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Don’t Bet Decades of Winnings on a Mediocre Hand

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Figure 1I have new online piece, co-authored with Dani Nedal, at Foreign Affairs:

President Donald Trump believes that America makes terrible deals—from the North Atlantic Treaty Organization (NATO) to the North American Free Trade Agreement (NAFTA). Why, according to Trump, do other countries take such advantage of the United States? Because our leaders and officials are stupid and incompetent and are terrible negotiators.  “Free trade can be wonderful if you have smart people. But we have people that are stupid,” said Trump when he announced his decision to run for president. On immigration, he was similarly blunt: “the Mexican government is much smarter, much sharper, much more cunning.” And during the negotiations over the Iran nuclear deal, he claimed that “we are making a terrible deal” because “we have the wrong people negotiating for us.” He added that “the Persians are great negotiators” and that “they are laughing at the stupidity of the deal we’re making on nuclear.”

If the Trump Doctrine is to put “America First” by focusing on bilateral bargains—understood in terms of short-term winners and losers—then its corollary is the “Good Negotiator Policy.” In the president’s world, bad people make bad deals.  The best, smartest people—most notably, Trump himself—always get the best bargains. He is right that personal attributes and interpersonal dynamics can make an important difference in international negotiations. But Trump’s focus on individual skill overlooks the most important factor that shapes political agreements in general and international ones in particular: the relative leverage of the parties involved.

The problem is that when the Washington locked in most of its bargains and arrangements, America was much more powerful, in relative terms, than it is now.

It takes a rather naïve negotiator to attempt to overhaul relatively favorable deals from a position of comparative weakness. The United States will not get better bargains than it achieved when it controlled more than twice as much of global power as it currently holds. If Trump abandons long-standing practices of American-led liberal order for bilateral, transactional, and zero-sum relations, other states have little reason to prefer dealing with Washington to China, Russia, or any other country.

When it comes to stiffing contractors, he’s shown a very good understanding of how power asymmetries shape bargaining outcomes. But, overall, Trump’s rhetoric is in keeping with a man who was born on third base and thinks staying there is a testament to his mad business skillz.

Anyway, go read the whole thing, if you’re so inclined. You may need to register to get access.

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  • dogboy

    “When I start talking about fixing our terrible , horrible no-good deals, people around here start talking about Bretton Woods and Dumbarton Oaks- listen, we are going to have the greatest timber industry in the world. The best. Bigly.”

    • dnexon

      Slow clap.

  • JDM

    Not to mention that Trump has a long track record as a terrible negotiator, overpaying for one business or property after another, leading to failure after failure.

    • dnexon

      Oh, don’t worry. That’s in there.

    • SNF

      Well, Trump gets good deals, in the end. He usually ends up paying $0.

      It’s easy to get things for free if you have no ethical standards or conscience at all.

      • IM

        But well, bankrupting the US and going away with the spoils can’t work.

    • Alex.S

      Yeah, but those deals only hurt the people or companies who were investing in his brand. Trump himself was always able to be slightly removed from the failures and loss of money.

      Bad news for whoever he is representing at the negotiations. I hope it isn’t a country I live in or anything.

    • Warren Terra

      Trump has a long track record as a terrible negotiator

      How can you say that? Scarcely ten days in office, and according to his own narrative he’s taken the failing, over-budget F35 program and made it a shining beacon of success; key to that inspiring transformation was a 6-7% decrease in the per-unit cost of the next batch of planes – a triumph of negotiation.

      Now, some moaners might quibble that per-unit cost decreases were intended from the earliest days of the F35 program, and that precisely this per-unit cost decrease was announced before members of Trump’s transition team even began meeting with Lockheed Martin. But that just goes to show what a tremendous master of negotiation Donald Trump is! His powers of negotiation defy time itself!

  • Bitter Scribe

    One of the most important aspects of good negotiation is grasp of relevant details. Attention to detail is exactly what we don’t have in the White House right now.

