it will pay, for a seller, its minimum;
strategy: a set of actions seen as a related set and intended to advance a party toward its
objectives through negotiation; (tactics: individual actions that constitute a strategy);
11
outcome: an explicit agreement between the parties covering the issues, or a de facto
pattern of behavior that approximates terms of an agreement and persists for some time. A party
is assumed to attach some value, positive or negative, to actual and potential outcomes. Market
consequences that may flow from an official settlement are something else again, not part of the
outcome in this sense. Government behavior is important enough to merit concentrated research
all its own, in addition to research on markets’ behavior (“results” in American business
parlance).
ratification: a party’s internal decision whether to give formal effect to an agreement
negotiated by an agent. This decision process, while often institutionalized, may be informal in
some instances.
This paper, reflecting my own research as well as the cited case studies, assumes that
much of what is relevant for the present questions at least during peacetime is found
elsewhere--in the markets, domestic politics, and international institutions concerned with
commercial and financial issues.16 This particular working paper imagines these conditions
“held constant” in order to investigate possible effects of international military-political or
security conditions alone. The most basic such conditions are (a) war and defeat or victory in
war; (b) in peacetime, the country’s place in the world distribution of military and general power
capabilities or of war threats, and changes in these military capabilities and threats; and (c)
whether the negotiating parties are also members of the same alliance (or a more limited military
relationship), members of opposing alliances, or neither. This particular paper will leave aside
bargaining between parties that are at war either with each other or against third parties, as well
as the direct consequences of war--preferring to go beyond the relatively obvious. Surely no one
would claim that World War II had nothing to do with the Bretton Woods negotiations.17 This
paper does attempt to identify more precisely some of the circumstances and channels of entry
through which other security conditions might enter the economic negotiating process in
peacetime. (Feel free to try this yourself at home.)
SOME HYPOTHESES
Priorities among objectives
One possible channel would be through the setting of the negotiators’ objectives.
Looking back, analysts sometimes try to interpret negotiations by referring to objectives or
motives. Inoguchi, for example, writes of the US demand for what became the 1986 Japan-US
agreement on semiconductor trade: “It is a manifestation of deep US concerns about national
16
Possibilities neglected here are explored in Odell 1980, Odell 1985, Odell 1993, other studies in Evans et al. 1993,
Odell 1995a and Odell 1995b, as well as in other works cited.
Specifically the Pearl Harbor attack in fact may have triggered Treasury Secretary Henry Morgenthau’s instructions
to his aide, Harry White, to begin drafting the plan that later led to the IMF, and more generally the second world
war destroyed the US public’s respect for the doctrine of security by isolation--which seems to have played a role
earlier in blocking US concessions on war debts, which in turn stymied earlier proposals to negotiate joint reflation
and exchange rate stabilization. Odell 1988.
17
12
security, since semi-conductors are widely used in high precision, high performance weapons as
well as in civilian applications.”18 Unfortunately this author supplies no evidence of any kind
for this claim.
What critics of actual negotiations often seem to want, even though they may not put it
this way, is a change in the objectives or priorities that principals assign to their negotiators,
rather than changes in how negotiating agents operate to achieve the assigned goals. Richer
importing countries are chastised for demanding that poorer countries agree to limit their exports
of light manufactured products, on the grounds that the importing country as a whole would be
better off to enjoy the less expensive products and have money left over. Many political leaders
nevertheless have directed many negotiators to achieve agreements to restrain certain imports in
order to satisfy a minority of their constituents. This criticism is concerned less with how
negotiators should behave once their objectives are set than with those objectives themselves.
Should political leaders direct trade negotiators to aim for the greatest possible average national
economic welfare, or re-election of the incumbent political party, or favorable attitudes in
exporting countries, or some mixture?
To take another example, in 1990 the US Congress debated the Bush Administration’s
agreement with Japan to produce a military fighter aircraft jointly (a case of mixed issues). US
critics complained that the President should have demanded that Japan import a purely American
product instead, and thereby reduce Japan’s trade surplus with the US. Advocates responded
that if Congress killed the agreement, Japan would refuse the US product and instead build its
own new plane by itself, which would reduce US influence on Japanese armed forces and
damage attitudes in each country toward the other.19 This debate reflected disagreement over
priorities among objectives that were themselves accepted by all: how much weight US
negotiators should assign to trade deficit reduction and maintaining this security relationship, to
the extent that the two were rivals. In this case participants seemed to differ as well about
whether the two were in fact in conflict--about what would actually happen if the US negotiator
held firm in demanding that Japan’s military forces buy the off-the-shelf US plane.
As a third example, today the United States debates annually whether it should maintain
high tariffs against Chinese goods or grant them the much lower tariffs given to GATT members
(without reciprocal Chinese trade concessions like those GATT members have made to the US).
Some argue that conditioning tariff reductions on improved political rights in China would help
improve those rights, while others insist this move would disadvantage US businesses in
international competition and perhaps even worsen Chinese political rights by slowing the spread
of capitalism in Chinese society. This debate too is partly about weights to be assigned to
economic, moral, and relationship objectives in making trade policy, though it probably also
reflects some disagreement about exactly what would happen if the US raised tariffs back to their
pre-1979 levels.
The emphasis in this study falls chiefly on the process that follows after negotiation
objectives have been set initially. Setting goals is central to all policy, foreign and domestic, and
18
19
T. Inoguchi 1991, 82.
Spar 1992; Ortmayer. 1992. The U.S.-Japanese FSX Fighter Agreement. Pew Case Study 350, Part A.
13
the totality of all policy making is far more than this study can hope to analyze seriously. Yet
three basic ideas about priorities may help at least limit the probability distribution of a party’s
future moves, and thus lead us on to other hypotheses. These ideas assume that parties will
always have multiple objectives and that at least some times, increasing weight on one will be
not be possible without sacrificing some of another.
