5 Negotiating Lessons from Sec. of State Tillerson’s Beijing Trip

That treacherous opening Chinese toast.

US Secretary of State Rex Tillerson made his first official visit to China last weekend, and the White House probably sees it as one of the bright spots in a rocky transition. His Beijing hosts, however, will view the meet as a major step towards their goal of regional hegemony and global respect. Like many western execs before him, Sec. Tillerson doesn’t seem to understand what the Chinese believe he’s agreed to.

This was how the new Sec of State described the US China relationship in January:

Tillerson says China should be barred from South China Sea islands” – Reuters, January 12.
But this past weekend, “Tillerson assured Xi of the Trump administration’s commitment to the principles of ‘no confrontation, no conflict, mutual respect, win-win cooperation,'” according to an editorial in English-language China Daily. The language is viewed as highly significant in China, and an acknowledgement of the country’s growing status and desire to be seen as an equal to the U.S.” according to NBC News.

 Chinese and traditional chess pieces
All negotiation in China is strategic negotiation

We’ve seen it before. The Chinese side raises their glasses of Mao-tai and proposes a long relationship of mutual understanding and joint cooperation. The western side “gambei’s” and then makes their own polite toast about “long term cooperation, success, and prosperity”.

Now, at this point the westerners feel they are done with the preliminary small talk, and are ready to begin the opening phase of the REAL negotiation.

The Chinese side feels they are running the new partnership, co-own the intellectual property, and will make all substantive decisions about operations, hiring, and distribution.

5 lessons from Rex Tillerson’s China visit:

  1. Manage the agenda, and then focus on individual deal points.

Tillerson followed western negotiating protocol by focusing on the key negotiating goals he wanted to achieve – most likely North Korea, auto-tariffs, and balance of trade issues. But for Chinese negotiators, there is always a larger agenda. Too many western executives fighting internal deadlines and hoping to satisfy their HQ sacrifice big-picture strategy for short-term deliverables.

  1. Watch the timing mismatch. Don’t make real concessions now for longer-term promises.

Tillerson seems to have backed away from his earlier tough line on the South China Sea and conceded to PRC demands over “respect for core interests” in exchange for some vague promises about reigning in North Korea. He has mad significant concessions RIGHT NOW for a possibility of compensation at some point down the road. This is a common dilemma for western negotiators, who are often called on to invest real money and transfer actual intellectual property today in the hope of expanding access to the Chinese market later.

  1. Avoid the slippery slope of concessions. Once you give in it never ends.

The US and PRC will certainly have trade disputes and frictions over the next four years. But from here on in, Beijing will refer back to the to the principles of ‘no confrontation, no conflict, mutual respect, win-win cooperation’ that the Secretary pledged in his first official visit. For Beijing, the main negotiating challenge will be to spin the meaning of “mutual respect” and “cooperation” – and it will surprise no one that these vague concepts will be applied to new islands in the South China Sea, anti-dumping suits, and most of all – to what the PRC likes to call “megaphone diplomacy”.

  1. Style and symbols count in China much more than in the West.

When the Chinese talk about “core interests” and “mutual respect”, they have very specific ideas in mind. Every time an American entrepreneur or German engineer raises his glass in a toast to “mutual cooperation”, he cracks opens the vault protecting valuable intellectual property. Western negotiators believe that contracts will define all substantive terms to their new partnership – but the Chinese side always comes back to “principles of understanding”. As a negotiator, it is your job to get a clear understanding of exactly what the Chinese side wants, and what your side can expect in return. Be polite and amicable when you discuss these issues – but be firm.

  1. You’re in the same boat – but who is the captain and who is the crew?

It’s relatively easy to get a Chinese negotiator to agree in principle to a cooperative partnership. Both sides tend to walk away thinking that they will have the power and authority to protect their interests and further their positions. In practice, however, Chinese tend to feel that they will call the shots on issues pertaining to China.

When you negotiate with a Chinese counterpart, take the time to build the relationship, set the right agenda, and uncover his true goals. A quick negotiating win in China should raise warning flags.

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