Tag Archives: Integrative Bargaining

Orange Blossom’s Special: Or How To Bargain Against Your Own Best Interests?

Remember when Orange Blossom told us Russia is our “competitor,” and we looked at the GDP comparisons of our real competitor (China) and our 11th ranked “competitor” in terms of GDP — the Russian Federation?  Then there was the time DB went off on “distributive negotiations vs. integrated negotiations,” and allowed as how the integrated form was just a bit too deep for our Siberian Candidate?  If we put these two concepts together there’s more cause for alarm in regard to our dealing with global trade matters, some of which flow nicely over into global security concerns.

We also need to recall Senator McCain’s observation that the Russian Federation is a gas pump masquerading as a country.  Thus:

“Compared to Canada and Australia, Russia’s export mix isn’t nearly as diversified: About half of its exports in terms of value are a combination of oil and natural gas. (Russia sits atop the third-largest oil reserves in the world, the number one natural gas reserves.) It should come as no surprise, then, that its currency is highly influenced by Brent oil. Where oil went starting in July 2014, so went the ruble.”  [USfunds]

That direction would be down.  Notice the date: 2014.  By December 2014 Russia was in a recession. [CNN money]  As of August 2016 Russia was in the throes of an 18 month recession. [CNN money] It’s not until May 2017 that the World Bank was ready to declare Russia waa in “recovery” mode.

“Growing macro-stability, driven by the government’s policy response package of a flexible exchange rate policy, expenditure cuts, and bank recapitalization – along with tapping into the Reserve Fund – has helped facilitate the adjustment of an economy hit by the double shocks of low oil prices and restricted access to international financial markets. The positive terms-of-trade effect from rising oil prices, coupled with more stable macroeconomic conditions, are expected to drive Russia’s economic recovery going forward.” May 23, 2017 [ WorldBank]

Now, let’s dive into the polite verbiage in this paragraph.  It’s ever so polite.  The second thing the Russians had to do was “make expenditure cuts,”  — can we say “austerity?”  By 2016 the Russian government was well into “austerity:”

Russia is preparing to slash government spending across the board over the next three years as it struggles to bring down a budget deficit swollen by lower oil prices and recession. Deep cuts are looming for health, education and even defence — which is slated for a swingeing 27 per cent reduction in expenditure next year, according to a draft budget that the government submitted to parliament late on Friday. [FinancialTimes]

Yes, even the vaunted military budget of  the Russian Federation was under the hammer in late 2016.  And did we catch that part about “restricted access to international financial markets?”  We now introduce the Magnitsky Act!  First enacted in 2012, and then there’s this bit: “Since 2016 the bill, which applies globally, “authorizes governments to sanctioof n human rights offenders in Russia, freeze their foreign assets, and ban them from entering the signing country.”  Why does the Kremlin care so deeply about the Magnitsky Act? See Slate, see The Atlantic, see the San Diego Union Tribune.   The oligarchs already had problems “accessing” financial markets, and the Magnitsky Act topped off the sundae.  And as for bank bailouts… the US has nothing on what the Russians had to do with their bank “recapitalization.” [Reuters 2015] [Reuters September 2017] [Moody’s 2018]

So here we are.  We have a gas pump masquerading as a country, with a GDP of $1.283 trillion.  Okay it’s not exactly fair to compare US states with entire countries, but who’s playing fair?  Our entire “gas pump masquerading as a country” has a smaller GDP than three individual US states.

state gdp Ouch.

Here we go again.  Mr. Orange Blossom Siberian Candidate, masquerading as  a US president, has been noticeably eager to avoid applying those sticky sanctions against the Russian oligarchs (of the Magnitsky Act variety) and had to get hog tied by a veto proof majority bill applying sanctions.  All bright smiles and twinkly eyes about a distributive bargain in which he gives up those icky sanctions (and facilitates access to financial markets) in exchange for ________________??  In which he slaps trade penalties on our real competitor (China) in exchange for _____________________??  In which he wants to make big deals with a nation with a very narrow economy (did I mention gas pump disguised as a country?)  With which he wants to conduct distributive bargaining while one economy is the largest on planet Earth and the other is smaller than three individual states part of that biggest economy on planet Earth?

So we’re going to get brassy with our top three trading partners, China, Canada, and Mexico [Forbes] and then get obnoxious with the Japanese (did we keep them in the loop when dealing with North Korea?), followed by calling the EU a “foe,” (GDP $17,308,862 million), insult Germany, France, and the UK, while ignoring India and Italy. Oh, and that thing about slapping tariffs on South Korean refrigerators … well, now Whirlpool is upset because those tariffs they applauded on the fridges just got really complicated when the Orange Blossom Special slapped on steel tariffs. [WSJ] [Bloomberg]  Oh well, DB’s been bouncing up and down for a while now complaining that integrated bargaining, nuanced negotiation, and multi-faceted layers of critical analysis and evaluation weren’t something often associated with the Orange Blossom Special.

And, the worst of it all seems to be that OBS never seems to actually GET anything.  We’ve got a big nothing-burger from North Korea, trade dispute referrals from Canada, Mexico, and China, nothing out of the renegotiation of NAFTA, nothing from EU/Japan trade deals, nothing from Australian/Japanese/Chinese regional trade deals.  Nothing so far.

If China is our true competitor, then why are we driving Chinese buyers into Russian soy bean markets?  (See, I told you I could get my soy beans into almost any post!)  If we want to compete with China, then why are we encouraging them to negotiate deals with the European Union?  Don’t WE want the business?

When a country doesn’t carefully evaluate who are its competitors, who are its friendly competitors, who are its adversaries, and who are its enemies; and, then doesn’t engage in the integrated bargaining necessary to cope with the ramifications and results of trade and economic negotiations the results are messy at best, and dismal at worst.  The Orange Blossom Special is off the rails, chasing the Gas Pump into a swamp, and one more metaphor and I will have rendered this paragraph as incomprehensible as Trump Administration Trade Policy.

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