First, while a state is fighting in a war, its agents will increase sharply the weight placed
on military-political objectives in economic negotiations with all other states and with
companies. Thus offers of military assistance and threats to withhold it, for instance, probably
will have substantially greater ceteris paribus effects on that negotiator’s moves than they would
in peacetime.
Second, the weaker the state militarily, the greater the weight its negotiator probably will
place on security on average. That is, the weaker the state, the more will it sacrifice commercial
for military value if there is no way to have both, other things equal. (Presumably this implies
that the weakest states will regularly place greater weight on security than on economic goals
when they must choose.) One reason is the principle of diminishing marginal returns. A given
increment to security will be worth more to a highly vulnerable state than to the state that is
already least likely to be conquered. Thus the strong power will not be willing to sacrifice other
goals to the same extent to achieve that increment; it will place greater weight (than the weaker
state) on achieving commercial gains when they are in conflict.
Suppose strength is defined objectively first, say by a combination of actual military
forces and (in the twentieth century) total industrial output, or better, by the relation between the
state’s capabilities and those of its neighbors or the world as a whole. If this idea is valid, we
should find that negotiators for China in the 1890s, when facing a dilemma, traded economic for
security value more often or to a greater degree than did the UK. Also we should find that when
a state rises dramatically in the local or world military power hierarchy over decades, its effective
priorities shift away from military goals on average, while a large secular drop should produce
the opposite shift.
Will smaller differences in this relatively-constant “variable” also have effects that are
significant in the big picture? Will major powers that are, say at one point in time, unequal but
closer in military capacity also tend to assign systematically different weights? Next year will
Indonesia, for example, place greater weight on military security relative to commercial
advancement than China? Will China give up more commercial gain for military gain on
average, when forced to choose, than Japan or Germany? Will Japan or German priorities differ
predictably from those of the USA? On the one hand, yes--if marginal returns diminish, the
security returns from such a trade-off should likewise be worth more to the somewhat weaker
power than to the somewhat stronger, at least somewhat more so. Yet recalling that other things
that are “held constant” here also strongly influence financial and trade behavior in peacetime,
variations in these missing causes -- such as a trade balance shifting from surplus to deficit in one
or two years -- might override this gradually-changing one when economic diplomats set
priorities next year. At this time we lack sufficient evidence collected consistently from many
cases to support any sound general answer to these questions.
14
Holsti (1986) proposes an idea that is related here. In the case of a weaker state tied to a
dominant partner for security, the more the dependent increases its partner’s trust that the
dependent’s security policy will remain loyal, the less will the partner demand that it sacrifice
material goals to demonstrate its reliability. Even if relative capabilities remain highly unequal,
Holsti suggests, varying trust on the partner’s part, reflecting recent experience, can ease or
worsen the dilemma that forces the weaker state to choose among its goals. He cites the
increasing latitude the Soviet Union allowed Finland after the 1950s, after the Soviets saw that
increased Finnish trade with the West did not come at the expense of Soviet security or
commercial goals.
Third, if a country’s national political institutions (including political parties)
systematically afford special influence to domestic groups that weight military objectives heavily,
then that state will probably trade off commercial for military gains more than average when
facing a dilemma, other things equal. Suppose, for example, that any government dominated by
military officers will weight national military objectives more heavily than average. Then we
should find that a regime change in a country should be followed by evidence of change in the
subjective weights officials assign to these objectives, as well as differences between military and
civilian governments in different countries that rank similarly on the economic issues at stake.
Conversely, if national political institutions give special influence to groups that weight their
own commercial gain strongly over national security objectives in negotiations on certain sectors,
then political leaders and negotiating agents will reflect this ordering and will be willing to
sacrifice the latter for commercial gain more than average when those issues are on the table.
[add example]
Many other things will also shape foreign policy objectives, and we must leave the rest of
that large subject for others. From here forward, let us assume that the negotiating party’s
objectives and priorities will be set at the outset of the process and that military security will not
necessarily be ruled out, at least as a constraint on what can be accepted.
Alternatives to agreement, resistance points, and distributive tactics
A central proposition of negotiation theory holds that the better an alternative to
agreement a seller perceives, the higher will be its bargaining resistance point and vice versa,
other things equal. The better the offer a seller hears from a third party, the higher a price will it
demand of the party across the table for the same item, and the worse the seller’s alternative, the
lower a price will it accept. If the buyer insists on paying less than the seller’s current
reservation price, the seller will prefer no deal in that bilateral negotiation. In multi-issue
negotiations, a party may have separate resistance points on different issues. Typically
negotiators try to keep their true reservation values secret.
Figure 1 is a highly simplified depiction of resistance points in a negotiation with two
parties and one issue. Points in this space represent possible outcomes and the axes measure the
value of each outcome for parties A and B. Suppose the dotted vertical line at value 2 represents
A’s resistance point. If B offered a deal worth less, A would prefer to reject that deal because A
15
has an alternative worth more than 2, whatever that means. All points to the right of that line
represent outcomes that would make A better off than it would be in the absence of agreement
with B. The horizontal dotted line at the value 10 represents B’s resistance point. Curve P is the
outer limit of deals that are technically possible. In this illustration the two parties enjoy a
positive zone of agreement, a set of
16
17
points at any one of which a negotiated agreement would create value for one or both parties
without making either worse off. Point M is in that zone.
Brazil (call it party A) participated in negotiations during the 1960s and 1970s concerning
an official agreement to limit fluctuations of international coffee prices. As the leading exporter,
Brazil’s alternatives to agreement with importing countries included letting the international
market set the price freely, and Brasilia began seeking this agreement when prices were falling.
Point M might stand for the agreement that made both Brazil and importing countries (party B)
better off in 1962, when they signed the International Coffee Agreement. Market prices rose
during the late 1960s, improving Brazil’s alternative to this official scheme. Now by selling to
the international market it could get a better price than before. In Figure 1, let the vertical line
marked 5 stand for the new Brazilian resistance point. As a result, in International Coffee
Agreement negotiations over an extension of the scheme, Brazil raised its terms for agreement.
