China, Germany, and “Just One More Thing” Negotiating

1. The “Just One More Thing” Negotiating Tactic

For the last six years, China and the EU have been negotiating a new (and massive) investment/trade agreement. This week, at the last minute, China tossed out “one more thing”: the right for Chinese companies to invest as equals in EU nuclear power technology.

I learned about this when a loyal reader (and long-time Asia resident) sent me a link to an article on this, along with the suggestion that we blog about this “one more thing” negotiation tactic. Great idea.

Writing about this negotiation tactic is a great idea because our China contract lawyers see it constantly — in fact, we saw it the very same day we read this article.

In our case, a client had been negotiating an NNN Agreement to protect its intellectual property from its Chinese manufacturer, and at the last minute, the manufacturer dropped in a new provision that would essentially allow it to copy our client’s product. Yes, you read that right. Right when our client believed its manufacturer would sign the NNN agreement, they changed a few words that would have eliminated all the protections our client was aiming to implement. This is incredibly common.

2. How to Fight Back Against the “Just One More Thing Negotiating Tactic”

What should Germany do now that China dumped a massive impediment at its feet in the last stage of negotiations? What should you do when this happens to you and your company?

Many years ago, I was drafting a contract for a client who had studied Zen Buddhism and had extensive China experience. We were negotiating a deal with a Chinese company and every time the Chinese company would stall or push too hard or lie or agree to nine out of ten things one day and then three out of the same ten things the next day, my client’s response would be, “We will be the rabbit.”

According to this client, “being the rabbit” was a Zen concept of fighting back by not fighting at all, like a rabbit that goes limp when attacked by an eagle. So when the Chinese company would come back with massive changes from the day before, my client would send the Chinese company a nice email saying something like, “I understand your new position and we will be reviewing it and responding when appropriate.” And then he would do nothing. For a long, long time.

Eventually, the Chinese company would come back and accuse my client of delaying the deal and it would reiterate how everyone needed to close the deal quickly. At that point, my client would say something like, “I understand why you are in such a rush, but we are more concerned with doing the deal correctly than quickly, so if you have any ideas on how we can speed this up, please let me know.”

The Chinese company would get so frustrated it would start backtracking on its backtracking and essentially return to where it had been before it had tried to gain more ground against our client at the last minute. I got the sense the Chinese company was simply not used to a Western company displaying Zen-like patience and this threw them off their game.

I often find myself instructing clients to “be the rabbit” in the face of a counter-party’s proposed last-minute changes (which they almost always planned from the start to include). Another of our lawyers is less Zen about how to fight back against the last-minute change tactic and he advocates just telling the Chinese company in no uncertain terms that we will never do a deal with you that contains your last-minute change, end of story.

3. Stick to Your Strategy, Don’t Be in a Rush

These two tactics are essentially the same and both emphasize not backing away from your original negotiating strategy in the face of a last-minute proposal. If you do go along with the Chinese company’s last-minute proposal — either in whole or in part — you almost certainly will have just opened yourself up to one or more new last-minute proposals. “Just one more thing” becomes “and one more thing”. “And another thing”.  It’s always something.

In its negotiations with the EU, the Chinese side is undoubtedly hoping domestic political pressures will cause the EU to grudgingly accept proposed last-minute changes just to get the deal done. Germany in particular has been pushing for a deal by the end of the year, after which it will hand the EU presidency to Portugal. Germany is Europe’s biggest exporter to China.

Over the years we have published many posts offering advice on negotiating with counter-parties in China, and only a few months ago Matthew Alderson recapped a report written in 1982 by the eminent Sinologist Lucien Pye, commissioned by the U.S. Air Force, that outlined how Chinese negotiate with foreigners. Know your adversary!

In negotiating (not only with China!), it’s best to bear in mind the words of legendary negotiator Kenny Rogers, who said, “You’ve got to know when to hold ’em, know when to fold ’em, know when to walk away, know when to run.”

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