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NEGOTIATION Diplomacy and Domestic Politics: The Logic of Two-Leve} Games ROBERT D. PUTNAM Perhaps the most perplexing consequence of growing global interde- pendence is the increasing entanglement of diplomat y and domestic politics. account for success and failure in international cooperation, neither a purely domestic nor a purely international analysis will suffice. In partic- ular, theories that treat the nation-state as a unitary actor are seriously misleading. As Ambassador Robert Strauss said of the Also Round trade negotiations: "During my tenure as Special Made Representative, I spent as much time negotiating with domestic constituents (both industry and labor) and members of the U.S. Congress as I did negotiating with our foreign trading partners." The politics of many international negotiations can be conceived of usefully as a t~vo-level game.) At the national level, domestic groups pursue their interests by pressuring the government to adopt favorable policies, and politicians seek power by constructing coalitions among those groups. At the international level, national governments seek to maximize their abilitr to satisfy domestic pressures, while minimizing the adverse consequences of foreign developments. Neither of the two games can be ignored by central decision makers so long as their countries remain interdependent, yet sovereign. Each national political leader appears at both game boards. Across the international table sit his foreign counterparts, while around the do- mestic table behind him sit his major political allies and competitors and The complete version of this paper was published in Intemational Organization, Summer 1988, 2:427-460. Lee seminal theoretical work in this domain remains Walton and McKersie (1965~. 60

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NEGOTIATION 61 representatives of key domestic interest groups. The unusual complexity of this game Is that moves that are rational for a player at one board (such as liberalizing imports or conceding territory) may be impolitic for that same player at the other board. Nevertheless, there are powerful incentives for consistency between the two games. The political complexities for the players in this two-level game are staggering. Any key player at the international table who is dissatisfied with the outcome may upset the game board; conversely, any leader who fails to satisfy his fellow players at the domestic table risks being evicted from his seat. On occasion, however, clever players will spot a move on one board that will trigger realignments on other boards, enabling them to achieve otherwise unattainable objectives. This "two-table" metaphor captures the dynamics of many international negotiations better than any model based on unitary national actors. Consider the following stylized scenario that might apply to any two- level game.2 Negotiators representing two organizations meet to reach agree- ment between them, subject to the constraint that any tentative agreement must be ratified by their respective organizations. For simplicity, assume that each side is represented by a single chief negotiator who has no independent policy preferences. It is convenient for exposition (but inaccurate descriptively) to decom- pose the process into two stages: 1. bargaining between the negotiators, leading to a tentative agree- ment (call that Level D; separate discussions within each group of constituents about whether to ratify the agreement (Level II). The requirement that any Level I agreement must, in the end, be ratified at Level II imposes a crucial theoretical link between the two levels. "Ratification" is used here to refer to any decision process at Level II that is required to implement a Level I agreement. The actors at Level II may represent legislators, bureaucratic agencies, interest groups, social classes, or even "public opinion." For purposes of counting "votes" in the ratification process, different forms of political power must be reducible to some common denominator, but the "voting" need not be formalized or democratic. The only formal constraint on the ratification process is that, since the identical agreement must be ratified by both sides, a preliminary level I agreement cannot be amended at Level II without reopening the Level I negotiations. In other words, final ratification must simply be 2 Investigators in other fields have recently proposed models of linked games, analogous in some respects to this model (I)enzau, Riker and Shepsle, 1985; Rogoff, 1985; Tsebelis, 1988; Scharpf, 1988; All and Eichengreen, forthcoming).

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62 SOVIET-AMERICAN DIALOGUE IN THE SOCIAL SCIENCES '~voted" up or down. Given these arrangements, we may define the '~in- set" for a given Level II as the set of all possible Level I agreements that would "win"that is, gain the necessary majority among the constituents- when simply voted up or downy For two reasons, the contours of Level II win-sets are very important for understanding Level I agreements. First, larger win-sets generally make Level I agreement more like). By definition, agreement is possible only if the win-sets of the organizations overlap, and the larger each win-set, the more likely they are to overlap. Second, the relative size of the Level II win-sets will affect the distribution of the gains from the Level I bargain. The larger the perceived win-set of the negotiator, the more he-can be "pushed around" by the other Level I negotiators. Conversely, a small domestic win-set can be a bargaining advantage: "I'd like to accept your proposal, but they would never accept it back home."4 Three sets of factors are especially important in determining the size of each side's win-set: 1. The win-set depends on the distribution of power, preferences, and possible coalitions among Level II constituents. In some cases, evaluation of no-agreement may be the only significant disagreement among the Level II constituents, because their interests are relatively homogeneous. An arms negotiator is unlikely to face criticism at home because a proposed agreement reduces the opponents' weaponry too much. In other cases, by contrast, constituents' preferences are more heterogeneous. In 1919, some Americans opposed the Versailles Treaty because it was too harsh on the defeated powers, others because it was too lenient. The strategic problems facing Level I negotiators dealing with a homogeneous conflict are quite different from those facing negotiators dealing with a heterogeneous conflict. In some cases, lines of cleavage within the Level II constituencies will cut across the Level I division, and the Level I negotiator may find silent allies at his opponent's domestic table. When the negotiation involves more than one issue, various groups at Level II are likely to have different preferences on the several issues, and the chief negotiator is faced with trade-offs across different issues: how much to yield on citrus exports to get a better deal on microchips, and so on. In certain cases, synergistic linkage in the international negotiations facilitates policy choices that would otherwise be unacceptable domestically. Economic interdependence multiplies the opportunities for altering domes- tic coalitions (and thus policy outcomes) by creating political entanglements across national boundaries. 3For the original conception of win-set, see Shepsle and Weingast (1987~. 4This strategy was first noted by Thomas C. Schelling (1960~.