In that situation, importing countries resisted and the parties deadlocked on this central issue.
They completed the negotiation in 1971 with only a shell of an agreement omitting any effective
ceiling-price mechanism at all.20 Seen in our diagram, Brazil’s shift to the right demanded terms
that would have been worth less to its partners than their own reservation value, given the
possibility curve, and so they declined.
Military conditions, economic alternatives
Now one channel through which the military security situation might affect a state’s
economic bargaining is through an intervening variable, by first affecting the state’s market
alternative to agreement. That is, the more military-political conditions worsen a state’s
aggregate or sectoral market alternative to a negotiated agreement, the more its negotiator will
probably ease its resistance point in those negotiations, other things equal, and the more the
military situation improves its market, the more it will raise its minimum demands.
Since true resistance points are difficult to observe, a derived proposition would be more
usable--one relating the security situation to the negotiator’s economic bargaining tactics. The
more the military-political situation worsens the market alternative to agreement, the more the
state will probably soften its distributive tactics in economic bargaining, and vice versa.
Concretely this change in tactics entails offering to or actually loosening any economic sanctions
in place, reducing threats and demands, increasing or accelerating proposals and concessions, and
taking steps to increase the credibility of promises. These terms could be defined operationally.
As an illustration of this indirect effect consider West Germany in 1978 as party A and
consider its aggregate balance of payments as the relevant market condition. At that time
Germany was in surplus and was accumulating more dollars that it preferred. Along with other
surplus countries German leaders began negotiations in the International Monetary Fund to create
a dollar “substitution account,” an account at the Fund that would accept dollars in exchange for
SDRs, the Fund’s money. The US resisted some features of the proposal and at the end of 1978
agreement had not been reached. This was the moment when the Khomeini revolution
20
TBA
18
overthrew the Shah of Iran, driving world oil prices up immediately. Rather quickly Germany’s
and Japan’s payments surpluses disappeared. Thanks to the unpredicted military-political event
in Iran, their excess dollar problem also disappeared (Gowa 1984). That revolution ironically
improved the monetary status quo relative to the proposed substitution account, whose supporters
then suddenly abandoned the negotiations to create it
Military alternatives, potential allies
Next suppose that state A, when valuing its alternative courses of action in the absence of
an economic agreement with B next year, will factor in its own international military-political
situation directly as one dimension of the no-deal scenario (given the assumption that even the
strongest state gives some weight to security goals in economic bargaining). This broader
conception of state alternatives is of course a defining distinction between states and all other
parties to economic negotiations. Then the greater the risk of war or loss of influence relative to
potential enemies that A’s leaders perceive, all else equal, the more A’s negotiator probably will
ease its distributive tactics during economic bargaining with a potential or actual ally, as a means
of cementing a relationship that could be needed for security. Conversely an improvement in
A’s perception of security should lead it to harden its terms and distributive tactics with an ally.
This effect might not appear, however, as long as the perception of military political danger is
low, say below its long-term average.
Benjamin Rowland’s interpretation of changes in Britain’s monetary bargaining behavior
during 1935 and 1936 illustrates this proposition. London and Washington had taken their
currencies off gold in 1931 and 1933 respectively, and the two governments were competing via
efforts to push the bilateral exchange rate in opposite directions. Any thoughts of halting this
conflict by agreement had been frustrated by grievances and distrust on each side. Paris
continued to defend the gold franc, but its weak payments position was making this effort
increasingly difficult to bring off. In 1935 a French currency crisis prompted US Treasury
Secretary Henry Morgenthau to suggest to Britain that the UK and the US create limited joint
gain by agreement. The two would engage France in a three-way agreement whereby London and
Washington would agree to stabilize their currencies if France would agree to an acceptable limit
to its devaluation, which was seeming inevitable. According to Rowland, Britain’s Ambassador
in Washington did not see this proposal as acceptable on economic grounds. Then in March 1936
Hitler moved into the Rhineland and currency markets renewed their flight from the franc.
Eagerness to take a strong stand against the Germans and fear that an economic crisis
might drive France to embrace fascism were two potent political reasons which now
joined Morgenthau’s economic calculations. After discussing the matter with Roosevelt,
Morgenthau sent a message to [Chancellor of the Exchequer Neville] Chamberlain
through a British intermediary. To his surprise, Chamberlain expressed himself in
complete agreement. In Britain too, the overriding motive for stabilization was concern
over the deteriorating political situation. But concern over the fate of France was joined
by a general wariness at giving offense to the United States, since it was now clear that
Britain would be dependent on the United States in the event of war. The decision to
cooperate was not one that Britain reached with any great enthusiasm. It sprang, instead,
19
from a failure of alternatives. Britain had explored and would continue to explore
diplomatic options by which she might contain Germany and Japan without the aid of the
United States, but the Stresa Front Strategy . . . grew less and less plausible. . . . The
imperial economic system . . . was itself increasingly faction-ridden (Rowland 1976,
209).
Rowland’s conclusion expressed in present terms is that these events, by worsening Britain’s
alternatives to agreement with Washington, defined broadly, led London to lower its resistance
point for a monetary agreement slightly, to the limited actual commitment to stabilize currencies
one day at a time (in Figure 1 say from 5 to 2). The result was the modest tripartite monetary
pact of 1936. After its alternatives had deteriorated, London believed M offered a gain when the
same agreement had meant a loss the previous year. Rowland does not describe the parties’
tactics in any detail.
Unfortunately Rowland also fails to provide any evidence whatsoever for this interesting
conjecture that British security beliefs influenced their monetary decision. The evidence
presented does not rule out the possibility that Britain would have agreed to this modest
monetary cooperation in 1936 for the economic reasons alone, even if the security move had not
taken place. The Atlantic monetary conflict was proving fruitless economically, especially
considering the lasting size disparity between the UK and US economies, and letting France
devalue unilaterally could have hurt British producers more. Rowland concedes that these
economic reasons were sufficient for Morgenthau to propose the pact in the first place.
