Who are the main stakeholder groups involved in the negotiation, and what are their primary interests? (this can be a table or list) What are the main agenda items

PROGRAM ON NEGOTIATION AT HARVARD LAW SCHOOL AN INTER-UNIVERSITY CONSORTIUM TO IMPROVE THE THEORY AND PRACTICE OF CONFLICT RESOLUTION

This exercise was prepared by Stephen E. Weiss, Associate Professor of Policy and International Business, Schulich School of Business, York University, and Sarah Tatrallyay (IMBA ’10). It is intended to provide a basis for class discussion, not serve as a complete factual record or assessment of the actual events. The authors gratefully acknowledge the assistance of Douglas Myers, Christina Simmons, David Towne, and Donald Lindburg. Any errors in the document are solely the responsibility of the authors. Copies are available online at www.pon.org, telephone: 800-258-4406 (within U.S.) or 781-966-2751 (outside U.S.); or by fax: 617-495-7818. This case may not be reproduced, revised, or translated in whole or in part by any means without the written permission of the Program on Negotiation, Harvard Law School, Pound Hall, Cambridge, MA 02138. Please help to preserve the usefulness of this case by keeping it confidential. Copyright © 2012, 2013 by Stephen E. Weiss and Sarah Tatrallyay. Distributed with permission. All rights reserved. (Rev. 03/13)

NEGOTIATING ABOUT PANDAS FOR SAN DIEGO ZOO

Part A: Myers’ Initial Plans In 1987, the People’s Republic of China loaned a pair of giant pandas to the San Diego Zoo in the U.S. Their arrival caused so much public excitement that journalists called it “pandamonium.” Over 200 days from July 1987 to February 1988, the Zoo drew more than 2 million visitors. The 30% jump in regular zoo attendance added $5.7 million to normal gate and souvenir receipts. The exhibit was a zoo director’s dream.

Before the pandas had even left the Zoo, Douglas Myers, the executive director of the Zoological Society of San Diego, began thinking about how to bring them back for a longer stay. The San Diego Zoo, like most zoos, had high fixed costs to cover. It was also fundamentally dedicated to educating the public about animals and developing its renowned expertise in the preservation of endangered species. For these reasons, attracting zoo visitors—new and returning—was an ongoing strategic concern for Myers, and giant pandas were “rock stars.”

The Zoo’s bargaining position, however, was relatively weak. China was the sole source of giant pandas, and only 1,100 remained in the wild according to a recent estimate.1 Moreover, they were in demand by zoos throughout the world. Chinese authorities responded very selectively. Washington’s National Zoo was the only zoo in the U.S. that had a permanent panda exhibit, and it resulted from the historic opening of relations between China and the U.S. in 1972. Since the late 1950s, the Chinese government had permitted fewer than 15 other countries to host these rare animals for even a short visit. In late February 1988, Myers decided to focus his initial planning on three main tasks. First, what kind of framework or set of general principles could be developed with Chinese organizations to facilitate a long-term panda stay? All of China’s previous panda arrangements had taken the form of permanent state gifts or short-term exhibition loans. Second, what concerns should Myers put forward—and in turn, anticipate from Chinese counterparts—as the main agenda items for negotiation? Third, what communication strategy and talking points should he use to persuade his relatively powerful counterparts and make his case for San Diego Zoo? He would have to undertake additional preparations, such as financial targets, but for now, the three tasks were “top of mind” as he began to review information on several pertinent topics. I. San Diego Zoo: Overview

The San Diego Zoo was located in the heart of the city on 100 acres (0.16 square miles) of 1,200-acre Balboa Park. The Zoo housed one of the most varied collections in the world— 4,000 animals from more than 800 species—and enjoyed an international reputation for its progressive

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approach to animal care and species conservation. The Zoo was managed by the non-profit Zoological Society of San Diego (ZSSD), which had the largest membership of any such group in the world and the largest zoo budget in the U.S.

