Signalling effects of social movements in asymmetric bargaining : Myanmar and China, 2011-2016

Abstract

This study explores asymmetric bargaining between Myanmar and China in the period 2011-2016. Despite close bilateral relations, several Chinese investment projects encountered social opposition in the course of political transition under the Thein Sein administration. Construction of the Myitsone Dam was suspended in 2011, and the contract of the Letpadaung Copper Mine was renegotiated in Myanmar’s favour in 2013. However, construction of the China-Myanmar Gas Pipeline and Oil Pipeline was successfully completed in 2013 and 2014 respectively. Assuming that the bargaining structure remained reasonably constant throughout this five-year period, the variation in outcomes from the opposition is puzzling. Numerous studies on Sino-Myanmar relations profess that US-Myanmar rapprochement disrupted Chinese economic interests inside Myanmar. Nevertheless, this proposition disregards the fact that the copper mine and pipeline projects continued, and overlooks the role of societal actors in Myanmar’s foreign policy. Given the deficiency of state-centric international relations in answering this empirical puzzle, this study draws on insights from two-level game theory and audience cost scholarship to analyse continuity and change in bilateral agreements between Myanmar and China. During democratisation in Myanmar, societal actors who were previously excluded from foreign policy demanded that the signed agreements be overturned. The emergence of social opposition after the signing of the agreements made the Myanmar government become entangled in an “audience cost dilemma” – continuing a project would disappoint the domestic audience, whereas discontinuing it would incur a compensation claim from the international partner. To address this conundrum, this dissertation introduces an audience cost mechanism for Myanmar that is a synthesis of social opposition, Naypyitaw’s diplomatic intentions and Beijing’s perception of domestic constraints inside Myanmar. The dissertation finds that, in a time of political transition, societal actors could be powerful actors in international cooperation. Political mobilisation in a social movement indicates the political costs likely to be borne by the executive for continuing the project. Second, Naypyitaw could use protest management to signal its resolve in an international dispute. It could stand firm by tolerating anti-Chinese project protests to escalate or establish a cooperative stance to extract concessions from Beijing by repressing protests. Third, Beijing’s perception can be observed through its attempts to win the societal actors over by changing the terms of the cooperation or building ties with opinion leaders. The significance of this research can be seen in four aspects. First, it enriches our understanding of asymmetric bargaining. Second, it conveys the signalling effects of social movements in international economic disputes. Third, it theorises a new bargaining context due to the reverse bargaining sequence. Finally, it develops a mechanism to respond to the “audience cost dilemma”. Outside Myanmar, the findings also shed light on other Chinese investment projects concluded through bilateral relations. At the time when Beijing is advancing its Belt and Road initiative, it seems likely that a change of political environment in a host country could turn a joint project not supported by the general public into a Chinese business risk.