A case of Trans-Pacific Partnership
Member countries of the proposed trade agreement are engaged in negotiation to prevent legal tussles that arise from business malpractices, such as issues touching on intellectual property, and investor-government conflicts. At least twelve countries are engaged in the negotiation, but two parties are involved, with the US leading countries from the North American region whereas Japan is the chosen leader of the Asian states including Australia, Brunel Darussalam, Japan, Malaysia, New Zealand, Singapore, and Vietnam. The American states involved in the discussion are Canada, the United States, Chile, Peru, and Mexico. The parties started negotiating in 2005 with the major goal of solving problems arising from intellectual property, service delivery, and agriculture. The Obama administration is fully focused on implementing the agreed policies under the accord, as it believes it will strengthen trade. Nine partners announced in 2011 that they intended to enhance trade and investment among member countries through promotion of innovation, financial growth, and expansion, and facilitate employment. Civil rights groups are concerned with ongoing negotiations because of the secret provisions contained in the document. The member countries are concerned with the current state of affairs where businesses are heavily affected by the trade rules, such as rules of origin, trade remedies, hygienic measures, industrial obstacles, intellectual property, government procurement, and competition policies. One of the proposals was to reduce tariffs by ninety percent before 2015. The member states adopted Obama’s trade proposal in 2010 when the APEC summit was held. The negotiation was postponed upon the inauguration of Obama as the president, but the country’s executive made an effort of reaffirming his commitment to the TPP agreement. Subsequently, the president appointed a representative in 2009 with specific instructions to ensure the country attains its economic and social interests.
In this paper, the negotiation strategies that the two warring parties, the United State and Japan, employ will be explored before suggesting an alternative strategy that entails an understanding of cultural differences. In the first section, the position of both parties will be evaluated since the states have not expressed their interests openly preferring instead to champion them through the TPP treaty. In the second section, the negation strategies are given whereby the ideas of scholars are assessed, especially the strategies they suggest before giving the exact tactics that the two countries employ. In the final section, a comprehensive alternative is given in solving the conflict. An understanding of culture is the first step towards solving the trade problems that face the two countries.
Positions of Stakeholders
United States and Japan
The members of Trans-Pacific Partnership are twelve, but the major actors are two who represent the views and interests of others. The United States and Japan are the main antagonists whenever the conference is held to deliberate on the issues facing treaty implementation. Recently, the US president visited Japan to extend negotiations whereby the two countries identified the ways through which bilateral trade could be enhanced under the auspices of TPP. However, the Japanese minister charged with the responsibility of implementing TPP agreements admitted that the two countries failed to reach at a consensus since contentious issues were not resolved given the fact the two countries have varying interests. The United States wants Japanese agricultural tariffs eliminated, as this will play a role in enhancing its market share in the Asian region. In particular, the Japanese five priority items worries the American policy makers because the state is reluctant to do away with tariffs on rice, wheat, and sugar. In fact, it is suggested that import quota should be expanded to include the American rice and wheat, but no elimination of the tariffs. While Japan accepted to waiver the tariff rates on beef, pork, and other dairy products, the reduction size was not specified, which makes the situation complex. American sugar is no as competitive as the Japanese sugar and allowing free market principles to prevail is disastrous for American goods in the Asian region. The American negotiators are aware of this fact and they intend to force their Japanese counterparts to reduce tariffs on rice, even though this will be unattainable since rice is politically significant in the country. The United States has an additional concern because Japan imported twenty percent of wheat from Canada and Australia. Although the US supplied sixty percent, it will have to face competition from these states even if tariffs are reduced, something that is likely to damage the country’s exports. Therefore, the US prefers a different system that maintains the import duty on wheat while at the same time expanding the quota. For Japan to realize its political ambitions, it has to maintain the tariffs, which is beneficial to the US, as it will facilitate profit generation.
The United States is in need of significant reduction of tariffs on beef and pork because this will not interfere with the Japanese for the same products. In early 1990s, the tariffs rates charged on beef and pork were too high before they were reduced from seventy percent to thirty eight. Unfortunately, the US has been unlucky because production of beef in the country has been in the increase. On the other hand, the Japanese currency has depreciated greatly since 2012. While one kilogram of beef was priced at one-hundred yen in 2012 before taxation, it currently goes for one-hundred and thirty. The current position of Japan is unfavorable to the American businesses and things must change of the two countries are to benefit. Therefore, negotiations should focus on this aspect and ensure mutual cooperation is achieved. Japanese policy makers are focused on realizing the state interests in the negotiations whereby the products will not face problems penetrating the market. The US negotiators, on the other hand, are keen on expanding exports in order to boost domestic industries. The interests of Japan cannot be said to be preservation of the agricultural industry because it has various options of ensuring foreign products do not affect its domestic factories. In fact, allowing foreign goods to compete with local products without tariffs is beneficial to the consumer. In this regard, the Japanese government is trying to control prices of products to prevent an increase in the prices of food products.
