G-7 summit: Trump could be using advanced game theory negotiating techniques – or he’s hopelessly adrift

Prime Minister of Canada Justin Trudeau greets US President Donald Trump during the G7 official welcome at Le Manoir Richelieu on day one of the G7

UPDATE: On social media, Donald Trump has said he will not sign the G-7 communique, reversing his decision from yesterday. Mr Trump said Canadian Prime Minister Justin Trudeau had made "false statements." 

The latest G-7 summit, held June 8 to 9 in Quebec, is one of the most contentious in years.

Donald Trump and his counterparts from six other industrialized countries have been at loggerheads over the president’s aggressive but unstable trade policy. Trump’s renunciation of the Iran nuclear deal, his efforts to renegotiate NAFTA and his intransigent stance on climate change are not helping matters. Nor is his lastest proposal to readmit Russia to the gathering.

But the ink on the G-7 communique won’t be dry before Trump darts to Singapore to meet with North Korean leader Kim Jong Un for nuclear talks, another example of his unpredictable decision-making style. One moment he’s threatening war with the dictator, and the next he’s buttering him up for a summit.

One way to understand Trump’s foreign policy decisions is to focus on their inconsistency rather than their content. Let’s take trade policy as an example.

I have written a number of times about the economic dangers of the Trump administration’s tilt toward protectionism. And I have pointed to the risk that Trump’s use of trade policy as a unilateral weapon could undermine the rule-based international order.

I remain worried about these issues, but what has struck me much more deeply in recent days is the seeming inconsistency, indeed instability, of Trump’s behavior on trade. It is worth considering its causes and consequences – which extend far beyond trade to his nuclear game of chess with North Korea and Iran.

Trouble in Trump trade land
First let’s review just a few of Trump’s recent trade decisions.

At the G7, Trump’s belligerent and unpredictable trade policy is the main reason the other leaders – which also include Germany’s Angela Merkel, the U.K.‘s Theresa May and France’s Emmanuel Macron – are so perturbed. Some commentators are even beginning to term the meeting a “G6 plus one” to signify Trump’s estrangement from his allies.

Recent events have inflamed tensions significantly. The White House said on May 31 that it would impose steel and aluminum tariffs on the European Union, Canada and Mexico. The three had previously received exemptions from the new tariffs, first imposed in March and justified with a little-used national security provision.

All are now planning retaliatory tariffs against the United States, along with legal action at the World Trade Organization. Friends indeed.

It’s the same story with China, which Trump has not only made subject to the same metals tariffs but has also threatened with US$50 billion of other sanctions if it doesn’t meet a series of demands.

Commerce Secretary Wilbur Ross recently traveled to Beijing hoping to negotiate increased Chinese purchases of American goods and a reduction of its trade deficit with the U.S. He was forced to return empty-handed after the Chinese government declared itself unwilling to act without an American promise to drop its tariff threats. An earlier leak that China would purchase an additional $200 million of U.S. exports turned out to be wildly optimistic.

The United States now finds itself isolated, not only from China but from its strongest allies as well. Is this a temporary step in negotiations, or is it the new normal?

Shifting trade winds
Of course, Trump’s proclivity for changing his mind is well-known, but all the same there is an understandable tendency among commentators to focus on the content of his policy choices.

This is especially true on trade, where Trump’s protectionist rhetoric has been exuberant, to say the least.

And it is true that Trump’s actions have been more anti-trade than those of his predecessors, beginning with his withdrawal from the Trans-Pacific Partnership during the first week of his presidency.

Nevertheless, over the last few months, Trump’s trade policy has seemed increasingly erratic. He publicly discussed reentering the Pacific trade deal and just as quickly dismissed the idea. He imposed metal tariffs, immediately granted exemptions to most of America’s major exporters and then withdrew those exemptions three months later. He threatened China with new tariffs on $150 billion worth of exports, then suspended them and risked political capital to save the Chinese corporation ZTE. And after pushing for extraordinary trade concessions from China, he had to take a U-turn after it denied that it had agreed to the most important of those demands.

Two schools of thought
There are two schools of thought about what is driving this policy instability.