The recent collapse of the Warsaw Pact and even the USSR as a state --hardly a minor
change in security for Japan and the West--failed to cause anti-Soviet allies to break off
economic negotiations with each other. Indeed, Canada and the US created a new free trade area,
the European Community adopted the union treaty and pledged to create a single common
currency, and the Uruguay round finally produced the largest negotiated package of trade
liberalization in history--after the cold war was over. Did these allies nonetheless raise their
resistance points in these negotiations for this security reason and run greater risks of impasse
than they would have done during the cold war? Or do states in general respond less to
improving than to worsening prospects of the same magnitude? Or is this security hypothesis
regarding allies simply invalid on average? Will the “partial regression coefficient,” when other
things are factored in, prove insignificant?
This hypothesis also implies that at a given time, A will use softer claiming tactics in a
financial or commercial negotiation with an ally than with a neutral state on average, when the
issues and all other conditions are the same. Relevant evidence might include, for example,
whether the US did or did not agree to more favorable terms in textile negotiations with Japan
and Korea than with India or Argentina on average during, say, 1965 to 1985, after correcting as
much as possible for differences in economic and other likely influences. Similar tests using
other parties could be imagined.
Another corollary might be that at a given time, credible threats of economic sanctions
conditioned on economic concessions coming from a more powerful ally will worsen A’s
20
perceived alternative to agreement, so that A probably will soften its claiming tactics slightly and
slowly until the ally settles. If A were not allied to C for military security, its negotiators would
probably yield less in commercial concessions. One thinks of Japan’s responses to US threats
and actual sanctions regarding the yen in 1971, semiconductors in 1985-90, and autos in
1993-95.
As an aside, however, this case also calls to mind the cautionary theoretical idea that the
negotiation process itself can change a negotiator’s priorities (Iklé and Leites 1962), perhaps
even among allies. A will probably react in the opposite direction to the extent that C’s use of
hard tactics raises the subjective weight A’s negotiator places on his pride in and reputation for
“saying no.”
Military alternatives, potential enemies
Looking at the other side of this balance-of-power coin would imply that if A perceives
greater and serious military-political hostility from country C next year and other things are
constant, A will probably harden its distributive tactics in economic negotiations with C, as a
warning of worse measures to come and in order to limit A’s contributions to C’s economic
strength. Urban (1983) reports that interwar Poland and Germany engaged in a tariff war from
1925 until November 1935, when they signed a trade treaty formally ending it. Yet trade
volume did not actually recover. He reports that because Nazi Germany had begun rearming
earlier that year, Polish leaders grew increasingly sensitive to the concern that greater trade with
Germany would enlarge its preponderance. Hitler was sending warm signals toward his
southeast but not toward Poland. Warsaw signed a loan agreement with France in 1936 and
shifted its economic orientation, according to Urban, for security reasons.21 Here too the
documentation of security objectives is thin. As a more extreme illustration one thinks even more
readily of the US and other economic sanctions imposed against the Soviet Union and China
beginning in the late 1940s and early 1950s, part of which was wartime in Korea.
Issue linkage
Nearly every international negotiation links different issues into a conditional
package--all except those rare few that are confined to a single issue. Here the question is not
when will parties link issues but when will they link economic issues to military ones? When
will a party condition its agreement to an economic deal on a military-political concession by
another or vice versa? (For this paper, let us jump over consideration of any issue that is both
military and commercial by definition, such as weapons sales, where linkage therefore occurs by
definition, in order to concentrate on the less obvious.)
Earlier a general theoretical reason for expecting delinkage was introduced. Under what
conditions might exceptions be made?
It might seem that such linkages will be more likely
within an alliance than between neutrals or enemies, because the military guarantee gives a
stronger allied partner special influence over weaker ones committed to relying on it. That is,
21
Urban 1983. The last point about France is only an afterthought in this source,.
21
within an alliance, will a stronger state A probably threaten to degrade its military support unless
it gets greater concessions on economic issues, the weaker the partner state B? Or is the
opposite perhaps closer to the truth? Will an alliance tie adopted for security purposes constrain
A as well as B even when A is stronger, so that A would be more like to link military threats and
economic concessions when bargaining with weaker neutrals than with weaker allies?
Empirical research could investigate some carefully selected cases for comparison.
On a different tack one might imagine that state A’s negotiators will be tempted to bluff
at least sometimes, underestimating their counterparts’ analytical skill or information.22 On this
reasoning, A will try to convince B that A will withhold a military value unless B makes a
commercial concession when A actually will not implement the threat because of its own security
plans. Consider a conjecture concerning monetary negotiations between the Federal Republic of
Germany and the US in 1966 and 1967. Bergsten (1975, 31-32) argues that
the most important postwar step in insulating the United States from external
pressure on its [gold] reserves was the explicit pledge by Germany--the most
persistent [balance of payments] surplus country in the world--not to use any of its
dollars to buy US gold, which was an implicit quid pro quo negotiated in 1967 for
the maintenance of unchanged American troop levels in Germany. Some smaller
countries, such as Korea and Taiwan, have adopted similarly (if not such
explicitly) “cooperative” international monetary policies.
One has to wonder why A’s own security environments and policies would not place tight limits
on its willingness to carry out such a threat, inside or outside an alliance. If having US troops in
Germany was valuable to the Pentagon and State Department for military-political reasons, was
such a threat really credible? Granted, some members of Congress were airing the idea of
pulling back troops for financial reasons, but would the Johnson administration not have fought
this effort just vigorously in the absence of a German gold pledge? Did German leaders issue
their gold letter for military security reasons? Did they really believe this threat? Unfortunately
Bergsten, like Gilpin, stops with only assertions lacking convincing supportive evidence.