  • JMP

    Trump’s a con artist, and it’s pretty clear that he looks at deals that way, instead of a bargain for mutual benefit he sees deal-making as adversarial in which each party is looking to screw over the other(s). That’s not how it works among non-sociopathic businesses, and it’s certainly not how it works with international multilateral trade deals, his plan to renegotiate all the existing commitments threatens to undermine the entire established order of international law.

    • rjayp

      You mean to say you don’t want to bring back a nuclear armed Co-Prosperity Sphere and a revanchist nuclear armed Germany?

      You really are a stick in the mud! ;)

      • Ahuitzotl

        maybe we could get them to conquer the USA?

    • bizarroMike

      More importantly, he’s used to using legal shenanigans to cow his negotiating partners. But he’s working to blow up the UN, NATO, and leave the WTO. How does he imagine he’ll enforce his screwy deal? At the barrel of a gun, I suppose. It won’t work, for at least the reason that many other leaders have a real domestic political incentive to call him on his bullshit.

      • John Revolta

        His usual method is “If you don’t like it, take me to court”. Smaller parties can’t afford to take him up on it.

        ……………………..could this actually work with smaller countries as well? Not China obviously, but…………………..?

    • PhoenixRising

      I want to comment on your embedded premise, as a principal in a small business. We are the relative size, annual revenue metric, of the kinds of businesses Trump Inc. has paid 66% of the contract and dared them to sue…refused to pay outstanding invoices until the doors close…claimed the paint job isn’t billable until previously unstated criteria are met…etc. (Small business is defined by the SBA is a ludicrous way, to include factories running multiple shifts, and that is not what we are.)

      It is, however, who we serve. And as a 20 year vendor to businesses from Fortune 500 down to 25 employees, I can tell you that your ideas are outdated. Sometime during the period between the dot-com bust and the real-estate bubble popping, US business owners got sociopathic.

      I am currently on hold with my lawyer to find out how many hundreds of dollars we have to pay him for his work in paying off a shameless liar with no actual claim, to get the former client to go away. Not pay his late bills, not properly account for what he might owe, just go away. ‘Go away’ is now our stated preferred outcome in disputes, because about 1 in 5 of our client base seem to be utter sociopaths.

      Trump’s ideas about how ‘deals’ work are perfectly in line with the expectations of US business owners. Many of them voted for him. They find his (legally) laughable claims that the time to negotiate the price is after extracting the value on previously set terms to be credible because that is what they do every day.

      TBC the mentally normal 80% of my clients didn’t vote for him, are horrified by his worldview that the larger entity has leverage to rewrite deals simply by the virtue of having more money and therefore the power to withhold a reasonable resolution. Because the majority of us know that we’re the ones getting hosed in his version of ‘business ethics’. But he isn’t delusional about this, he’s just wrong about how it applies to his present circumstance.

  • Shalimar

    during the negotiations over the Iran nuclear deal, he claimed that “we are making a terrible deal” because “we have the wrong people negotiating for us.”

    One of our lead negotiators was Energy Secretary and nuclear physicist Ernest Moniz. Trump replaced him with a moron who doesn’t even know what the Energy Department does. Says it all about ability to choose the right people.

    • SNF

      But the new guy is willing to tell Trump how great he is. And you have to be smart to be able to grasp the greatness of Donald Trump.

      If Ernest Moniz is so smart, why doesn’t he realize how great Donald Trump is? Doesn’t seem so smart now, huh?

      Checkmate, libtard.

      /s

  • I don’t think the phrase “mediocre hand” derives from the relevant universe of gaming. Face it—isn’t the evidence becoming overwhelming that Steve Bannon is dungeonmaster for some eldritch horror from a place where space and time merge together and melt even the strongest psyche’s puny defenses against chaos? And that’s before the game even starts!

    Also, too, that appendage isn’t mediocre; it isn’t even a hand.

    • bizarroMike

      I thought you’d slip in a small hand joke somewhere, but the eldritch tentacle works too.

  • Shalimar

    “the Mexican government is much smarter, much sharper, much more cunning.”

