Mitchell’s Musings 6-18-2018: The Donut Doesn’t Look So Good

15 Jun 2018 6:41 PM | Daniel Mitchell (Administrator)

Mitchell’s Musings 6-18-2018: The Donut Doesn’t Look So Good

Daniel J.B. Mitchell

When you go through life make this your goal,

Watch the donut, not the hole. --- The Donut Song[1]

In my June 4th musing, I started with the quote above. The theme was simple. President Trump had recently announced a cancellation of the planned “summit” with North Korea over nuclear weapons. I noted in that musing that walking out of negotiation was a tactic, not an ultimate outcome, and that critics should await the outcome – the donut. I further noted that in collective bargaining, walking out of a negotiation as a tactic was not unusual. But since the parties to a collective bargaining negotiation will likely eventually have to work out “something” (a contract, typically) – it is the resulting agreement, not the tactic which led to that outcome, that must be evaluated. Watch the donut, in other words, not the hole.

Of course, as it turned out in the North Korean affair, there was a summit in Singapore as had originally been planned. The Trump walkout was temporary and was rescinded. But the donut that emerged from the meeting was a vague agreement that, other than a return of soldiers’ remains from the Korean War, didn’t include what appeared to be a key objective, i.e., specific steps toward denuclearization. Moreover, President Trump after the meeting with Kim Jong-Un threw in an announcement that planned U.S. military maneuvers with South Korea would be cancelled, apparently without consulting South Korea or his own military. Not surprisingly, and with good reason, critics pointed to the ultimate donut that emerged from the summit and its aftermath as a win for North Korea.

But let’s go back to the collective bargaining analogy and let’s view the outcome from that perspective. Collective bargaining agreements do sometimes leave difficult issues unresolved and, in any case, don’t attempt to deal with every possible situation that could emerge during the contract’s duration. Perhaps the most obvious example is the fact that virtually all union-management contracts have a grievance-and-arbitration clause. If either party believes the other is violating the contract, a mechanism is in place to provide a resolution. Suffice it to say, there is no such mechanism in the deal that was signed with North Korea. That absence of a mechanism alone suggests that a rancid donut was produced.

But there is another lesson from collective bargaining that may be more significant. As with international negotiations, collective bargaining is a repeat game, not a one-time process. In the latter case, contracts are periodically renegotiated when they expire. In the former case, nations continue to live on the same planet and have to deal with one another indefinitely. In such situations, the deal you reach today can influence future deals and your future relative bargaining power.

For example, the date on which a union-management contract expires (which is part of any negotiation) matters in the future. Thus, if you were a union negotiator bargaining with a hotel that had a seasonal business – say, a peak season in the summer – you would push for an expiration date that would allow a strike in the summer. And, of course, from the management perspective, you would want a winter expiration.

What Kim Jong Un and the North Koreans learned from the Singapore summit – and from their and Trump’s previous behavior – is what President Trump most wants is a situation in which he comes out looking good domestically. He plainly didn’t like North Korean atomic bomb tests and missile launches. He didn’t like bellicose North Korean threats against the U.S. All these things made him look bad. He temporarily cancelled the summit when North Korea made statements that seemed to suggest they were the winners simply by forcing him to meet. The summit was put back on track when such comments from North Korea ceased. And the whole event in Singapore was conducted with much pageantry that made Trump look good.

As a result, the North Koreans know now what makes Trump look good, and what makes him look bad, and what his objective really is. If they tested bombs or launched missiles shortly before the 2018 or 2020 elections, Trump would look bad. Even making statements around those times that they had won would make Trump look bad. In short, they have acquired leverage – bargaining power – that can be used in the future. Put another way, what’s wrong with the donut is not that it doesn’t immediately produce denuclearization. It is that the deal 1) has no mechanism for resolving its ambiguity and incompleteness, and that it 2) gave North Korea more leverage in future dealings with the U.S. To mix a metaphor, that’s the way this donut has crumbled.




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