Douglas Myers became executive director of the ZSSD in 1985. By then, he had accumulated 14 years of experience in animal keeping, and zoo operations and administration. He began his career at Busch Entertainment Corporation after earning a B.A. in business and psychology. At Busch Gardens, he moved from animal keeper and supervisor of animal shows to operations manager. In 1982, he became the general manager of San Diego Wild Animal Park. Over the next 3 years, he took on major operational and planning responsibilities for both the Animal Park and the Zoo and managed the ZSSD’s educational activities, public relations, marketing and the budget. Myers had publicly committed to building the San Diego Zoo’s reputation as one of the greatest zoos in the world.

The city of San Diego, with a population of 1.1 million, was the second largest city in California and sixth largest in the U.S.2 Its per capita income made it the wealthiest among U.S. cities with a population over 1 million.3 San Diego’s economy was driven by defense, manufacturing, and tourism. The Port of San Diego played a major role in all of these industries. In addition to its shipping and trade activities, the Port accommodated the only large-scale submarine and shipbuilding yards on the U.S. west coast and the largest naval fleet in the world. The region was known for its cool, sunny climate. Temperatures remained nearly constant throughout the year (an average of 71º Fahrenheit), and annual rainfall was minimal (9-13 inches). These conditions suited many animals and favored the San Diego Zoo. II. Zoos in the U.S.: A Brief Background Zoos in North America started out primarily as facilities for the display of animals to the public. Like other founders, Dr. Harry Wegeforth, who built the San Diego Zoo, was said to have a “dazzling passion” for animals.4 His inspiration for the Zoo had come from animal exhibits at an international exposition in San Diego in 1916. Over time, the mission of zoos evolved from display to public education and animal conservation. To promote these values and oversee compliance, the American Association of Zoological Parks and Aquariums (AAZPA) was established in 1924. By 1987, there were 117 AAZPA-accredited zoos in the U.S. The most popular attractions were generally the large mammals that children learned about in school. Elephants, giraffes, and the “big cats” (e.g., lions, tigers, leopards) drew crowds. (See Exhibit 1.) In studies of “attracting power” and “holding power” (respectively, the likelihood of a visitor stopping at an exhibit, and the time spent at it), researchers reported a significant correlation between an animal’s physical size and its popularity, although this finding did not go uncontested.5

Exotic and nearly extinct animals were also star attractions, albeit for different reasons. For Americans, animals from Africa and Asia carried a certain mystique; they created intrigue. But they were also expensive to acquire and maintain.

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At most zoos, finances were chronically troubling.6 Costs for animal care, which involved food, keepers, medical supplies and veterinary services, tended to be high and fixed. Revenue from ticket sales and parking covered less than half of a zoo’s costs. To boost revenue, industry experts recommended that new exhibits be undertaken every two years, yet their development was expensive, particularly when customization was involved.7

Supporters underscored zoos’ positive economic impact on host cities. Zoos created jobs, generated tax revenue, and served as marketing tools to promote tourism and spur community revitalization. According to the AAZPA, accredited zoos and aquariums in the U.S. were responsible for nearly $4 billion in annual economic activity and 11,000 full-time jobs in the 1980s.8 Remarkably, zoo and aquarium attendance exceeded annual attendance at all professional football, basketball, and baseball games combined.9

In the late 1980s, however, zoo attendance dropped nationwide. Competition for visitors had intensified. Besides traditional alternatives for family entertainment such as museums and concerts, which were arguably distinct from zoos, amusement and theme parks had encroached on zoos’ turf by adding animal displays. Busch Gardens, for example, had rides and animals that entertained visitors for an entire day.

This period saw the arrival of a new breed of zoo managers. In contrast to early directors who were largely enamored of animals, many new directors were business professionals who looked at zoo management differently. They thought about non-traditional opportunities and revenue streams. Some directors took to marketing their zoos as destinations for leisure and recreation. Others conceived of plans such as breeding and selling exotic species, which was strictly forbidden by the AAZPA. Most zoo managers still abided by AAZPA regulations.

