1. CUTS Institute for Regulation & Competition Training Programme on Commercial and Economic Diplomacy 22-26 October 2007, Royal Orchid, Jaipur Session 5 Effective Negotiations in commercial and Economic Diplomacy Understanding (Multilateral) Negotiating Processes and Mechanics A Presentation By B. K. Zutshi October 23, 2007

2. Multilateral Trade Negotiations: Understanding Negotiating Processes and Mechanics OUTLINE Approaches to Negotiations: “Harvard” School/ “Getting to Yes.”* Distributive vs Integrative Bargaining** Effective Participation in Negotiations :  National Level Preparations  Role of Regional Groupings, Coalitions etc Negotiating Techniques:Tariff Negotiations for Industrial Goods Negotiating Techniques: Services Market Access Negotiations * Roger Fisher and William Ury of The Harvard Negotiating Project, Penguin Books ** Raymond Saner: The Expert Negotiator, Martinus Nijhoff Publishers B. K. Zutshi 2

3. Approaches to Negotiations “Harvard” School / “Getting to Yes”  This approach has been developed under the Harvard Negotiating Project,  It distinguishes between two methods: Positional Bargaining; Principled Negotiations or Negotiations on Merit.  And seeks to judge a method of bargain by three criteria: should produce a wise agreement; be efficient; and should improve relations, (or at least not deteriorate them), between the parties. B. K. Zutshi 3

4. Negotiating Processes, Approaches to Negotiations Contd. Positional Bargaining  Parties take positions: a sequence of them;  Give them up successively to  Arrive at a settlement  This may involve two approaches: SoftHard FriendlyAdversarial Goal : An AgreementVictory Disclose bottom lineMislead about the bottom line Yield to pressureApply pressure  Some examples B. K. Zutshi 4

5. Negotiating Processes, Approaches to Negotiations Contd. Principled Negotiations or Negotiations on Merit: “The Method”  Participants: problem solvers  Goal: wise outcome reached efficiently and amicably  Separate the people from the problem Soft on the people, hard on the problem  Focus on interests, not positions Explore interest and avoid having a bottom line  Invent options for mutual gain  Insist on using objective criteria  Resist pressure and power play  Examples B. K. Zutshi 5

6. Negotiating Processes, Approaches to Negotiations Contd. B. K. Zutshi 6 Raymond Saner Approach  Distributive Bargaining: Zero sum game  Integrative Bargaining: Win Win Result

7. Effective Participation in Negotiation : National Level Preparation At the stage of agenda setting  Identify areas and issues in which the concerned participant may have an aggressive interest and issues that may be of concern, where a defensive strategy may have to be deployed.  Seek to include in the agenda issues of aggressive interest where a member could be a demandeur and in respect of issues of defensive interest, attempt to have them excluded, or at least build-in safegaurds in the mandate, if total exclusion is not possible.  In specific issues seek a balance in the terms of the mandate. 7 B. K. Zutshi

8. In actual negotiations on the agenda:  Identify areas and issues of interest and concerns, on the basis of research studies  Formulate initial and subsequent national positions after consultation with all stake holders, including with NGOs and Civil Society Groups.  In a situation where a member has already undertaken liberalization autonomously and is engaged in domestic policy reform, (which is today the position in many developing countries), the internal reform and liberalization processes should be coordinated with multilateral engagement.  In short, deploy domestic liberalization and reform agenda for seeking concessions from negotiating partners in areas of export interest, and, at the same time harness multilateral engagement to facilitate domestic reform processes and enhance their credibility. Effective Participation in Negotiation : National Level Preparation Contd. 8 B. K. Zutshi

9. Effective Participation in Negotiation : National Level Preparation Contd. Manpower resource development and deployment:  A critical factor for effective participation;  Trade policy experts and subject matter specialists to work together on specific issues;  Policy coordination at the national level;  Deployment of adequate staff both in the capital and at Geneva; 9 B. K. Zutshi

10. Effective Participation in Negotiation : Role of Regional Groupings and Coalitions Regional groupings and coalitions of various kinds have an important role in multilateral negotiations Substantive negotiations take place outside the formal negotiating structures through bilateral and plurilateral contacts in regional groups and coalitions These informal structures are critical components of the process Among the more prominent ones during the UR was the QUAD:Canada, EU, Japan and the US. In the present round the QUAD is now Brazil, EU, India and the US. In the present round there is a plethora of groups with varying membership: G-33, G-20 etc. Among developed country members of WTO: OECD consultation group Developing countries have an Informal Group, which has played a decisive role at critical junctures in WTO negotiations. 10 B. K. Zutshi

11. Least developed countries have a Group of their own. Then there are regional groups such as the African Group and the Latin American Group. Regional agreement members also coordinate their positions. In the case of ASEAN, there is a high degree of coordination so much so that subjects and issues are divided among the members for representation purposes in various councils, committees and negotiating groups. There are also issue- and sector- specific coalitions which cut across developed / developing country divide. A good example is the CAIRINS group on agriculture negotiations. There are also a large number of ad hoc groups on all kinds of subjects. Since Members interests and concerns vary from issue to issue and subject to subject, there is a shifting Kaleidoscope of groups and coalitions. Effective Participation in Negotiation : Role of regional groupings and coalitions Contd. 11 B. K. Zutshi

12. Negotiating Techniques: Goods Market Access Negotiations: Tariff Reduction Item-by-item approach  Bilateral negotiations based on requests and offers. Principal technique until the Kennedy round; widely used again in the Uruguay round. May consist of only binding a rate without lowering it. Linear tariff cut  Across-the-board negotiating technique providing for the same rate of reduction for all items; used in the Kennedy round. Formula: T 2 = rT 1, where T 2 is reduced tariff, T 1 the original tariff, and r is a coefficient (0 < r < 1), (1- r) being the percentage reduction. B. K. Zutshi 12

13. Negotiating Techniques: Tariff Reduction (Contd. ) Harmonization Formula  An approach aimed at flattening tariff peaks and reducing tariff escalation. In the Tokyo round the so-called ‘Swiss formula’ was used : T 2 = R T 1 / R + T 1, where R is a coefficient (16 or 14). Free trade for a sector or product  Abolition of tariffs for a given sector. This approach was used in the Tokyo round by the signatories of the Agreement on Trade in Civil Aircraft. It was also used in the Uruguay round in the context of so-called zero-for-zero tariff negotiations in some sectors B. K. Zutshi 13

14. Negotiating Techniques: Tariff Reduction (Contd. ) Doha Mandate  Modalities: All three indicated earlier under consideration. Since then consensus on formula cut on the basis of a Swiss formula, no agreement yet on the coefficient and the differential of the coefficient between developed and developing countries  Base rates  Implementation periods and staging  Special and differential (S&D) treatment of developing countries B. K. Zutshi 14

15. Negotiating Techniques : Services Market Access Negotiations Enabling Policy, Procedural and Technical framework  Negotiating Guidelines and Procedures  Guidelines for Scheduling of Commitments  Secretariat note on Technical Aspects of Request and Offers Item-by-Item Approach, based on Bilateral “Request - offer” Process Other possible Approaches: Plurelateral negotiations on clusters of service sectors Credit for Autonomous Liberalization B. K. Zutshi 15 B. K. Zutshi