TPP agreements seek to tackle the problems that member states face regarding market access through elimination of tariffs, as well as other trade barriers that have always made it hard for goods and services to flow freely. For instance, movement of people and goods form one region to the other has not been easy, something that affects production and development. When foreign goods are allowed into the economy, chances are high that employment opportunities will be created and consumers will definitely benefit from high quality products and reduced prices. Enhanced markets play a critical role of job creation, improvement of standards of living and welfare, and enhancement of preferable development within member countries. The trade issues that the treaty seeks to resolve include regulatory coherence, competition, incorporation of small and medium scale enterprises, and development. Through regulatory coherence, the treaty will likely promote trade, as policies, regulations, and rules are standardized to facilitate efficiency. The commitments facilitate competitiveness, as well as business enhancement both regionally and domestically, which promotes economic integration and employment among member states. Member states face serious challenges regarding empowerment of small and medium sized enterprises in their economies, but the treaty is expected to address these issues by encouraging them to engage in international trade. In many countries, small and medium size companies complain because they have little understanding on the functionality of the agreements. Finally, the treaty will serve to spur economic and social development, as it seeks to liberalize the markets, instilling discipline to improve investments, and strengthening institutions. The United States is advancing the policy that promotes digital economy and application of green technologies in production and distribution of goods and services, something that will promote innovation.
SWOT analysis refers to a structural planning technique that is employed in assessing the strengths, weaknesses, opportunities, and threats. In this paper, the technique will be used in understanding the bargaining power of the two countries, the United States and Japan as far as TPP treaty is concerned. The analysis entails a process in which objectives of the two countries are specified, as well as classifying internal and external factors, which might be either beneficial or inauspicious. Establishing the strengths helps in understanding the special features of the two countries that are likely to give one of them an advantage over the other. Looking at the weaknesses is equally important in the sense that it plays a role in understanding the existing shortfalls. Opportunities are elements that the two countries are likely to utilize to achieve competitive advantage. Threats are the factors that would probably lead to problems.
Negotiation Strategies
Salacuse identified various constraints that governments face whenever they engage in negotiations. The negotiators from the United States and Japan find themselves in difficult situations as they try to strike the best deals for their governments. According to this scholar, the government has the monopoly over legitimate use of force given the fact it enjoys various privileges and immunities. Unfortunately, the parties in the conflict are both governments and they cannot exercise their legitimate over. While the Japanese officials have the support of the legislature, their American counterparts have to act according to the provisions of the law. In this regard, the assertion by Salacuse that negotiation rules is one of the constraints is valid, especially for the American negotiators who have to consult the congress and the senate before engaging in any talks with members of the TPP. Based on this, the rules play two important roles of regulating the negotiation process, as well as controlling the entire process. While the two governments would be willing to compromise to arrive at win-win solution, the interests of their respective constituents do not permit them to do so. Salacuse claims that governments depend on their constituents for resources and support hence they have to make decisions that are consistent with their expectations and desires. In this conflict, American and Japanese political parties, labour unions, the military, the media, and various civil societies are affected, which means they influence the outcome of the decisions.