III. San Diego Zoo: Operations The San Diego Zoo operated as a non-profit organization run by the ZSSD. The ZSSD, in turn, was governed by a 12-member board of trustees. The land title and the animal exhibits belonged to the City of San Diego Water Department and the City of San Diego respectively. The ZSSD was also responsible for the Wild Animal Park, an enterprise in a second location (see below). The two entities employed 1,500 people full-time. Together, the Zoo and Animal Park were billed as the “greatest zoo in the world.”10 Mission In promotional literature, the Zoo was described as “a conservation, education and recreation organization dedicated to the reproduction, protection, and exhibition of animals, plants and their habitats.”11 It was accredited by the AAZPA. Budget The ZSSD’s 1988 budget, which included operations of the Wild Animal Park, was $68 million. (That was more than 10 times the budget of a typical U.S. zoo such as the Dallas Zoo.) Animal collections and exhibits accounted for 25% of the total while auxiliary activities (e.g., costs of

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food, gifts and ride maintenance) absorbed 44%. The remaining allocations were: general administration, 14%; fund-raising, 7%; hospital and research activities, 5%; and membership and education activities, 5%. The largest sources of revenue in FY1987 were admissions (41% of the total) and auxiliary activities (36%). The latter included retail merchandise and food sales, in-zoo transportation, and parking at the Wild Animal Park. The next largest revenue source (8%) was ZSSD membership dues. In 1987, more than 150,000 member households paid annual dues of $45. (Admission to the zoo was free to ZSSD members. One-day general admission was priced at $8.50 in February 1988.) The rest of ZSSD revenue (15%) came from a city property tax, grants, donations and investment income. Over the last 5 years, expenses had risen at a compound annual rate of 9%. Costs for animal care were rising at almost 12% which included inflation of 4%. In addition, the Zoo was subsidizing the Wild Animal Park, which had turned a profit in only 1 of its first 13 years of operation. In 1984, for example, the Park lost $825,000. The Zoo itself needed capital for ongoing programs to improve facilities. Zoo management realized that $4.5 million of the 1987 revenue was “nonrecurring income” from the panda visit. Future donations and grants were not predictable, and there was no formal, corporate donation program in place at the Zoo. Expertise in Conservation The San Diego Zoo was known worldwide for its expertise in animal conservation and species preservation. It initiated the practice of performing necropsies on all of its deceased animals and spearheaded development of the field of zoological pathology. In 1975, the Center for Reproduction of Endangered Species (CRES) was created to counter the rising worldwide trend of species extinction. A sizeable infrastructure had been built over the last decade, which led to formidable 5 to 10-person teams of scientists and staff in six major fields: genetics, virology, immunology, reproductive physiology, behavior and pathology. The CRES bred endangered species in captivity for release into their native habitats. It even maintained a cryopreservation facility for rare sperm and eggs called the Frozen Zoo. By the late 1980s, the Center had successfully raised African Black Rhinos, California Condors, cheetahs, tigers, and a large number of other species. Wild Animal Park The Wild Animal Park was located 35 miles northeast of the Zoo. With grounds covering 1,800 acres (2.8 square miles), the Park provided an expansive setting for animals to live in and be observed. Animals were regularly exchanged between the two locations. Horticultural Expertise

In addition to the extraordinary variety of its animals, the Zoo held a second treasure: a fully accredited botanical garden containing 3,500 species, including endangered plants. The staff’s horticultural expertise enabled them to grow food for some zoo animals. That included 18