We do have detailed evidence about a subsequent military-economic linkage or attempted
linkage in Japan-US negotiations, but the evidence suggests this was a bluff that failed. After
the occupation ended in general, the US continued its occupation of Okinawa and the other
Ryukyu Islands in particular, and the Japanese people objected almost continually. The US
stored nuclear weapons on Okinawa and used the island as a staging area for possible fighting
against China in defense of Taiwan and actual fighting in Vietnam. Resentment in the mass
public burst out into periodic demonstrations that even became violent on occasion, including the
famous 1960 crisis that forced President Eisenhower to cancel his state visit. The bilateral
security treaty adopted then, over these protests, was due to expire in 1970 without further
negotiations, which would provide a perfect opportunity for renewed demonstrations. Late
1960s protests were even larger than those in 1960. In early 1969, the national security adviser
to the new US President judged, according to his memoirs, that the US needed to make a
22
Odell 1997 provides a theoretical basis for this reasoning drawn from social psychology.
22
concession on Okinawa for national security reasons, and the issue was urgent. In November
1968 Okinawa voters in their first direct election chose a Socialist as their chief executive, and he
announced immediately that he would begin to study closing the US bases gradually and
returning the islands to full Japanese administration. Kissinger in March 1969 sent a memo to
Nixon, supporting views shared in the State Department and the Joint Chiefs of Staff, that “our
refusal to negotiate an accommodation could well lead as a practical matter to our losing the
bases altogether” (Kissinger 1979, 327). First, however, Nixon meant to press Tokyo to extract
a commitment to greater Japanese military spending (Buckley 1992, 122).
Meanwhile Nixon was also negotiating for Japanese concessions on textile trade. In
November 1969 Nixon opened a Washington summit meeting with Prime Minister Sato by
telling Sato what he badly wanted to hear: that the US would finally return Okinawa to Japanese
civilian administration and free of nuclear weapons in 1972 (Destler, Fukui and Sato 1979, 136).
Reportedly Nixon understood Sato to agree to match this concession with Japanese concessions
on textiles. Sato and his emissaries also spent time with US officials discussing the terms of a
textile agreement. Upon his return, however, Sato failed to bring about Japanese implementation
of this plan, and the negotiations dragged on for nearly two more years, finally ending with the
“Trading with the Enemy” threat. It seems fairly clear that Nixon was attempting to get
something (textiles) that he wanted (for domestic political objectives) in return for his Okinawa
concession, even though the administration was going to do it anyhow for military-political
reasons alone. If this is an instance of peacetime military-economic linkage, it was probably a
bluff on the US side and was not reciprocated on the Japanese side. It does not seem to be
strong evidence contrary to the theoretical expectation of general insulation.
One of Washington’s other textile agreements of that period did include a form of true
and effective linkage but not a military one. Korea and Taiwan also resisted US pressure stoutly
and continuously until well into 1971. At the end of the day, when Korea saw its own no-deal
alternative deteriorate when Japan’s did, Seoul also yielded but Korea alone managed to extract
partial compensation. The US provided a loan and food aid beyond what was otherwise
scheduled, in amounts keyed to Korea’s losses from the trade agreement (Odell 1985). Korea’s
negotiators also always took American textile negotiators to visit the DMZ in person, in an
attempt to convince them to exempt Korea entirely, but with little apparent effect.
Ratification with a security card
Finally, after a negotiation has been completed, the international deal often must clear a
further hurdle in each national capital. At that stage if not before, policy advocates seeking
support sometimes “play the security card.” They advance an argument that their financial or
trade negotiating strategy or agreement will further their country’s security interests, or that
rejection will damage those interests or relationships needed for military-political reasons. This
argument is designed to cause fellow citizens to re-frame the debate in their minds from a purely
commercial question to a different one. The argument introduces a new reference point for
evaluating alternative courses of action--the country’s military-political objectives or
“interests”--and urges the listener to attach a substantial weight to those objectives when making
the decision. The speaker sometimes evokes emotions connected with patriotism. One might
23
investigate the hypothesis that when this argument is made, more constituents are likely to
endorse the agreement and it is more likely to be ratified, other things equal.
The locus classicus is US President Truman’s campaign to secure the support of a
skeptical Congress and country for his massive Marshall Plan of foreign aid for western Europe
in 1947-48 by “scaring the hell out of the country.” Less noticed, by the way, is the fact the
Truman’s and Marshall’s decision to give priority to this effort came at the expense of a major
political campaign to ratify the International Trade Organization charter. The ITO was intended
to be the commercial counterpart of the Bretton Woods institutions and the United Nations. A
large-scale ratification campaign had turned the tide against the Bretton Woods Agreements Act
in the spring of 1945 (Odell 1988). The US had also initiated the ITO proposal, led those
negotiations, and initialed the agreement in March 1948, but Washington abandoned it in 1950
(Odell and Eichengreen 1997).
Many times US critics of hard economic bargaining with Japan and Korea have played
this rhetorical card in internal politics. It is they who are often heard crying that economics and
security are inextricably intertwined. Japanese and Korean advocates of concessions to such
harsh tactics, or concessions to forestall US use of them, have been heard making similar pleas to
their own fellow citizens. But we have done little careful research on this tactic, showing either
when it is most likely to appear or when it is more and less effective.23
IN LIEU OF CONCLUSIONS
How much do we know about the influence of military-political conditions on the
international economic negotiation process? We know a fair amount about economic sanctions
for political purposes. Additionally it is almost certainly true that wartime conditions bias
economic negotiations toward military objectives, and that bargaining over any issue that is both
commercial and military by definition will also reflect both sorts of influence. But beyond these
important but special conditions, we don’t know much--if “knowing” means having specified the
channels through which our claims enter the negotiation process, having direct or indirect
evidence for these beliefs, and having ruled out prominent alternative interpretations.