Salacuse went ahead to discuss the seven critical rules that influence the government to make certain decisions in negotiations. As the United States and Japan continue to engage in talks to solve the problems they face as regards to the supply and distribution of agricultural products in the Asian subcontinent, the rules play out differently. The first rule, according to the Salacuse, is recognizing identifying the powers of the opponent and evaluating the ways in which such powers and authorities affect the strategies and tactics to be made. The Japanese negotiators are considered hardliners because they are reluctant to adjust their demands mainly because they are aware of the American influence and power in the global system. The second secret entails understanding the sources of powers of the opponent since some are legal while others are political. Japan knows that the United States commands enormous powers globally because of its advanced political institutions, economic strategies, technological advancement, and cultural superiority. Therefore, the US is likely to invoke its powers in the negotiation table, something that forces the Japanese diplomats to employ alternative strategies, such as engaging other parties in trade negotiations to cajole the US. The third secret that any public official has to consider are the likely constraints that negotiation partners face and these include legal and political limitations. Unfortunately, the United States is the only partner that faces some political and legal challenges domestically in trying to apply TPP agreements, something that gives Japan undue advantage. The fourth rule is identifying the interests of the partners. The Americans are concerned with expanding the markets for the agricultural products whereas their Japanese counterparts in need of safeguarding national interests and territorial integrity. The fifth secret is all about learning the rules governing the negotiation process, as well as the protocols. This explains why the leadership of president Obama made an effort of setting up an entire department to engage in negotiations while the Japanese government set up an entire ministry to drive the negotiations. The sixth secret suggests that, as negotiations go on, participants have to identify the privileges and immunities of the opponents. Finally, the negotiators must consider their interests, as well as those of the organizations they represent.
In an article title extreme negotiation, Pearsall Stacy notes that various strategies must be employed in engaging in talks with other stakeholders, one of them being getting the bigger picture of the problem, which entails an understanding of the other person’s point of view. The American negotiators seem to employ this strategy because it calls on the negotiators to act fast in order to reduce resistance. The second strategy entails uncovering the problem by conducting further research and collaborating with other stakeholders. This involves evaluation of other party’s motivations and concerns. The problem has to be deal with in various ways instead of proposing a fixed solution. Pearsall notes further that eliciting genuine buy-in whereby the negotiators use facts and fairness to handle issues is highly encouraged. In the fourth strategy, trust building is proposed, as this will facilitate strengthening of relationships. Unfortunately, none of the partners is willing to build trust because the countries are perennial enemies. The final strategy is about focusing on the process by taking the steps to strengthen the negotiation.
The current international system is compared to the Hobbestian state of nature since it is anarchic whereby people play zero-sum games meaning one’s loss is another’s gain. The actors in the global system are unable to agree over important issues implying the system does not have a leviathan or a national police. Since the system does not have a government, a vacuum exists and powerful states fill it. Similarly, the United States and Japan dictate issues in the TPP treaty because they are the most powerful in their regions. In fact, this aspect gives the two countries an opportunity to realize their interests. The two states must agree over an issue because an agreement is signed and whenever they fail to strike a deal, talks are said to have stalled. The two states apply various negotiation strategies in trying to force the other to accept its policy. Negotiation is one of the conflict resolution strategies that are often employed in the initial stages. However, powerful states prefer intervening militarily when the softer strategies fail. The aim of negotiation is to facilitate understanding, attain an advantage over others, and design resolutions that satisfy the interests of the concerned parties. Negotiation is a special skill in conflict resolution that is often employed in businesses, non-profit organizations, and government institutions. While a negotiator might be untrained, a number of government officials engaged in drafting trade policies are experts with specialized skills to represent their organizations effectively.
One of the negotiation strategies is distributive, which entails hard bargaining and is based on a model that tends to bargain for the best in the market. The parties take extreme positions even though they might be aware that such positions will not be allowed. The negotiators will then utilize a number of tactics, such as slyness, pretending, and brinkmanship with an aim of ceding as little as possible before compromising. Under this strategy, the representative envisages the entire procedure as a process of allocating a fixed amount of value. Policy makers in government choose this strategy after realizing that the thing being requested is available and can be achieved, but the only problem is that many people want it. Unfortunately, the strategy does not aim at arriving at a win-win situation because one party must lose something that gives the strategy a new name, win lose tactic. Japan is aware of the advances of the United States in the Asian continent, as it knows that the superpower is in need of the new markets for its finished products. If it lowers the tariffs, it will lose nothing because it does not face direct competition from the American products. However, its concern is the prices of products given the fact it does not want the foreign products to infiltrate the market. In trying to resolve this issue, Shell suggested a strategy that focuses on information sharing (Shell 38). Analysts observe that Japan stands to benefit if it lowers the tariffs, but many people will wonder why the government is reluctant to give in to the American demands. Distributive negotiation takes place when people who have never met for the first time engage in discussions. An example of distributive negotiation is an individual buying a car or a house. Many would be surprised why the Japanese and American policy makers employ this strategy. According to Machiavelli, those charged with the role of making policies should use all available options to achieve greatness. This explains why many negotiators employ this form of strategy since its results are positive.