Supporters of the president tend to see it as a negotiating tactic, the “Art of the Deal” on a grander scale. Trump, they believe, is trying to throw world leaders off-balance so that he can extract more trade concessions from them.

Trump’s detractors, by contrast, see the president as hopelessly adrift, swayed this way and that by the varying opinions of his advisers. When globalists such as Steve Mnuchin and Wilbur Ross, secretaries of the treasury and commerce, respectively, have his ear, the president softens his stance on trade. But when U.S. Trade Representative Robert Lighthizer and White House adviser Peter Navarro, economic nationalists both, are in the room, Trump doubles down on protection.

Master negotiator?
If U.S. observers accept that Trump’s shifting policy is part of a broader negotiating strategy, Americans can perhaps hope for a better outcome than what they see now.

Indeed, there is some basis in game theory for “irrational” behaviour as a negotiating technique. Nobel laureate Thomas Schelling, in his 1960 classic “The Strategy of Conflict,” pointed out that negotiators with a reputation for overreacting when their demands aren’t met can be in a stronger position to extract concessions.

If a country can convince its opponent of its willingness to follow through on threats even when they are self-destructive, the country can more effectively compel changes in behaviour. Moreover, if an opponent doubts the ability of a country’s leaders to understand or carefully consider the consequences of the opponent’s threats, the country is, ironically, in a stronger negotiating position. This “irrationality” approach was famously termed the “madman strategy” by Richard Nixon and played a role in motivating his escalation of the Vietnam War during the Paris negotiations.

Perhaps, then, Americans are witnessing the early stages of a negotiating strategy that will ultimately bear fruit.

Or malleable amateur?
Even in this optimistic scenario, however, the president’s approach seems too myopic.

After all, international trade negotiations do not play by the same rules as military diplomacy, where much of this theory was developed. Such techniques might have a greater change of working with Iran and North Korea, but of course the risks of escalation here are even more severe.

Trade is different because it is mutually beneficial and also because it requires cooperation that is sustained over time. A country’s reputation for stable compliance with its agreements is thus put at a premium; otherwise the country risks being shunned by potential partners. To wrest trade concessions from America’s partners may be satisfying, but if it is accomplished at the cost of weakening the world trading system, it is hardly worth the price.

The costs of instability
If, on the other hand, Trump’s unstable policy is a symptom of indecision in the face of the competing agendas of his aides, the world economy may be in for a bumpy ride. Irrational behavior can be used selectively as a negotiating technique but has a high cost if not applied carefully and strategically. If a country’s negotiating partners doubt its willingness or ability to follow through on its promises, cooperation becomes impossible.

In the final analysis, a stable and rule-based trading system is in the United States’ long-term interest. Inconsistent and aggressive trade policies, whether produced by a master negotiator or a malleable amateur, risk poisoning the mutual trust necessary to make such a system function.

The ConversationSome are now saying that President Trump is in the early stages of reconsidering America’s membership in the WTO. Hopefully the president will come to understand what is at stake soon, before it is too late.

Charles Hankla is an Associate Professor of Political Science at Georgia State University

This article was originally published on The Conversation. It was not commissioned or paid for by NBR.


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16 Comments & Questions

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Trump is complaining about Canada's agricultural tariffs, but he also pulled the US out of the TPP that would have lowered those tariffs.

Did he ever grasp the TPP, or even bother to read a quick summary? 

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I reckon President Trump is using advanced chaos theory.

Or maybe just chaos.

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Left wing media you can’t help your self.

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Ummmmm... since when was NBR left biased? Is it not possible that Donald is just a bumbling moron who has no real idea about anything he’s doing?

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With his hostility to the TPP (to win angry blue-collar votes), it's Trump who's in line with left-wing media, not to mention the likes of Andrew Little and Jane Kelsey.

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The best thing to do when people call "fake news" or other such throwaway lines when they can't handle rational debate... is to keep reporting, thick and fast!

Keep up the good work NBR :)

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Love the cheesy business book power plays in this pic. Trump does the dominant handshake, but Trudeau comes in with the hand over the top - then Trump tries to trump him with the hand on the back, but the Canadian steps in close to invade his personal space. Decision on points to Trudeau.