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varieties of eucalyptus trees to feed koalas as well as varieties of bamboo suitable for pandas. Relationships with Chinese Zoos The San Diego Zoo had developed relationships with zoos throughout the world. Through the contacts of one of its trustees, the Zoo started working with Chinese zoos in 1979 to help endangered animals—notably, the red panda, takin (large goat-antelope), and Manchurian cranes. In the 1980s, Zoo management, which then included Myers, successfully negotiated exchanges of several Chinese animals for exhibition as U.S. and world “firsts.” Prominent examples included: 1983 a pair of Chinese Monals (pheasants): the first exhibition outside China since the 1800s 1984 golden monkeys sent as “conservation goodwill ambassadors”: the first exhibited in the Western world 1986 Eastern kiang (mule): the first exhibited in the U.S. By 1987, when the giant pandas arrived, the Zoo had fostered the first birth of a Sichuan takin outside of China. (The takin generally shared habitats with the giant panda.) Animal transfers between the San Diego Zoo and zoos worldwide typically took place in accordance with AAZPA policies and in the case of endangered species, an AAZPA Species Survival Plan (SSP). Begun in 1981, this cooperative animal management program was designed to manage breeding of selected endangered species so they could develop healthy, self-sustaining populations. Some species granted SSP status were deemed “flagship species” for their capacity to elicit strong feelings from the public.12 Initiatives at the Zoo in the Late 1980s San Diego Zoo built its first “multi-species habitat” in 1986. Instead of isolating animals of one species, this area assembled animals found side by side in the wild and native plant life. The Zoo pioneered the design and construction of cage-less, open-air exhibits with invisible wires and moats that allowed visitors to see better and even touch and feed animals. This naturalistic approach corresponded with growing interest in animal conservation and quality of life as well as the commercial need to enhance the zoo experience for visitors. 1986 marked San Diego Zoo’s 70th year of operations, and the ZSSD launched a flashy marketing campaign to celebrate and entice the public to visit. TV ads showed tigers and other animals cavorting to classical music, and giant billboards appeared all over the city.13 (For key dates in the Zoo’s history, see Exhibit 2.) In March 1988, the month after the giant pandas’ departure, the Tiger River Exhibit (a.k.a. the Kroc Family Tropical Rain Forest) was scheduled to open. It was the most costly and challenging exhibit ever undertaken by the Zoo: The enclosure alone ran a cool $5.8 million.14 Joan Kroc, the widow of McDonald’s restaurant founder Ray Kroc, had donated $3.3 million in 1985. It was the largest private donation in the zoo’s history.

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The next new exhibit, if Myers could swing it, would house giant pandas. They would be the star attraction for the Zoo. IV. Giant Pandas: The Species

With their black ears, eye patches, shoulders and legs, and contrasting white bodies, giant pandas (Ailuropoda melanoleuca) grew to an adult size of 200 to 300 pounds. In the wild, they had a life expectancy of 14 to 20 years. In captivity, they lived an average of 28.

Pandas had a rather sedentary lifestyle. Due to poor digestion, they spent 12 to 16 hours each day consuming bamboo for nourishment—from 20 to 40 pounds of it. While the pandas might come across 25 varieties of bamboo during the course of a day, they tended to be picky and ate only four or five types. They sat upright as they ate, much like humans sitting on the ground. (See Exhibit 3.)

Not surprisingly, people saw the giant pandas as cute, lumbering creatures. In their natural habitat, however, they could be as dangerous as any other “bear.”* They were skilled tree- climbers and swimmers and ventured to high altitudes to find food.15

Habitat

Giant pandas lived in a few remote mountain ranges in central China (Sichuan, Shaanxi, and Gansu provinces) at elevations between 5,000 and 10,000 feet. These areas were usually cool, misty, and damp. Pandas did not hibernate. In the summer, when temperatures rose, they headed to higher and cooler elevations. On the average, a panda roamed a 1.9 square-mile range.

Over the past 15 years, the total area of panda habitation had declined 53%.16 The chief causes were logging and conversion of land to agricultural use. With panda pelts worth up to $40,000 on the black market, poaching also occurred, even though convictions for the offense after 1983 carried the death penalty.17

Reproduction

Females reached breeding maturity at 4 to 8 years of age and could reproduce until age 20, but most mothers in the wild raised only five to eight cubs in their lifetimes. They were able to conceive once a year, during a 2 to 3 day period, and give birth 95 to 160 days later to a 4-ounce cub (1/800th the size of the mother). When twins were born, only one cub usually survived.† Mothers then spent 3 years raising the cub.