The second strategy is integrative negotiation and its main objective is to improve the quality of an already existing treaty or agreement. It supplements distributive strategy, as it does not encourage parties to go for the piece, but instead they should explore the available options to expand it. In other words, this strategy aims at arriving at a win-win situation whereby the interests of each party are provided. One of the objectives of the TPP treaty is to enhance standardization of goods and services hence objectivity and observance of principled criteria is encouraged. Through the strategy, the parties are likely to develop trust and build strong relationships. Therefore, the idea of creative problem solving is highly encouraged among members, as this will facilitate cooperation where each party benefits from the treaty. The parties to this treaty have failed to strike a substantial deal because the two powerful states, the United States and Japan, are yet to reach at basic trade agreements. The United States wants Japan to make some concessions in the agricultural sector to allow its products to penetrate the market, but Japan has some reservations regarding reduction of tariffs. The treaty was meant to facilitate multilateral agreements where the members consisting of twelve countries are beneficiaries, but it has turned out to be a tussle between the two powerful countries. Application of integrative strategy would have solved the issues that various members face in overcoming trade barriers. While members have been trying to achieve collective objectives and goals, the United States and Japan prefer dealing with the issues through bilateral discussions under the umbrella of TPP. The leader of the Japanese Liberal Democratic Party was clarified that the country was focused on instituting exceptional polices on the manufacture and distribution of wheat, sugar, and rice before embarking on the program to boost the country’s markets on beef, pork, and dairy products. The leader went ahead to claim that the country was only prepared to accept numbers that will permit the government to fill people’s wishes and expectations. This means that Japanese government is focused on applying the first strategy, as it is not prepared to make any compromise.
The United States has always put pressure on Japan to accept some unfavorable trade policies. The US applies bilateral and multilateral trade negotiations to coax Japan, but the current strategy being applied is different and many people doubt whether it will achieve the desired results. Japan has a strong foreign economic policy towards the United States that will always guide any form of negotiation. The United States fails to differentiate Japan with its industries and any form of trade conflict has always been referred to the special units of the WTO, such as enhanced dispute settlement mechanism. Even though American foreign policy makers do not consider Japan a direct rival in trade, but securing its market is critical in realizing the objectives of the treaty. The United States was reluctant in approving Japanese membership in TPP, as it was given the condition of including rice in the negotiating table. The two states have special interests related to fulfillment of trade goals as they participate in the negotiations setting up TPP policies and this is a weakness to both of them because they do not make genuine decisions. In fact, Japan went ahead to set up an entire ministry to deal with issues touching on TPP. Recently, the TPP ministry claimed that the treaty is baseless and meaningless without Japanese participation. Since Japan is major player in the TPP treaty, the United States is attracted because member countries will have economic, political, and social power to compete with another regional bloc (Comprehensive Economic Partnership) that brings together China and other East Asia states. The US does not have an advantage as it engages in the discussions because the congress has to approve all polices before they are presented to the member states. Again, the US is apprehensive of the situation because other global actors, especially Japan, will interpret its actions to mean a strategy to rebalance Asia if Japan is not represented in the treaty (Medoff 89). In this regard, the United States does not have the guts to expel Japan from the treaty.
While the US applies the negotiation strategies cautiously, Japan is considered a hard negotiator because it understands its role perfectly and threats do not bother its representatives. Consequently, this serves as strength on the side of Japanese negotiators while it is a threat to the Americans. Japan has been engaging other TPP partners in talks over agricultural cooperation with the aim of forcing the United States to accept its policies. Analysts consider this as one of the strategies to force the partners to cooperate. Recently, the Japanese government entered into an agreement with Australia referred to as JAEPA, which is meant to boost the country’s trade strategy. Some analysts observe that the idea of inviting Australia to form an economic treaty was part of the government’s development strategy, but the reality is that the prime minister was trying to force the US to accept the TPP treaty as it is meaning no changes should be made. The United States consider this an ulterior motive because Japanese officials were scheduled to meet with their American counterparts. The aim was to test Australian commitment to the agricultural policies. The treaty between Japan and Australia is specific in dealing with the contentious products, including rice, wheat, sugar, pork, beef, and dairy products, as it does not suggest reduction of tariffs. Since Australia is willing to abide by the new trade rules that favor tariffs, the US has no option even though it has always demanded for zero tariffs. Japan insists that it permits small and quantitative increases in imports. Although negotiations are ongoing, the Japanese government is pressuring the United States to follow a strict agricultural model by lowering tariffs on beef only without removing them (Salacuse 78).