How hard have we tried, specifically? Not very. We have more assertions than
documented conclusions, and assertions, however interesting, are notoriously sensitive to
authors’ preconceptions. Can we collectively do better, via well-focused research efforts? This
is only a working paper intended to elicit reactions, negative as well as positive, that might
improve a continuing project’s future trajectory. Do some of these candidate ideas seem wrong
or too obvious to merit investment? Would you introduce different ideas to answer the same
questions, or ask different questions? What about a recursive model with reciprocal causation?
Do you think careful empirical research will show any such hypothesis to be significant in
general? How could one test or explore any of these relationships empirically? Thank you for
any advice you may wish to give.
23
Walton and McKersie 1965, pp. 118-19, 317-19 and Friman 1993 are exceptions.
24
Here is a summary of the hypotheses discussed:
1.
OBJECTIVES. Wartime: While a state is fighting in a war, its agents will increase
sharply the weight placed on military-political objectives in economic negotiations with
all other states and with companies and vice versa, all else equal.
2. Capabilities: In peacetime as well as wartime, the weaker the state militarily, the greater the
weight its negotiator probably will place on security on average, all else equal.
3. Institutions: If a country’s national political institutions (including political parties)
systematically afford special influence to domestic groups that weight military objectives
heavily, then that state will probably trade off commercial for military gains more than
average when facing a dilemma and vice versa, other things equal.
4. ALTERNATIVES AND DISTRIBUTIVE TACTICS: Markets: The more the
military-political situation worsens the market alternative to agreement, the more the state
will probably soften its distributive tactics in economic bargaining and vice versa.
5. Allies. As the subjective sense of military risk or loss increases, the state will probably
soften its distributive tactics in economic bargaining with potential allies and vice versa.
6. Enemies. If A perceives greater and serious military-political hostility from country C and
other things are constant, A will probably harden its distributive tactics in economic
negotiations with C, as a warning of worse measures to come and to limit its contributions to
C’s economic strength, and vice versa.
7. ISSUE LINKAGES Are military-economic linkages more likely or less likely within an
alliance than between neutrals or enemies?
8. RATIFICATION When the “security card” argument is made, more constituents are likely
to endorse the agreement and is it more likely to be ratified, other things equal.
APPENDIX
A partly-subjective theory sometimes stimulates questions such as how can we ever get
evidence adequate for identifying what negotiators truly believe? What can be done if little or
no direct evidence is available? And how can such a theory avoid becoming so complex and
particular as to lose its claim to be theory? First and most important, if we believe negotiators’
subjective values and beliefs truly are part of the causal chain, then our best theory should
represent what we think as accurately as possible without regard to anticipated empirical
problems. Why would it be better to substitute other concepts in our very theory and thus lead
25
ourselves in the wrong direction? While omitting subjective concepts may seem a convenient
way to draw attention away from the need to gather evidence for them, such thinking is woefully
short-sighted. Doing so reduces our theories’ value for guiding our research, and practice for
that matter. The widespread academic habit of sweeping this problem under the rug is one
reason why so few practitioners use political science theories.
Second, we should seek the best evidence we can get about beliefs, and the weaker the
evidence the more skeptical we should be, exactly as with any other claim. No inference from
evidence in social science is ever perfectly complete or beyond question, however. There is no
immaculate perception. Every claim ever made--no matter how detailed the operational
definitions, how large the sample size, how many variables in the regression--has failed to escape
some uncertainty, some valid qualifications. All empirical methods are flawed; these are
matters of degree.24 Evidence limited to published statements by a political negotiator is less
complete and convincing than evidence that includes this information but also interviews
separately with others who were present in private with the individual while decisions were being
made, and so on.
Third, if no relatively direct evidence of parties’ beliefs is available, one approximation,
for the negotiator and the more distant researcher alike, is to use proxies. As an example, one
analyst might assume that a political leader values her country’s trade balance in direct
proportion, so that a movement in the positive direction is better and the opposite movement is
worse. This analyst might take movements in that trade balance as a proxy for the weight the
negotiator will place on a negotiation and on increasing exports as an objective. Naturally this is
even less convincing evidence of policy beliefs than published statements alone and conclusions
should be so qualified. But I believe even this type of result, if it is designed explicitly to
address a subjective theory, will help move us collectively toward empirically valid theory faster
over the long term than will research that misstates the theory in the first place and then tries to
test the wrong idea or defend it to the death.
Fourth, of course no theory is worthy of the label if it becomes infinitely complex. The
solution must lie in decisions, at every step of the intellectual process, both to strain to discover
or create overarching ideas and to weigh whether adding a new distinction will help more than it
will sacrifice. I do not know of any general rule for making such marginal decisions, nor should
we expect all readers ever to agree on how much parsimony is enough. Join in the fun.
REFERENCES
Aggarwal, Vinod. 1985. Liberal Protectionism: The International Politics of Organized
Textile Trade. Berkeley: University of California Press.
Angel, Robert C. 1991. Explaining Economic Policy Failure: Japan in the 1969-1971
International Monetary Crisis. New York: Columbia University Press.
24
See Kaplan 1964.
26
Binmore, K., and P. Dasgupta, eds., 1987. The Economics of Bargaining. Oxford: Basil Blackwell
Buckley, Roger 1992. US-Japan Alliance Diplomacy. Cambridge: Cambridge University
Press.
Destler, I. M., H. Fukui, and H. Sato. 1979. The Textile Wrangle: Conflict in Japanese-American
Relations, 1969-1971. Ithaca, NY: Cornell University Press.
Faure, G. O., and J. Z. Rubin, eds. 1993. Culture and Negotiation. Sage, 1993.
Fearon, J. D. 1994. Signaling versus the Balance of Power and Interests: An Empirical Test of a
Crisis Bargaining Model. Journal of Conflict Resolution 38 (2): 236-69.
Finnemore, M. 1993. International Organizations as Teachers of Norms: the United Nations
Educational, Scientific, and Cultural Organization and science policy. International Organization
47 (4): 565-98.