    “And don’t even get me started about the Canadians. I will never forgive that time Canadian hookers tricked me into disrobing first, covered me in maple syrup and then left me naked in front of a Tim Hortons.”

  • In Trump’s rhetoric, this paradox is resolved by the claim that he, along with his team, is a smarter, cannier, and far-superior negotiator than are past American officials and foreign interlocutors alike.

    Ha ha ha ha.

    And whatever treaties he enters into will be the best treaties ever, fantastic, we’ve never seen a treat so great in the – they went crazy, they applauded until their hands – Beautiful.

    Americans who object to having to take part in the pre-mortem mandatory organ donation treaty will be mocked on Twitter.

  • MacK

    So what you are saying US – and the U.K. actually had pretty good deals, negotiatiated when they held a strong hand, and Trump wants to reopen the negotiations. I can go with that.

    • Ronan

      These people are delusional. A lot of English nationalists online are thanking god that they’re gonna be out of the eu so won’t end up “destroyed” like Germany is, apparently, now , at the hands of merkel. I mean, What kind of person looks at contemporary Germany, compares it to the uk, and thinks the Germans are the ones with the problem ?

      • Harkov311

        Ah, but see, you're thinking in terms of rational metrics like societal pluralism, economic growth, and a sustainable future. England is way ahead of Germany on such important matters as telling evil foreigners to go away, which as we all know, matters way more than anything else.

        • sonamib

          The Germans try to keep foreigners away by having a godawfully hard language to learn, but their mischievous scheme doesn’t appear to be working.

  • Beyond just Trump, it always bugs the hell out of me when I see right wing yahoos like John Bolton and Orrin Hatch take dumps all over the UN, the Geneva Conventions, etcetera. You guys realize those things are to our immense advantage, right? Both strategically and economically? And you want to piss them away because, what, every country in the world doesn’t act like a totally dependent client state? If I may use a new Trumpism: Fools. I don’t call them critics. I call them fools.

  • petesh

    Thanks for this, and the very interesting graph. Could you expand a bit more on the “global capabilities” metric?

    I have previously used economic data (GDP/PPP mostly) to estimate the US share of the global economy, which has roughly declined from 50% to <20% since 1945 (IIRC). I vaguely thought that our vast military expenditure would be enough to compensate, but I guess not. These clowns could really blow it for us, bigly and long-term. Grrr.

  • Mike G

    “But we have people that are stupid”

    For the past week or so, yes.

  • PhoenixRising

    when Washington locked in most of its bargains and arrangements, America was much more powerful, in relative terms, than it is now.

    Thank you for this summary of why Trump’s negotiating position is doomed. It’s clear and brief enough to make GOP voters have a shot at grasping the cause of the crisis we’re about to enter.

    As I said above, not because he’s wrong about the norms and leverage points in business that have gotten him where he is (the thrice bankrupt son of an actually rich man, who has handled vast sums in his life, little of which sticks to him) but because he is wrong about how they work in international relations.

    It’s almost enough to make you think these eggheads in their ivory towers might know something.

  • alexceres

    America and its allies dominate the economic and international organizations of the world. Not as much as they used to, but still, by an overwhelming margin. The US is the largest economy in the world, by far. Using treaties to force the world to play ball on our court has made us richer and even more powerful.

    The idea we should burn this all down so we can go back to kicking ass with boys coming home from abroad in flags and coffins is not merely insane but profoundly stupid. Shifting the terms of struggle away from the economic and diplomatic arena weakens us. Militarily, we can’t even keep Iraq and Afghanistan under control.

    I suspect this has nothing to do with American foreign power, and instead offers a way for Bannon to take more domestic political control. Bannon is on record as wanting to burn the American establishment down. In an unsurprising turn of events, Nazi’s aren’t interested in America’s best interests or even its national security. A few small wars right before an election is straight out of the GOP playbook.

  • NYD3030

    What is the Y axis on this chart?

It is main inner container footer text