The Rice Trek A Game for Primers in Negotiation

EASYPol Module 180 The Rice Trek A Game for Primers in Negotiation General Note

The Rice Trek A Game for Primers in Negotiation General Note Azeta Cungu, Agricultural Policy Support Service, Policy Assistance and Resource Mobilization Division, FAO, Rome, Italy for the Food and Agriculture Organization of the United Nations, FAO FAO Policy Learning Programme aims at strengthening the capacity of high level policy makers in member countries in the field of policies and strategies for agricultural and rural development by providing cutting-edge knowledge and facilitating knowledge exchange, and by reviewing practical mechanisms to implement policy changes. About EASYPol EASYPol is a an on-line, interactive multilingual repository of downloadable resource materials for capacity development in policy making for food, agriculture and rural development. The EASYPol home page is available at: www.fao.org/easypol. EASYPol has been developed and is maintained by the Agricultural Policy Support Service, Policy Assistance and Resource Mobilization Division, FAO. The designations employed and the presentation of the material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. FAO January 2008: All rights reserved. Reproduction and dissemination of material contained on FAO's Web site for educational or other non-commercial purposes are authorized without any prior written permission from the copyright holders provided the source is fully acknowledged. Reproduction of material for resale or other commercial purposes is prohibited without the written permission of the copyright holders. Applications for such permission should be addressed to: copyright@fao.org.

FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: General Note Table of contents 1. Introduction... 1 2. The game... 1 2.1. Background information for the players... 2 2.2. Concept and rules of the game... 4 3. Readers Notes... 8 3.1. Time requirements... 8 3.2. EASYPol links... 8 Module metadata... 9

FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: General Note 1 1. INTRODUCTION Learning objectives This simulation game emphasises practical learning. It is aimed at providing a controlled learning environment in which players can engage in role-playing to explore, first hand, and reflect on some key negotiation concepts and principles. The main learning objectives of the game include: i. fostering participants awareness of the role of relationship, process, outcome (or content) for optimal negotiation; ii. cultivating a capacity to analyse information as well as behaviour in order to understand the importance of cooperation and signalling (e.g., gestures of good will, deeds that signal commitment, etc.) over a one-shot gain and aggressive playing; iii. bringing to light the role of information and preparation, so as to ensure effective use of the available information, in decision-making and the negotiation process; iv. reiterate the importance of building trust; v. analyse and practice on the choice of negotiation strategies (cooperation, competition, etc) and development of options; vi. explore the concept of uncovering real interests and the notion of value creation for negotiations. Required background Readers should have copies of Information Sheet for Southland and Mirland, respectively; a copy of News Slip for Round 8 of the game; and a print-out of pay-offs schedules for each team. Readers can follow links included in the text to other EASYPol modules or references 1. See also the list of EASYPol links included at the end of this module 2. 1 EASYPol hyperlinks are shown in blue, as follows: a) training paths are shown in underlined bold font b) other EASYPol modules or complementary EASYPol materials are in bold underlined italics; c) links to the glossary are in bold; and d) external links are in italics. 2 This module is part of the EASYPol Training Path: Policy Learning Programme, Module 4: Policy and Strategy Formulation, Session 5: Rice Trek Simulation game.