Friman, H. Richard. 1993. Side-Payments versus Security Cards: Domestic Bargaining Tactics
in International Economic Negotiations. International Organization 47: 387-410.
Gardner, R. N. 1956. Sterling-Dollar Diplomacy: Anglo-American Collaboration in the
Reconstruction of Multilateral Trade. Oxford: Clarendon Press.
Gilpin, Robert. 1981. War and Change in World Politics.
--- . 1975. US Power and the Multinational Corporation. New York: Basic Books.
Gowa, Joanne. 1984. Hegemons, IOs, and Markets: The Case of the Substitution Account.
International Organization 38: 661-83.
Haas, P. M., R. O. Keohane, and M. A. Levy, eds., 1993. Institutions for the Earth. Cambridge,
Massachusetts: MIT Press.
Haggard, S., and B. A. Simmons. 1987. Theories of International Regimes. International
Organization 41: 491-517.
Hampson, Fen O. with Michael Hart. 1995. Multilateral Negotiations: Lessons from Arms
Control, Trade, and the Environment. Baltimore, Maryland: The Johns Hopkins University
Press.
Holsti, K. J. 1986. Politics in Command: Foreign Trade as National Security Policy.
International Organization 40: 643-671.
27
Hufbauer, Gary, Jeffrey Schott, and Kimberly Ann Elliott. 1985. Economic Sanctions
Reconsidered: History and Current Policy. Washington: Institute for International Economics.
Ikenberry, G. John. 1988. Market Solutions for State Problems: The International and
Domestic Politics of American Oil Decontrol. International Organization 42: 151-77.
Iklé, F. C., and N. Leites. 1962. Political Negotiation as a Process of Modifying Utilities. Journal of
Conflict Resolution 6: 19-28.
Inoguchi, Takashi. 1991. Japan’s International Relations. London: Pinter Publishers.
Kennan, J., and R. Wilson. 1993. Bargaining with Private Information. Journal of Economic
Literature 31 (1): 45-104.
Keeley, James F. 1983. Cast in Concrete for all Time? The Negotiation of the Auto Pact.
Canadian Journal of Political Science (June).
Knorr, Klaus. 1975. The Power of Nations: The Political Economy of International Relations.
New York: Basic Books.
Keohane, R. O. 1984. After Hegemony: Cooperation and Discord in the World Political
Economy. Princeton: Princeton University Press.
Kissinger, Henry A. 1979. White House Years. Boston: Little Brown.
Lake, D. A. 1988. Power, Protection, and Free Trade: International Sources of US Commercial
Strategy, 1887-1939. Ithaca, New York: Cornell University Press.
Lax, D. A., and J. K. Sebenius. 1986. The Manager as Negotiator: Bargaining for Cooperation and
Competitive Gain. New York: The Free Press.
Martin, Lisa. 1992. Coercive Cooperation: Explaining Multilateral Economic Sanctions.
Princeton: Princeton University Press.
Milner, H. 1992. International Theories of Cooperation among Nations: Strengths and Weaknesses.
World Politics 44 (3): 466-96.
Mitchell, R. B. 1994. Regime design matters: intentional oil pollution and treaty compliance.
International Organization 48: 425-58.
Odell, J. S. and Barry Eichengreen. Forthcoming. The United States, the ITO and the WTO:
Exit Options, Agent Slack, and Presidential Leadership. In The WTO as an Organization, ed.
Anne Krueger. Chicago: University of Chicago Press.
28
Odell, J. S. 1997. Policy beliefs and international economic negotiations. Presented at the
International Studies Association convention, Toronto.
--- 1995a. Market conditions and international economic negotiation. Unpublished. January.
--- 1995b. Toward a valid theory of international economic negotiation. Unpublished. April.
--- 1993. International Threats and Internal Politics: Brazil, the European Community, and the
United States, 1985-1987, in Double-Edged Diplomacy: International Bargaining and Domestic
Politics. eds. P. Evans, H. K. Jacobson, and R. D. Putnam, Berkeley: University of California Press.
--- 1988. From London to Bretton Woods: sources of change in bargaining strategies. Journal of
Public Policy 8: 287-316.
---. 1985. The Outcomes of International Trade Conflicts: The US and South Korea, 1960-1981.
International Studies Quarterly 29:263-286.
--- 1982. US international monetary policy: markets, power, and ideas as sources of change.
Princeton: Princeton University Press.
--- . 1980. Latin American Trade Negotiations with the United States. International Organization
34: 207- 228.
Ortmayer, Louis. 1992. The US-Japanese FSX Fighter Agreement. Pew Case Study 350.
Washington: Institute for the Study of Diplomacy, Georgetown University.
Preeg, Ernest H. 1970. Traders and Diplomats: An Analysis of the Kennedy Round of
Negotiations under the General Agreement on Tariffs and Trade. Washington: Brookings
Institution
Pruitt, Dean G., and Jeffrey Z. Rubin. Social Conflict: Escalation, Stalemate and Settlement. New
York: Random House, 1986.
Raiffa, H. 1982. The Art and Science of Negotiation. Cambridge, MA: Harvard University Press.
Rhodes, C. March 1989. Reciprocity in Trade: The Utility of a Bargaining Strategy. International
Organization 273-300.
Rothstein, Robert L. 1979. Global Bargaining: UNCTAD and the Quest for a New
International Economic Order. Princeton, NJ: Princeton University Press.
Rowland, Benjamin M. 1976. Preparing the American ascendancy: the transfer of economic
power from Britain to the United States, 1993-1944. In Balance of Power or Hegemony: The
Interwar Monetary System, ed. Benjamin M. Rowland, pp. 195-224. New York: New York
University Press.
29
Spar, Debra L. 1992. Co-developing the FSX Fighter: the domestic calculus of international
co-operation. International Journal XLVII: 265-292.
