US-China Negotiation in 2011 (sung to the tune of Rock the Boat – Don’t Rock the Boat, Baby)

When negotiating, do you want to reinforce the status quo or upset the existing order? It’s not simply a matter of being conservative vs. risk taking – this is a key predictor of your success or failure. The decision to support or disrupt the status quo is a matter of style, strategy, time horizon and environmental analysis.

Every negotiation presents counter-parties with only 2 possibilities:

    1. Support the status quo
    2. Disrupt the status quo.

Supporters come in 2 varieties.

    1. Monopolists or quasi-monopolists who have the power and/or environmental adaptation to benefit from the situation the way it is. These negotiators should be either competitive or avoiding.
    2. Weak players, niche-exploiters, price takers, and those unable to adapt to an adverse environment. This class of status-quo preserver would say, ‘The devil we know is better than one we don’t’. These counter-parties are accommodators or compromisers.

Disrupters are generally pretty similar – they understand that the best way to advance their cause and maximize their interests is to shake things up. Start-ups, expanders and negotiators who believe they can benefit from shifts to the commercial or regulatory landscape are disrupters. This type of negotiator is a collaborator or a competitor. They benefit by breaking the rules or subverting entrenched market leaders.

US, China and the Status Quo
How a negotiator perceives status-quo will tell you a lot about his interests and goals.

Until about 2007, US counter-parties tended to approach US-China negotiation from the perspective that that the status quo was in their favor. This was part of the DNA of American negotiators – from the boot-strappingest start-up all the way up to the Federal government. Western strategists in China equated ‘progress & reform’ with ‘doing things the US way’. Sec of Treasury Geithner’s exchange-rate negotiating approach is a great example – he seems continual perplexed by China’s inability to conform to ‘business as usual’, and has spent the last 2 years waiting around for Beijing to come to its senses.

Chinese negotiators have their own quirks and biases when it comes to analyzing the status quo. Beijing orthodoxy is that the 21st century belongs to China, and that the rest of the world will pay any price to participate in the new China-centric economic order. Beijing seems intent on rolling back the calendar to pre-2006 times when central planning and state control was unchallenged. Compulsory technology transfers and increasing censorship of the internet indicate how Beijing sees the new world order.

Disruption Happens
The problem is that both sides can’t be right. If Washington and Beijing both conclude that inertia favors their goals, then the stage is set for a collision of interests. Ironically, conservative strategies actually lead to a highly unstable situation.

The future of US-China commerce depends on counter-parties’ ability to manage chaos and change. The same reality will govern individual businesses and industries. When entrenched players begin to lose ground to competitors – or are weakened by environmental factors – the stage is set for disruption and hyper-competition. This is not a scenario that favors soft-landings – or steady recoveries.

Our love is like a ship on the ocean
We’ve been sailing with a cargo full of, love and devotion
So I’d like to know where, you got the notion
Said I’d like to know where, you got the notion
To rock the boat, don’t rock the boat, baby
Rock the boat, don’t tip the boat over
Rock the boat, don’t rock the boat baby
–Hues Corporation 1974.

Next: When is it best to Rock the Boat?

Leave a Reply

Your email address will not be published. Required fields are marked *