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There's this short twitter thread that makes perfect sense in it's analysis of Trump's character and how that then affects his approach to global trade https://twitter.com/fawfulfan/status/1002502747206422529

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"Trade Wars are easy to win"

Looks like Trumpelstiltskin will get his wish, a huge dose of his own medicine, and gets to fight tariffs flying in from all sides of the globe. As the US economy and stock market bomb, and people lose their jobs, there is no way he will take responsibility for the carnage he created, being a textbook narcissist. I truly hope this scenario doesn't happen, as it will affect us in NZ just as much, but we need to be prepared for the worst with such an unhinged toddler at the control panel of the world's largest economy. Having a six times bankrupt Ooompaloompa in charge of your country is not the way to riches and glory. The exact opposite, actually.

Standing by with popcorn :)

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This is a silly piece.

First, Trump continues to do everything he said he would on the campaign trail. The fact that “experts” like this writer think his actions are unpredictable and erratic prove only that there is no such thing as a competent academic in 2018.

Second, since when is protecting your nation-state a negative policy? Every day we’re told “protectionist” trade policies are terrible, but last time I checked, the role of a national leader is to protect the nation.

Third, as anyone in business knows, the leader of a corporation is always making decisions with more information than the average employee. Sitting at Georgia State University and claiming Trump’s moves as “irrational” is like a receptionist critiquing the CEO’s merger. Not only does he not know what Trump knows, he CAN’T know.

Fourth, saying Trump’s actions destroy the rule-based international order is partisan nonsense. Not only is there no alternative to the US-led world order, every other major country on the planet wants to reinforce it. An academic should know that rules can be changed and updated without “undermining” the rule-based order. That he doesn’t says more about him.

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I agree.

He is keeping his promises to the American people. Where is the reporting about the booming US economy and record unemployment? Trump doesn't play by the rules of diplomacy as he doesn't care about the reputation of other world leaders or what they think of him.

The question is do we want a world leader that is rude and brash (probably a serial adulterer-or at least used to be), but will get results, or another Obama/Clinton type - no results, but some really nice speaches.

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Massive over simplification. Do China or even Japan or France really want a US led rules based world order. The assertion is actually totally contradictory and only makes sense from the total ignorance of a MFAT so called diplomat who believes that rules based trade and EEC led law, equalism and utopian communism in place of market capitalism is the irreversible order, just like nuclear deterrence apparently made global war and any need for serious NZDF force , outdated ideas too ridiculous to think about in the NZ foreign affairs closet , 70 years ago
Trump may well just be another Republican Harding , Coleridge or Hoover with zero understanding of the world or the minds of the generals and admirals of any serious military dictatorship.
Any informed analysis would be that Jong is just playing the usual NK role as the lead interference, spoiler and strike force for XI and Putin as at the highest strategic level they are still quite co dependent, with Iran and India the outer quad.
In terms of Kissinger madman theory about his use and deployment of the Nixon's reckless one liners, supposedly to keep Giap and Mao confused. Its about as convincing as the idea Trump is a controlled mine exploder. The Madman feared by Giap, Mao and Breshnev was General LeMay and earlier Douglas MacArthur. Even the rating pushing the big gun activation on the USS New Jersey and USS Newport News could take Nth Vietnam apart in a few days and was a more useful random than Nixon on Trump.

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Until the rest of the world is able to move away from begging this Trump chap for exemptions and retaliate with crippling tariffs (or other actions) of their own on the US, the Americans will continue calling the bluff. The fact is that these countries NEED the US and so this garbage about the US being isolated is just that, garbage.

ZTE has just agreed to cough up US$1 billion in fine so things have moved on since this article was written.

Just because Trump isn't the typical politician and is unpredictable, it doesn't mean he can be written off. He's managed to please Israel and the Saudis seem cool with that. Iran isn't, but they've got domestic issues to worry about with the nuclear deal now torn up.

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yes the reality is the world (even China with its huge trade surplus with the US and holdings of US govt bonds) needs the US more than the US needs to world.

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Trump is putting the brakes on Political correctness gone mad ! Strong leadership and being able to say NO has been Trumps greatest attributes !

If Clinton was in Power we would be marrying our siblings and pets and have communal toilets for all to visit in full view. Terrorists would be welcome into America and the world would be headed to Hell and nuked !

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