Stein, Janice Gross. 1993. The Political Economy of Security Agreements: The Linked Costs
of Failure at Camp David. In Double-Edged Diplomacy: International Bargaining and
Domestic Politics. Berkeley: University of California Press.
Suzuki, M. 1994. Economic Interdependence, Relative Gains, and International Cooperation: The
Case of Monetary Policy Coordination. International Studies Quarterly 38 (3): 475-499.
Thompson, L. L. "Negotiation Behavior and Outcomes: Empirical Evidence and Theoretical
Issues." Psychological Bulletin 108, no. 3 (1990): 515-32.
Thompson, Scott. 1977. Unequal Partners: Philippine and Thai Relations with the United
States, 1965-1975. Lexington, Massachusetts: Lexington Books.
Underdal, A. 1992. The concept of regime effectiveness. Cooperation and Conflict 27: 227-40.
Urban, Laszlo K. 1983. Once More with Feeling: German-Polish Interwar Trade
Negotiations. East European Quarterly XVII (March): 89-108.
Walton, R. E., and R. B. McKersie. 1965. A Behavioral Theory of Labor Negotiations: An Analysis
of a Social Interaction System. New York: McGraw-Hill.
Walton, R. E., J. E. Cutcher-Gershenfeld, and R. B. McKersie. 1994. Strategic Negotiations: A
Theory of Change in Labor- Management Relations. Boston, Mass: Harvard Business School
Press.
Young, O. R. 1991. Political Leadership and Regime Formation: On the Development of
Institutions in International Society. International Organization 45 (3): 281-308.
Young, O. R. 1975. Bargaining: Formal Theories of Negotiation. Urbana: University of Illinois
Press.
Zartman, I. W., ed. 1994. International Multilateral Negotiation: Approaches
Management of Complexity. San Francisco: Jossey-Bass.
to the
---, ed. 1978. The Negotiation Process; Theories and Applications. Beverly Hills, CA: Sage.
--- and A. Bassani. 1988. The Algerian Gas Negotiations. Pew Case Studies in International
Affairs, No. 103. Washington, DC: Institute for the Study of Diplomacy, Georgetown University.
30
outtakes:
Choice of parties: prospective enemies
No: “party” can be in a conflict as well as a cooperation
Move down to tactics:
Poland illustration really is on the level of beliefs
could be interpreted equally as an illustration of this relationship within the frame of an ongoing
negotiation between parties, rather than as a decision at the limit to begin or end talks with a
party. It might be argued, in fact, that by engaging in conflict over their exchange rate, the UK
and the US were already parties to a negotiation, given a definition as broad as mine.
“party” can be in a conflict as well as a “cooperation.”
Move down to tactics or delete:
Here “security” may be understood to mean not only gross ratios of capabilities but also actions
that change the odds of attack or defeat in war. These security beliefs among top leaders will
influence instructions given to economic negotiators, according to this idea, even when financial
and trade ministers themselves have no responsibility for military-political affairs.
After the Versailles conference, relations between Weimar Germany and Poland were tense on
one level. Germans wanted their Silesian territory back and Stresemann held out for territorial
revisions as a condition for a lasting bilateral trade agreement. Their conflict escalated to a tariff
war beginning in 1925. Meanwhile until 1934, nevertheless, these two governments also left
space even then for trade to pass in sectors of concern to organized economic interests in the two
countries. Poland continued to have an export surplus with Germany, the only one in eastern
Europe. In November 1935 these two also signed a trade treaty that formally ended their tariff
war. Yet trade volume did not recover in fact. In response to the depression, many
governments had begun controling their economies much more thoroughly. In addition, Nazi
Germany had begun rearming earlier that year, and Polish leaders grew increasingly sensitive to
the concern that greater trade with Germany would enlarge its preponderance. Hitler was
sending warm signals toward his southeast but not toward Poland. Warsaw signed a loan
agreement with France in 1936 and shifted its economic orientation accordingly for security
reasons.25 One thinks even more readily of Western economic sanctions against the Soviet Union
and China beginning in the early 1950s.
25
31
Move down or delete:
Poland illustration really is on the level of beliefs
We should also resist the temptation to stretch the meaning of “security” ever more
broadly. Believing as I do that preserving our natural environment and protecting women from
battering in their homes are vitally important goals does not convince me that all these diverse
phenomena are best analyzed using the single concept “security.” Conceptual stretching risks
concealing profound differences in the causation of different phenomena, which could only delay
effective remedies for concrete problems, as well as wasting even more academic time than we
scholars waste anyhow. Better to introduce distinctions explicitly and observe them--thus
opening the possibility of studying theoretical relationships that are specified more
narrowly--without, however, completely abandoning effort to create more general formulations
that could eventually encompass narrower relationships as well. More general formulations are
likely to have greater value when they are built upon on accurate descriptions of real experience
using carefully specified, concrete variables and relationships, both of which are sorely lacking in
this area today.
the Tokyo Round,26
?Perhaps most telling of all, at least for academics, is that detailed studies even by self-described
“realists”--who begin from the premise of anarchy and typically assume that military affairs
dominate the economic in politics--also fail to report any military-political influences on specific
economic negotiations (Krasner structural conflict,? Grieco ?
HYP 2:
Bergsten: Germany and Japan held $s longer; but selling could have hurt all holders financially
too (see post 71)
Japan failed to retaliate on trade (but also for pure economic power reason)
Not comparisons with more or less powerful state
[think more. Delete?: Yet in every actual case the negotiator and her principals begin ex ante
with significant uncertainty about how the other party and their own society will respond to
possible moves under prevailing market and domestic-political circumstances. With
uncertainty one natural tendency will be to believe that the trade-off can be avoided, that the
same strategy can achieve the one without sacrificing the other, at least until shown otherwise.
If such evidence does come forth, normally more than one cogent interpretation can be fitted to
it, as earlier examples illustrated. .........]
26