Case StudyCase Study
Unequal Indonesian Foreign Negotiations
This case study shows how a weaker negotiating party can negotiate successfully with a stronger negotiating party in an international agreement.
Negotiation Sim Role Play
World first highly practical gamified online Negotiation...
"This is one of the best courses that I have attended. The attendees inside and outside..."
Sales Negotiation Training
Close more deals at higher Revenue & Margins. Tool-s...
"Perfect training, recommendable for anybody with business negotiation needs. Opened u..."
When two parties enter into an unequal negotiation, in terms of the negotiation power they bring to the table, the interests or goals of either party can have a dramatic influence on the positions they adopt in the negotiations. Sometimes this can have the effect of giving the weaker more negotiating power. Usually however, this power disparity is leveraged by the more powerful party for their advantage. The negotiation case study of the U.S. – Indonesian negotiations over the Conditions of Aid is an example of both possibilities.
The takeover of China by the Communists in 1949 added a new geopolitical concern to the interests of the United States in the Far East. Two theories of strategic concern were the Domino effect of potential Communist takeover of countries near to China’s mainland, and the Leapfrog theory, where it was considered the Communists might try to gain control of a country within the protected geographic sphere, and deemed a protectorate or ally of the Unites States. Of considerable concern was the potential threat to Indonesia.
In the Mutual Security Act of 1951, the U.S. committed its government to providing aid to foreign countries but only in regards to that foreign government’s return commitment to U.S. long term interests. The U.S. used trade embargoes against Communist countries, and in particular China, especially as the U.S. became engaged in the Korean conflict. A foreign country could not expect any foreign aid if it were to engage in any form of trade with a member of the Communist bloc.
Indonesia considered itself a neutral country. It was responsible for roughly 40% of the world’s exports in rubber. Indonesia was very strong nationalistic country and resented foreign intrusion into its affairs. There were many radical elements within Indonesia that sympathised with Communist China. The Indonesian government did not want to provide the same level of commitment required by U.S. policies. Its goals consisted of the demand that the U.S. provide assistance in the stabilisation of the international price of rubber and tin. It also wanted considerable compensation in the form of foreign aid to beef up its own internal security and infrastructure. The interests of both countries were at cross purposes and posed a challenge for the negotiation that followed.
U.S. Ambassador, Merle Cochran and the Foreign Minister of Indonesia, Subardjo signed an agreement that did not have the support of the Indonesian Cabinet. As matters developed, it became clear that if the Americans were to use the purchase of large quantities of rubber and tin conditional on Indonesian acceptance to the American interests, this perceived obedience to American policies and interests would meet with stiff opposition within Indonesia. In fact, the Indonesians made it quite clear they would walk rather walk than submit to any attempt at coercion by the U.S. Potentially, Indonesia could have traded with China instead.
As a result, Indonesia signed a very agreeable deal, known as the Cochran-Subardjo agreement that was signed on January 5, 1952. Indonesia did not have to commit to any mutual defence treaty with the U.S. However, when the agreement became public, a huge outcry erupted from the Indonesian nationalists. Subardjo was removed form his office as was the pro U.S. Indonesian cabinet.
At the insistence of the new Indonesian negotiators, negotiations were now conducted in Washington. The more militant Indonesian negotiators gave up some very lucrative military grants to satisfy the nationalistic concerns of its people, but they did so through their own choice. In other matters, the Indonesians gained many of their other negotiation objectives, but the overall aid they could have procured was considerably diminished. U.S. objectives were watered down in the ensuing agreement, as in the end, Indonesia held a stronger more skillful hand due to their indifference to the influence of foreign aid as an inducement to comply with the U.S. position.