Alternative Sources of Action
Japanese shareholders consider contracts very important because they provide avenues that facilitate creation of contracts, but Americans employ them to prevent others from intruding into their space. The Japanese put much value on the memoranda of understanding believing that they are formal documents signifying a strong relationship. Americans view such documents as goodwill hence they are simply ceremonial. A Japanese company rarely obeys a binding contract because they are used to memoranda. This has always raised issues concerning honesty among business executives from the two countries, which affect the performance of companies in the United States.
One of the cultural aspects that are highly contestable between the two cultures is hierarchy. The Japanese apply the teachings of traditional religion of Confucianism established several centuries ago. In this regard, religion is pointed out one of the cultural aspects that affect business in the United States because Japanese executives fail to honor business transactions that are inconsistent to their religious teachings. For instance, business managers believe that each person has a proper position in society whereby morality is a valued aspect. This means business organizations, as well as top executives should have high standards of morality (Zhao 78). Regarding social relationships, people should interact without considering race, social ranking, and ethnicity implying that justice and sincerity should prevail over other aspects. In any Japanese company, hierarchy is very important and workers should respect the positions and the roles of each other. In of the cases showing the influence of culture on the development of Japanese-owned business in the US, the Japanese firm refused to seize the opportunity to expand its business operations because the chief executive was not present to pose for photographs (Zhao 113). This shows that culture has a powerful influence on the business as far as Japanese managers are concerned. The American managers were surprised because his assistant should have filled the gap. Ownership of businesses is usually concentrated in the hands of few individuals who are expected to make decisions. Unfortunately, junior officers are supposed to represent the organization in major conferences and discussions. The senior management is likely to overrule any decision made, which is an obstacle to business operations in the country. Japanese companies operating in the United are forced to adjust the culture apart from setting up powerful business networks and hiring competent workers. The senior managers should be ready to be addressed by their first names because hierarchy is no longer a valued business practice in the US.
Another cultural difference between the cultures of the two countries pertains to gender equality and the positions of women in the business world. Americans are never comfortable hiring Japanese women for the higher positions because men will overlook them in the negotiating tables. Confucius teachings instruct women to obey their husbands implying that female managers are unlikely to make independent decisions. The Japanese constitution protects the rights and freedoms of women, something that has helped a good number of them who are in the management positions. However, the native Japanese still hold the traditional view that women are naturally naive, inferior, and less intelligent. Best performing American firms operating in Japan are also reluctant to hire women into senior managerial positions because it will affect their businesses. Viewing of women as being inferior to men changed after the Communist takeover in Japan, as the constitution allowed them to participate fully in economic matters. A woman was permitted to take a course of her choice at the university and take part in any profession, including serving the company as lawyer. In the United States, women have been successful in pushing for their rights, as the government has been forced to institute stricter laws to protect them. However, the case of Japan is different because of the strong believe in religious teachings. A number of Japanese owned companies in the US do not employ women into senior positions, something that affect their performance because it is interpreted to mean gender discrimination (Penny 17). It is noted in this part that cultural views on gender is problem to the development of business sin the country.
Culturally, the Japanese believe in collectivist approach where the welfare of the group is important as opposed to the interests of an individual. The group plays a major role in the Japanese community because it is responsible for individual wellbeing. In the business world, the individual employee has to be loyal to the group because it awards him or her status and social position. Many Japanese employees in the United States would jump into the opportunity to work for the best company with claims that it helps in developing talent. This has led to job-hopping, which is a break from the socialist value of devotion. In the United States, Japanese companies struggle to do business because they have to be wary of the strict laws related to copyright and patents. In Japan, the community is entitled to share information, knowledge, and technology freely. The collective mindset of many Japanese executives operating in the country and other places with strict laws makes it difficult for them to conceptualize the regulations leading to serious fines through litigation.
Works Cited
Medoff, Rafael. Baksheesh Diplomacy: Secret Negotiations between American Jewish Leaders and Arab Officials on the Eve of World War II. Lanham: Lexington Books, 2000. Print.
Pearsall, Stacy. “Extreme Negotiation”. Harvard Business Review 3.9 (2007): 67-75. Print.
Salacuse, Jeswald. Seven Secrets for Negotiating with Government: How to Deal with Local, State, National, or Foreign Governments-and Come Out Ahead. New York: AMACOM, 2008. Print.
Shell, Richard. Bargaining for Advantage: Negotiation Strategies for Reasonable People. New York: Penguin Books, 2006. Print.