Posted by: bklunk | September 14, 2006

Could We Apply Prisoners’ Dilemma Analysis to this Situation?

EU and China Trade

As BBC news reports, China and the EU are “striking a bargain” in order to agree upon trade agreements. In doing so, China agrees to open its doors to its activities more with the rest of the world, and the EU agrees to view China as a constructive competitor instead of constantly complaining about its activities.

BBC, or the British Broadcasting Company, has been reporting on all sorts of news around the world for several years now. With it, their credibility has increased and they are looked to as a good, solid news source. Although I cannot find an author’s name, I believe that I can trust the information which the site gives me.

Throughout this article, BBC mentions how Europeans of various EU countries have been complaining about China’s trade activities and their surreptitious happenings. The EU would like to know more about what is going on because they know that China is a dominant superpower in trade. In the meantime, China has simply kept itself out of the loop, talking as though “it is on the edge of the WTO” when it actually “is the system” and clearly playing the protagonist. After this meeting, China has agreed to exchange more information about the happenings so as to keep one of their number one traders (the EU) involved. These efforts will help to incorporate China more into the EU’s trading. At the same time, the EU plans to step up to the challenge presented by China’s presence in the trade atmosphere. Up to this point, the EU has often been complaining a lot about China, claiming that the nation is taking away jobs and ruining the economy. Now, the EU has been told to stop complaining and take up the challenge of competing with Chinese trade instead.

Could we apply prisoners’ dilemma to this situation?  China and the EU could both gain by cooperation on trade but there seem to be temptations to cheat and fears about being played for a sucker.  Would preferences be arranged the same here as in the prisoners’ dilemma: T>R>P>S?

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Responses

  1. China doesn’t exactly have a stellar history of playing well with others (or its own people), and so I’d think the EU has every reason to be a tad nervous. China’s government, technically, should also be nervous about betraying its ideals, but the PRC’s faithfulness to Communist doctrine is a long debate for another blog.

    At any rate, as with most international trade agreements, it basically (oversimply) is a real-world application of the prisoner’s dilemma. There is something to be gained by surreptitiously screwing over your trading partner, but (usually) more to be gained by long-term honest cooperation.

  2. I agree with Frankie. The prisoners’ dilemma can be exemplified in many of today’s international trade agreements. However, with China’s history, as stated by the last blog, I can understand why the EU is cautious, if not all-out skeptical, about making a deal and opening itself up more to a state that has sometimes been wishy-washy on treaties. Although I do think that China, in the long-run, should be able to see the good that could come of staying with such an agreement, many states are blinded by immediate satisfaction, and give no thought to backing down from a treaty if they think they will notice tangible benefits immediately. Within these situations it just depends on whether or not one actor is willing to be the “bad guy” and who is going to do it.

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