Teaching Real-World Political Economy: Simulating a WTO Negotiation

Abstract

“If free trade is a no-brainer, why isn't trade free?” Students often express such sentiments at the conclusion of a typical international trade course, during which they have learned that free trade is optimal, but that countries continue to restrict trade substantially. This article describes a simulation of a round of trade liberalization under the auspices of the World Trade Organization (WTO). The simulation differs from others in the literature in that it represents a substantial component of the course, but it is not the course's focal point. Because the simulation has proven beneficial to students, the article attempts to provide a blueprint that will enable other professors to implement the project with minimal start-up costs.

Keywords:

• Simulation
• Negotiation
• Free trade
• Active learning

Notes

¹ Gardiner (1998) makes the case for increased student participation and active learning in the classroom. Paul and Mukhopadhyay (2004) examine various active learning techniques and the associated impact on student learning. Their article describes a business to business negotiating component they find particularly beneficial in helping students' overall understanding in international business issues. Angel (1994), Rodgers (1996), Cooper and Grinder (1997), White (1997), Gremmen and Potters (1997), Alden (1999), Dwyer and Johnson (1999), Mason (2001), McGuinness (2004), Manuel and Tangedahl (2009), and Garvey and Buckley (2010) provide just a sampling of the myriad simulations and role-playing exercises in business and economics courses. Ogden and Benedict (2000), Ponte (2006), and Young (2005) present simulations and role-playing exercises specifically targeted at improving negotiation skills.

²The WTO website (http://www.wto.org) contains an excellent summary of its evolution, membership, and the current issues with which it is dealing.

³Instructors may find sufficient time in their course to include some basic principles of negotiation or may provide their students with tools for self-study. Foundational concepts in the negotiation literature include best alternatives to negotiated agreements (BATNAs), zones of potential agreement, and framing and judgment biases (Fisher, Ury, & Patton, 1991). A BATNA is the best alternative available to you should a negotiated agreement fail. Identification of BATNAs forces negotiators to focus on their underlying interests, not the resultant negotiating positions. BATNAs within a given negotiation are not necessarily static. Moreover, negotiation environments become more competitive and “hard,” the less desirable the BATNA. A zone of potential agreement is essentially the intersection of BATNAs. Hence, understanding other parties' BATNAs requires understanding their underlying interests. The WTO simulation encourages students to consider those underlying interests in attempting to understand their opponents' negotiating positions and strategies.

Numerous studies in the business, legal studies, and negotiations literature describe ways to learn the skills and strategies necessary for successful negotiating. Taylor, Mesmer-Magnus, and Burns (2008) show how negotiation courses improve at least self-perception of negotiation skills. Instructors may wish to share Balachandra, Crossan, Lee, Leary, and Patton (2005), Lax and Sebenius (2004), and McClendon, Burke, and Willey (2010) with their student who wish to improve their negotiation skills. Readers interested at understanding how ethical culture impacts the negotiation process should refer to Aquino (1998).

⁴The Summit of the Americas was a conference at which the process of creating a free trade area, or bloc, encompassing North America, South America, and the Caribbean was initiated.

⁵Institutional aspects of trade typically appear approximately 7–9 chapters into a trade text, with 9–11 chapters normally being covered during a semester.

⁶There has been surprisingly little controversy in the country-selection process.

⁷It is strongly recommended that instructors have each world meet in a different room for the negotiating sessions.

⁸In order to balance negotiating power, the list includes some issues that are not, strictly speaking, within the WTO's sphere of influence. The instructor should identify these issues for students, discuss the appropriate forums for those issues, and explain the rationale for including them in the simulation. Typically, the rationale involves enabling students to learn more about issues that appear in the current press, such as the value of China's currency.

⁹A complete set of tables is available from the authors upon request.

¹⁰Interestingly, some students always choose to ignore this warning and both they and their team members pay the price.

¹¹The simulation provides initial point values for the world and each country. However, one could allow students to propose alternate point values for their country if they can justify the structure through their research.

¹²Instructors who wish to streamline the simulation can tell students to use the rationales from the handouts, rather than researching country goals. This has worked well in helping students understand the complexity of trade negotiations, although they miss the in-depth understanding of their country's motivations.

¹³The point tables help provide students a clarity in purpose and an understanding of how greater effort in research and preparation will be rewarded in better project outcomes and grades. Li Ling-yee (2011) suggests such a link leads to greater effort expended and better learning outcomes.

¹⁴This has yet to happen. The structure of our simulation parallels the actual WTO as a distributed bargaining situation. Since the world and each negotiating country earns zero points should no agreement be found, the simulation has effectively eliminated each country's BATNA. This design helps prevent the students' cognitive withdrawal during the simulation and enhances the learning outcomes (Taylor et al., 2008; Stevens & Gist, 1997).

¹⁵As part of a university funded mini-grant, formal evaluations of this project were administered during a fall and summer term as part of the required course evaluation. Sixty-five of the 66 students taking the course during this time recommended that the project be used again—the remaining student responded “unsure.” Ninety-two percent of those students claimed to have learned “a lot” or “quite a bit” about the complexity of global trade negotiations while the remaining 8% admitted to learning “some.” None of the students selected either “a little” or “nothing” on this question.

¹⁶Internal constraints faced by students arise because they represent countries that are affected differently by the various issues. Nevertheless, they share a common constraint because all students are subject to how the world is affected by the negotiations. The students are also affected by personal constraints. Because the simulation is used late in the course, students will have already earned roughly 50% of their course grades. Those students with high grade aspirations and those that have performed poorly on earlier exams will have the strongest incentives to achieve beneficial outcomes for their specific country.