Geoffrey Hale Political Science 3170 University of Lethbridge September 24, 2010

Game Theory and International Negotiations Basic concepts “Win-sets”, negotiating room, and negotiating leverage Making agreements “stick” Voluntary and involuntary defection Factors affecting “win set” size Why it matters Examples and applications

Basic Concepts: Two-Level Games Theory holding that international negotiations involve bargaining on at least two levels between or among national governments, and between government leaders (or negotiators) and other domestic political actors including actors within their own governments and/or actors among relevant societal groups. Successful negotiations require: agreement between negotiators / countries on the basis of mutual (but not necessarily equal) benefit; capacity of each government secure internal ratification of the agreement according to its relevant (private or public) political processes.

Basic Concepts: Two-Level Games Level 1 Game Country “A”Country “B” Political leader   Political leaderand senior advisors|Level 2 Game Country “A”Country “B”Political leader / sr. negotiator Internal political / b’cratic actorsInternal polit. / b’cratic actors External political / societal actors (supportive / conditional / opposed)

Key assumptions States are not unitary actors in negotiations Negotiators’ preferences, bargaining conditions are not fully transparent Implications Critical to have understanding of other parties’ negotiating contexts, priorities, especially in multi-party negotiations. (Easier said than done.)

Key Assumptions II States are not unitary actors in negotiations Negotiators’ preferences, bargaining conditions are not fully transparent Bargaining environment may be dynamic subject to change based on external political or policy environments for negotiations, or based on internal dynamics (winners / losers / unforeseen issues) of negotiations themselves. Implications Negotiations not “over” until everyone agrees. Agreement does not necessarily imply ratification.

Key assumptions III Negotiators may use bargaining dynamics to influence their own domestic actors BUT Domestic political institutions play vital role in structuring internal dynamics of initiating, conducting, and/or ratifying international institutions. Ratification processes may be formal, public OR private, internal to government (or branches of government) OR combination of both Implications: Usually multiple agendas present at bargaining table. Negotiations may involve element of “bluff” involving leaders’ capacity to mobilize domestic support, overcome opposition (internal and external). Political leaders with greater domestic autonomy may be at relative disadvantage compared with more politically constrained negotiating counterpart.

Key assumptions IV States are not unitary actors in negotiations Negotiators’ preferences, bargaining conditions are not fully transparent Bargaining environment may be dynamic subject to change based on external political or policy environments for negotiations, or based on internal dynamics (winners / losers / unforeseen issues) of negotiations themselves. Negotiators may use bargaining dynamics to influence their own domestic actors BUT Domestic political institutions play vital role in structuring internal dynamics of initiating, conducting, and/or ratifying international institutions. Domestic actors in each country may attempt to take prior or ongoing political actions to change terms on which negotiators are likely to be able to ratify any agreement.

“Win-sets” The collection or set of agreements among negotiators that would obtain ratification by their respective constituents in an “up-or-down” vote. Win-sets for each “Level 1” party must overlap The smaller the win-sets for each party, the greater the likelihood that negotiations will break down.

“Win-sets” II The collection or “set” of agreements among negotiators that would obtain ratification by their respective constituents in an “up-or-down” vote. Win-sets for each “Level 1” party must overlap to some degree The smaller the win-sets for each party, the greater the likelihood that negotiations will break down.

“Win-sets” III The relative size of each country’s “win-sets” will affect the distribution of the joint gains from the international bargain.\ Negotiators with smaller win-sets can use risk of non-ratification to shape process of negotiation, extract more concessions from countries with larger “win-sets” Size of win-sets may be shaped by government’s relative autonomy from domestic political interests, perceived gains from agreement vs. non-agreement, perceived costs of not securing agreement. Xm [ [ ] [ Ym Y 1 Y 2 X 1 Y 3 Max. possibleMax. possible gains for Xgains for Y

“Win-sets” IV Scope of negotiations will affect size of “win-sets” Broad negotiations among relatively limited number of parties increases potential for trade-offs, bargains leading to agreements. The growing in the number of negotiating parties increases the difficulties in achieving agreement on large-scale agreements Multi- or plurilateral agreements more likely to be achievable on more narrowly focused issue clusters (fewer ‘external’ linkages) Explains specialization, decentralization of international economic institutions

Key factors affecting size of “win-sets” “Level 2” Preferences and Coalitions Distribution of political, societal interests actively or conditionally in favour of, opposed to potential agreement relative size of enthusiastic “internationalist” coalition vs. resolutely “nationalist” or “isolationist” coalitions relative homogeneity vs. diversity of domestic interests potentially affected. interests may exist independently in each country or cooperate across national borders. Relative intensity of coalitions likely to gain or lose from agreement. Capacity of governments to negotiate trade-offs to neutralize or reconcile potential opponents

Key factors affecting size of “win-sets” “Level 2” Preferences and Coalitions II “The lower of the costs of non-agreement (status quo) to constituents, the smaller the ‘win sets’” More self-sufficient states usually have lower costs of non-agreement than trade dependent states. If political influence of supporters, opponents relatively equal, political contest may be determined by relatively unaligned groups “in the middle”.

Key factors affecting size of “win-sets” “Level 2” Institutions How transparent? Secrecy may be advantage – but only if societal ratification of secondary importance to outcomes. Consultation may be vital for mobilization of / validation of outcomes by key stakeholder groups.

Key factors affecting size of “win-sets” “Level 2” Institutions II Who has veto points, and at what stages of process? Centrality of “Fast Track / Trade Promotion Authority” in securing ratification by U.S. Congress Support still requires support from key Congressional leaders, often on both sides of House, Senate. Differences between “Treaty”, “Executive Agreement” Importance of provincial support as “cover” for federal trade negotiations in Canada. The stronger the autonomy of a (democratic) state, the weaker its international negotiating position.

Key factors affecting size of “win-sets” Level I Negotiators’ Strategies Management of domestic expectations, fears key factor in balancing leverage on negotiating partner(s) with capacity for ratification. Total gains / losses from negotiations often less important than their distribution among actual and potential coalitions of supporters and opponents. Negotiations more likely to succeed when negotiators “collude” in managing relative costs and benefits of potential agreement.

Managing “game breakers”, risks of “defection” Uncertainty, inadequate political / technical research often critical factors in managing negotiations. Negotiators often “bluff” in order to convince counterparts that their “win-sets” or “kinky” – reflecting limited capacity to sell compromises past specific point. Involuntary defection – a negotiator or leader is unable to secure ratification of an agreement May result from informal political processes (being overruled by political superiors or colleagues) or formal political processes (legislative or electoral defeat). e.g. Negotiations with U.S. government subject to ratification by Congress with independent powers, multiple veto points empowered by decentralized decision-making system.

Managing “game breakers”, risks of “defection” II Voluntary defection – the reneging on a bargain by a “rational egoist” in the absence of enforceable contracts. Less likely when likelihood of repeated negotiations on different subjects creates incentives for the cultivation of trust among political and bureaucratic actors. Good faith may be reinforced by potential for political, diplomatic or economic costs.

Summary “Two-level” game theory provides general model for analysis of international negotiations BUT – use as predictive model depends on the number of separate factors, actors involved in negotiations, ratification AND Capacity of negotiators, policy analysts to identify accurately the key members of stakeholder coalitions, their priorities and conditions for ratification in highly dynamic, uncertain game.