Mr. Geithner goes to Beijing.

It’s hard to criticize China for being arrogant in its dealing with the West when the US is kowtowing like a supplicant. Like most rational negotiating entities, China tends to repeat tactics that are successful – and it has been very, very successful in its management of this US administration. If there are any good reasons for Beijing to alter its competitive Win-Lose tactics with Washington, they are well hidden. The Obama administration will be spending the next 2 ½ years lowering expectations and chasing after Beijing to execute on vague promises about forex and trade.

US business can learn a great deal about dealing with Chinese counter-parties from Mr. Geithner, but unfortunately most of the lessons are about how not to negotiate in China.

Lessons learned:

1. Timetables and deadlines must not be arbitrary. If you can’t back up a deadline, then don’t impose one. The April 15 Treasury Dept report on currency manipulation became the goal, not a tool. When Geithner punted on the deadline he lost the battle. Many have argued that the measure unfairly targeted China and never should have been used as a tactic. While that may or may not be true, Geithner’s last-minute capitulation was perceived in China as a victory and a sign of weakness. Westerners who come to China with an arbitrary deadline are putting themselves on a slippery-slope of endless compromise and back-tracking.

2. ‘Face’ might not matter to you, but it does to the Chinese. If your Chinese counter-party feels they have the advantage or that you lack dignity, it will impact on your negotiating power. Geithner and the Obama people may consider themselves to be enlightened Win-Win high-roaders, but in Beijing they are seen as amateurish blunderers who talk tough but back down. The Chinese side does not consider these Americans to be their equals, and every compromise Washington makes reinforces the Chinese notion that there are more benefits left to uncover.

3. Sell your deal at home first, settle on a rock-solid bottom line and ambit goals – and THEN sit down with your Chinese counter-parties. Be clear on your metrics and stick to them. If you want to succeed in China, you first have to develop your own notion of what constitutes a ‘win’. Like many US deal-makers before them, Geithner & Co. have returned from China to start a much tougher, more acrimonious negotiation with their own home office. Trying to explain to your senior management and Board of Directors why they should accept a bad deal in China is a career-killer.

Chinese negotiators often talk about the need for ‘harmony’ and ‘good relationships’ in business dealings, and novice Americans allow themselves to assume that this means 50-50, tit for tat compromise. More skilled Western negotiators know that the first point to be worked out is how each side defines what harmony and success really mean in the present context. The Obama administration is in the process of learning that they have been too quick to declare this deal ‘done’. Learn from their mistakes, or be ready to repeat them.

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