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NEGOTIATION 63 2. The win-set depends on Level II political institutions. Ratification procedures affect the size of the win-set. For example, the U.S. separation of powers or the Japanese propensity for seeking the broadest possible domestic consensus constrains their respective win-sets more tightly than those of many other countries. This increases the bargain- ing power of American and Japanese negotiators, but it also reduces the scope for international cooperation. Cetens parties, the more autonomous a state is from domestic pressures, the weaker its negotiating position internationally but the greater its scope for international cooperation. 3. The win-set depends on the strategies of the Level I negotiators. Each negotiator has an unequivocal interest in maximizing the other side's win-set, but his motives are mixed with respect to his own win-set. Thus, a utility-maximizing negotiator must seek to convince his opposite number that his own win-set is "kinly," that is, that the deal he proposes is certain to be ratified, but that any deal even slightly more favorable to the opponent is unlikely to be ratified. If a negotiator wishes to expand his win-set in order to facilitate ratification, he may exploit both domestic and international side payments. An experienced negotiator familiar with the respective domestic tables should be able to maximize the cost-effectiveness of the concessions that he must make to ensure ratification abroad, as well as the cost-effectiveness of his own demands and threats, by targeting his initiatives with an eye to their Level II incidence, both at home and abroad. A rational Soviet arms negotiator should target his threats and his offers neither at the hawks nor at the doves in Congress, but at the "persuadable skeptics" in the middle, while paying special attention to the views of the "swing voters" back home in the Kremlin. Other factors must be considered in a more comprehensive account of two-level games: The role of uncertain~. Level I negotiators are often misinformed about Level II politics, particularly on the opposing side. Uncertainty about the win-set can be both a bargaining device and a stumbling block in two- level negotiation. In purely distributive terms, negotiators have an incentive to understate their own win-sets, but uncertainty about the opponent's win- set increases one's concern about the risk of failed ratification. The impact of Level I negotiations on Level II preferences. Much of what happens in any bargaining situation involves attempts by the players to alter one another's perceptions of the costs of no-agreement and the benefits of proposed agreements. In two-level games, governments gener- ally seek to expand one another's win-sets. In some instances, international pressures "reverberate" within domestic politics, tipping the domestic bal- ance and thus influencing the international negotiations.

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64 SOVIEI:AMERICAN DIALOGUE IN THE SOCIAL SCIENCES The role of the chief negotiator. As principal-agent theory reminds us, the interests of the negotiator may diverge from those of his con- stituents. International negotiations sometimes enable leaders to do what they privately wish to do but are powerless to do domestically. Conversely, if a proposed international deal threatens the cohesion of the negotia- tor's domestic coalition, he will be reluctant to endorse it, even if Judged abstractly) it could be ratified. The most portentous development in comparative politics and interna- tional relations in recent years is the growing recognition among scholars in each field of the need to understand entanglements between the two. Analysis in terms of two-level games offers a promising response to this challenge. REFERENCES Alt, J.E., and B. Eichengreen In press Parallel and overlapping games: Theory and an application to the European gas trade. Economics and Politics. Denzau, A, ~ Riker, and K. Shepsle 1985 Farquharson and Fenno: Sophisticated voting and home style. American Political Science Review 75:1117-1134. Rogoff, K. 1985 Can international monetary policy cooperation be counter-productive? Jour- nal of Intemational Economics 18:199-217. Scharpf, F. 1988 A game-theoretical interpretation of inflation and unemployment in Western Europe. Journal of Public Policy 7:227-257. Schelling, T.C. 1960 The Strategy of Conflict. Cambridge, MA: Harvard University Press. Shepsle, K.A., and B.R. Weingast 1987 The institutional foundations of committee power. American Political Science Review 81:85-104. Tsebelis, G. 1988 Nested games: The cohesion of French coalitions. British Journal of Political Science 18:145-70. Walton, R.E., and R.B. McKersie 1965 A Behavioral Theory of Labor Negotiations: An Analysis of a Social Interaction System. New York: McGraw-Hill.