Few topics have dominated the headlines recently as much as President Trump’s efforts to renegotiate trade relationships with other countries. There are good reasons for the attention they get: The outcomes affect the prices of so many of the goods that make up our economy—and, in turn, businesses, their employees and our retirement accounts.
There is another reason for us to follow trade negotiations, though. They present—in real time and in a grand scale—lessons about the practice of negotiating, which we can define as the means through which conflicts are resolved when we are not appealing to some formal authority, like laws and courts, to do that for us. It’s something that the HR function has to do almost every day.
There are two main types of negotiations. The first is “zero-sum,” which means we cannot make things better for both of us, whatever I gain comes at your expense and vice versa. Trump is well-known for thinking about conflicts and their resolution in this manner—perhaps because many of his business deals were that way. Think of this like buying a house from someone you do not know and are unlikely to see again.
The other type is known as “win-win,” which means that we could make things better for both of us if we manage the conflict well or worse for both if we do not. Whenever there are relationships that will continue, they quite likely have win-win aspects to them. If there is a conflict with an employee, for example, smart supervisors know that while they can force an employee to follow their orders—a zero-sum situation—it is better for the long run if they can try to work out something together.
Rules from the negotiating table
There are some clear lessons from research and experience about negotiations, especially zero-sum ones. The first one is, whoever goes first in attempting to settle has the advantage because they shape the subsequent negotiations. They do that mainly through their initial offer. Surprisingly, perhaps, the more extreme your initial offer is, the better the settlement is likely to be for you because your opponent likely thinks, Wow, you must have a very strong position. So, they back down. By these criteria, Trump seemed to do well in initiating the renegotiations of trade agreements and starting, say, with China, with very extreme proposals for 154% tariffs on Chinese goods coming to the U.S.
The exception to the extreme offer rule is if the party on the other side does not believe that your offer is credible, that you are bluffing. Then, they call your bluff and come back with something equally extreme. This is what happened when China countered Trump’s extreme tariff proposal with equal tariffs on U.S. goods. When Trump announced in response, “That’s not how you play!” he was acknowledging publicly that he was not expecting China to call his bluff. Now, the bluffer is in a worse position.
If you’ve heard the expression “negotiating against yourself,” this is what it describes, as now you have to come back with a concession and a new offer before the negotiation even starts. An employee negotiating their starting salary is worse off if they make an offer that the managers think is ridiculous in that context: Management doesn’t even make a counter-offer. Now, the employee gained nothing and going forward has irritated their boss. A more reasonable initial request would have gotten them somewhere.
HR lessons from trade negotiations
There are two main lessons we can learn from the current trade negotiations. One is what happens when we mistake “win-win” situations for zero-sum.
Think about that negotiation over starting salaries with a new hire, for example. As the HR person, you could get a great deal for your employer by making a low initial offer and securing a low starting salary—but in the process, you might so irritate the new hire that it helps them decide later on to quit for a job elsewhere. We see this happening on the trade front, where the U.S. has the power to push a smaller country to accept a deal that hurts them. But later on, we may want something from them, such as their support on a vote in the UN or help fighting terrorists. Will we get it, or will they demand something costly for us in return?
A second lesson is about the importance of keeping negotiations private and not letting the public in on the process. Professional negotiators and diplomats know, for example, that negotiations involve exaggeration, bluffing and sometimes threats. But constituents don’t know that.
When Trump made extreme demands and, no doubt, bluffs in trade negotiations with Canada, the Canadian public responded angrily in ways that changed their election results, hardened the negotiating posture of their new leaders and led to boycotts of U.S. goods and travel. We know this too in HR: What you say to a professional negotiator on the other side—a union representative or an employee’s lawyer—may involve exaggerations or threats. It has to stay private because if their constituents find out, their positions may harden in response.
International trade … employee relations—it’s the same process, just different stakes.
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