2 EASYPol Module 180 Applied Material 2. THE GAME 2.1. Background information for the players Mirland has a fairly developed economy and a record of impressive economic progress that has been successfully managed and sustained for over three decades. It has a young and well-educated labour force and complex economic system that is more and more focused on high-potential sectors including technology and human capital-intensive services. Mirland is currently also a major player in international trade for agricultural products. In the last decade, Mirland s agricultural sector has surged capitalising on experience and good traditions in the area and the interest of foreign investors seeking to quickly tap into the opportunities created by the country s newly-found economic openness. An important cereal producer, especially of rice and barley, Mirland has been massively subsidising exports for about 8 years. Despite of the economic success, the country still has a relatively closed political system and less-than-friendly relations with some of its neighbours. Especially, inherited from its past is a history of hostilities with Southland over important ideological disagreements. In recent years, Mirland s ruling power has shown signs of moderation such as its intention to join the WTO and the recognition of the need for improved relations among the countries in the region. Mirland would like to join WTO within the next few years. To this end, in 2005, the government initiated a thorough analysis and revision of existing price and product policies to determine the impact that an eventual WTO membership would have on the economy and the degree of adjustment it will necessitate. The report concluded that WTO membership would benefit Mirland though, at least initially, it would come at a cost to some. Authoritative people in Mirland have voiced their concern that the continued use of export subsidies could damage the country s bid for WTO as well as pose a huge burden on the state budget. Most analysts think that the current debate and a turn in public opinion will eventually bring an end to the era of generous state subsidies, within a few years time. Mirland has been receiving press reports on the intention of Southland to use some of its leeway in tariff commitments it had negotiated under the WTO in order to exercise a higher level of border protection on rice. This is been taken seriously in Mirland because of the likely consequences on local producers for whom Southland represents their main export market. Many of the neighbouring countries are not large rice consumers. Southland, on the other hand, has a large and growing domestic market for rice what represents an opportunity for Mirland s outwards-oriented firms. Southland is a lower middle-income country with a rich resource base and a large rural sector, mainly agriculture-based 3. The country is a founding member of WTO and has also signed free trade agreements with neighbouring countries, such as members of the 3 As of 2001, 46 percent of Southland s population was rural while 45 percent of the country s workforce is engaged in agriculture (1999 figure).

FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: General Note 3 Common Continental Market, with whom it is currently reducing tariffs. This, however, does not apply to Mirland who has remained outside the Common Continental Market initiative. In-line with its commitments, Southland has undergone important trade liberalisation reforms and resisted any pressures for more protection in agriculture what would have been seen by donors as a step back in terms of the country s commitment to free-trade 4. The government was also worried that higher food prices would adversely affect food security for poor urban constituencies. Opening up to trade has led to some positive developments like the increase in production and exportation of some key cash crops, the expansion of contract farming and emergence of viable input supply chains. Unfortunately, however, the expectation that price incentives facing smallholder farmers would improve has not materialised. On the contrary, grain imports have increased dramatically over the last decade or so, from 562 metric tonnes in 1985 to more than 2 million in 2000. The increase has been most marked in rice following a reduction of more than 55% in production. This effect is strongest in smallholder agriculture as rice is predominantly produced in peasant farms of less than 10 ha. Moreover, a recent government study on the incidence of poverty in Southland showed that 23.5% of people living under the national poverty line are rural as opposed to only 8.6% among urban dwellers. Most of the rural poor tend to be peasant farmers primarily engaged in grain production, especially rice. In these conditions, the government is worried about the effect that subsidised imports from Mirland are having on local rice producers. In response to Mirland s insistence on subsiding rice exports, Southland is considering raising tariff protection, as an antidumping measure, in order to: (i) protect its rice producers from what they consider to be unfair trade practices, and (ii) tackle problems of uncontrolled urbanisation and overcrowded cities by improving agricultural livelihoods and encouraging the development of the rural sector. Southland is not self-sufficient in rice. Moreover, almost every other year, the country experiences crop failure in cereals. As a result, it will continue to rely on imports, at least for the foreseeable future. Southland has made it clear that it has no intention of building up unjustified protection barriers but, in the interest of food security and economic development, it is determined to halt any products sold below their production costs. 4 Technically speaking, the tariff bindings that Southland negotiated in the Uruguay Round still allow for high levels of protection of the agricultural sector, higher than what is currently in place, notably the possibility of higher tariffs on imported grains.

4 EASYPol Module 180 Applied Material 2.2. Concept and rules of the game Time necessary for the game: Half a day (i.e., four hours), plus debriefing session. Resource persons: Training materials: Two experienced trainers are necessary for an effective delivery of the game and facilitation of group work. Copies of Information Sheet for Southland and Mirland, respectively; Copy of News Slip for Round 8 of the game; Print-out of pay-offs schedules for each team; Flip-charts, markers and other accessories for the debriefing session Participants will be divided in two groups representing Midland (M) and Southland (S), respectively. Group S is a team of experts from the government of Southland who is working hard to determine a level of border protection on rice that would deter any future dumping behaviour from Mirland while remaining in-line with its Uruguay Round commitments. Group M is a working team of specialists from Mirland s Ministry of Finance, Ministry of External Trade, Ministry of Agriculture and Food Processing Industry, Mirland s Association of Rice Industries (MARI) and academics who are analysing the issue of export subsidies. The existing level of subsidies, at ten percent on an ad valorem basis, is judged excessive by any rate and will have to go. The aim is to arrive at a conclusion on the level of support that rice producers should continue to receive from the government in view of the changes in the internal and external environments. The task of each team, representing the two trading partners, is to maximise their country s pay-offs from bilateral trade. It is assumed that the teams have already carried out some quantitative analysis and came up with the following estimation of pay-offs that each side would receive depending upon the tariff and subsidy levels adopted. Table 1 below summarises the results of the analyses.

FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: General Note 5 Table 1: Pay-offs accruing to countries Southland Mirland Percent ad valorem tariff on rice imports 2% 5% 7% Percent ad valorem subsidy on rice exports 2% 5% 7% 11 11 13 15 9 5 13 9 8 12 8 7 5 7 6 15 12 6 Note: Pay-offs are in International Monetary Units (IMU) per ton of traded rice. Round 1 to 3 Instructions There will be no direct negotiations due to ongoing political disputes between the countries. Each party will set the tariff and subsidy level independently, based on whatever information available but without direct communication. After each round, teams will receive feedback on other party s chosen strategy, i.e., level of tariff/subsidy, respectively. Lesson learned Importance of preparation, obtaining information as well as effectively using it. Role of cooperation and signalling for optimising long-term pay-offs. Importance of building trust and investing in the relationship: deeds, history matters. Choice of strategies in interacting with partners as opposed to acting-reacting behaviour. Narrative Initially, teams do not engage in direct negotiations due to ongoing political disputes. In these three rounds, the game will be played over again as a repeated game. In absence of direct negotiations, as the level of tariff/subsidy in the first rounds are set, parties will try to adjust their policies for what they think would benefit them in relation to what the other party s policy is. Moreover, parties might also want to respond to the status quo. After each round, teams will receive feedback on the other party s chosen strategy, i.e.,

6 EASYPol Module 180 Applied Material tariff/subsidy, respectively. In absence of a formally negotiated agreement, the game can be played endlessly unless some equilibrium (i.e., implicit deal) is reached between the parties. Round 4 to 7 Instructions Round 4 Two representatives from each team meet unofficially in an academic conference on international trade and regional economic integration. The meeting is not planned but the two decide to use it to exchange views. Their discussion will take place in private and any deal reached will remain confidential. Upon their return home, they will report this unexpected meeting to the working groups. Teams chose a new tariff/subsidy level. Feedback on the other party s move will be provided to teams, at the end of the round. Round 5 to 6 There will be no direct negotiations. Each party will set the tariff and subsidy level independently, based on whatever information available but without direct communication. After each round, teams will receive feedback on other party s chosen strategy, i.e., level of tariff/subsidy, respectively. Round 7 Direct official negotiations are established at this stage. Unexpectedly, Southland receives an invitation to talks from the Mirlandese government who is eager to show its trading partner good will and commitment to improved relations. One representative from each team is invited to meet in a third country, Neutra, in an attempt to come to an understanding that would be acceptable to both parties. After the talks, representatives return to their home countries and new levels of tariff/subsidy come to force. Lesson learned Importance of building trust and investing in the relationship: reputation effects, selfenforcing mechanisms. Cost of deviating from the agreement and short-sightedness. Importance of discussing face-to-face as a means for efficient and effective negotiations: explore range of acceptable options, discuss and agree on alternatives. Role of formal versus implicit (and/or informal) commitment in dispelling uncertainty over enforcement. Narrative Behaviour and possibly outcome (content) of the game will change as face-to-face meetings and then formal negotiations are introduced further on in the game. The issue of building trust, the importance of the relationship and potential short-sightedness are explored. With implicit agreements (potential outcome of round 4), parties might be tempted to deviate from the agreement in an attempt to achieve a higher reward. Due to short-sightedness, some parties might go for large short-term gains with no regard to the future of the relationship with their partners. The agreement will be stronger: (i) if parties trust each other (depending on history of the previous round, reputation and authority of

FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: General Note 7 the (lead) negotiator), (ii) if a self-enforcing mechanism exists such that parties see no benefit from deviating, e.g., the agreement is expected to make both parties better-off compared to the no agreement scenario, (iii) if time horizons longer than a one shotgame are to be considered in which case, nurturing an on-going partnership becomes a valuable outcome for each round. Round 8 Instructions Some news has reached the Mirlandese negotiation team regarding an imminent budgetary crisis in Southland (see Round 8: News Slip for Mirland). Each party is invited to think of ways to improve on the status quo. Can we do better than the deal we have? Hint: Think of ways to create value, think of underlying interests. Negotiations are permitted through confidential communication channels (trusted envoys, diplomats, secure telecommunication lines, etc). If necessary, face-to-face negotiations could take place at the end of this round. Lesson learned ability to analyse and effectively use the information that becomes available in order to improve the outcome of the negotiation in terms of process and content. revise expectations given change/ update of information and use information as well as direct communications to uncover real interests in partners. explore additional options and create value for negotiations. Narrative This session is mainly intended to explore concepts of interests versus positions, value creation and sharing. How far one wants to go in this direction, in Round 8, can be adjusted. This round allows ample space for creativity in terms of the options that might be considered and discussed. Upon understanding partner s real concerns, additional options designed to address those concerns could be generated and put in the negotiation table. In the Rice Trek game, the Mirlandese team might suspect that the needs to raise financial resources swiftly might be behind Southland s eagerness to raise tariffs. Mirland could consider alternatives that might help Southland overcome the difficult financial situation, at least in the short run, through means other than tariff protection. Some might miss this opportunity, i.e., a chance to give the game a very invigorating and interesting twist. If one wants to avoid this, teams might need some facilitation in the 8 th round while staying clear of suggesting possible solutions. This has to come from the teams. If it does not happen, anyway, then this per se is something important to discuss during the de-briefing. During the actual role-playing, course facilitators can make an important contribution in managing the process. This could consist in handling the messages and communication between teams, managing time in each round (i.e., ensuring teams are ready with their proposals within the time available for each round), and observing group dynamics for insights during the debriefing.

8 EASYPol Module 180 Applied Material 3. READERS NOTES 3.1. TIME REQUIREMENTS Time required to deliver this module is estimated at about half a day (i.e., four hours), plus debriefing session. 3.2. EASYPol links By linking to the sub-modules listed here below, readers will be able to build the complete simulation game: The Rice Trek - A Game for Primers in Negotiation: EASYPol Module 180-a: Trainer s Instructions EASYPol Module 180-b: Mirland Information Sheet EASYPol Module 180-c: Southland Information Sheet EASYPol Module 180-d: Round 8 Information slip EASYPol Module 180-e: Payoff Calculation Sheet This module belongs to a set of modules which are part of the EASYPol training path Policy Learning Programme, Module 4: Policy and Strategy Formulation, Session 5: Rice Trek Simulation game Readers can follow other EASYPol documents under Module 4, which is structured as follows: Module 4: Policy and Strategy Formulation Session 1: Making sense of policy processes Session 2: Two case studies: Making sense of policy processes Session 3: Key factors in state citizen synergy Session 4: Extrapolate Session 5: Rice trek Simulation game Session 6: Ministerial Loan Bargain Game Session 7: Pulling it all together

FAO Policy Learning Programme The Rice Trek - A Game for Primers in Negotiation: General Note 9 MODULE METADATA 1. EASYPol module 180 2. Title in original language English French Spanish Other language 3. Subtitle in original language English FAO Policy Learning Programme Programme de formation aux politiques de la FAO Programa de aprendizaje sobre políticas de la FAO The Rice Trek A Game for Primers in Negotiation: General Note French «Rice Trek» - Jeu de familiarisation à la négociation : Note générale Spanish La travesía del arroz : Un juego para iniciadores en la negociación. Notas generales Other language 4. Summary This simulation game emphasises practical learning. It is aimed at providing a controlled learning environment in which players can engage in role-playing to explore, first hand, and reflect on some key negotiation concepts and principles... 5. Date January 2008 6. Author(s) Azeta Cungu, Agricultural Policy Support Service, Policy Assistance and Resource Mobilization Division, FAO, Rome, Italy 7. Module type Thematic overview Conceptual and technical materials Analytical tools Applied materials Complementary resources 8. Topics covered by the module Agriculture in the macroeconomic context Agricultural and sub-sectoral policies Agro-industry and food chain policies Environment and sustainability Institutional and organizational development Investment planning and policies Poverty and food security Regional integration and international trade Rural Development 9. Subtopics covered by the module

10 EASYPol Module 180 Applied Material 10. Training path FAO Policy Learning Programme 11. Keywords negotiation, policy-making, negotiation approaches, strategies, tactics