During the mating period, males and females attracted each other with calls and scents. Their sense of smell was highly developed. For the rest of the year, they lived solitary lives.

* There was some debate among scientists as to whether the panda should be classified as a bear or raccoon. † Nearly 50% of all giant pandas born in captivity were twins.

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Protected Status

In 1987, the population of giant pandas in the wild was generally estimated to be less than 2,500. The official count was 1,100, based on the Second National Panda Survey conducted by China’s Ministry of Forestry and the World Wide Fund for Nature (WWF) in 1985-88.18 Coordinated international efforts to protect pandas began in the fall of 1979 when Chinese government officials agreed to develop a joint project with the WWF. It became the first international conservation organization to work in China. The WWF had been keen to land the project for its 20th anniversary year, in 1981. The giant panda was its longstanding logo.‡ By 1988, there were various protections in place for the giant panda as an endangered species. In the U.S., the Endangered Species Preservation Act of 1969 prohibited the importation and sale of species in danger of worldwide extinction. Additional legislation in the 1970s and early 80s strengthened existing laws and charged the Fish and Wildlife Service at the Department of the Interior with overseeing compliance for land animals. By 1988, the giant panda had been placed on the endangered species list.

Internationally, trade in endangered species was limited by The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Both China and the U.S., among some 90 other countries, were signatories. In force since 1973, the treaty banned trade of endangered species undertaken for commercial purposes and set forth additional restrictions depending on the status of the species. In 1984, the giant panda was moved up from CITES Appendix III to Appendix I, which carried the strictest regulations.

In China, the China Wildlife Conservation Association (CWCA) had been established in 1983 as a non-governmental organization (NGO) to promote sustainable development. The CWCA adopted the giant panda as its logo. Organized under the auspices of the China Science Association, it became the largest ecological conservation organization in China and joined the International Union for Conservation of Nature and Nature Resources.

By the late 1980s, there were 13 managed care facilities for giant pandas in China’s central mountain region.19 The main centers were Wolong National Natural Reserve (which started a panda program in 1980) and the Chengdu Panda Breeding Center (established in 1987). The purpose of these facilities was to study panda habits, breeding cycles, interactions and eating preferences so that scientists could effectively transition pandas from zoos to the wild.

Sadly, breeding programs in China had not been very effective. From 1936-88, the 345 pandas in captivity had produced 67 litters of 106 cubs, and only 32 survived for more than one year.20 In other words, for over 50 years, the programs had produced less than one cub per year.

‡ During the founding meetings of the WWF in England in 1961, Chi Chi, the only giant panda in the Western world, was on exhibit at the London Zoo. She inspired the founders’ choice of a logo.

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V. Panda “Exchanges”§: A Brief History Between 1936 and 1946, a period of political turmoil in China, animal hunters took giant pandas to the U.S. and Great Britain.21 When World War II and the Chinese revolution ended, the nascent People’s Republic of China put a stop to the panda outflow. The government adopted the giant panda as a national treasure and carefully controlled access to it.

In the late 1950s, the government began to employ giant pandas as goodwill ambassadors in a practice that became known as “panda diplomacy.”22 The first country to receive a panda as a state gift was the USSR. From 1957 to 1982, China presented pandas to 8 more countries, including the U.S.** (See Exhibit 4.) The animals were generally sent abroad in pairs.†† The last state gift was a male sent to Japan to replace the male in the original gift after its death in 1980. In the mid-1980s, diplomatic goals became entangled with commercial pursuits in the so-called “rent-a-panda” period. It began when pandas loaned to the Los Angeles Zoo for exhibit during the 1984 Olympic Games were subsequently sent to San Francisco at a fee of $100,000 per month.23 Thereafter, the Chinese government—and freelance agents and intermediaries— concentrated exclusively on short-term, fee-based exhibition loans of 3 to 6 months.24 Zoos throughout the world proffered rental fees, percentages of souvenir sales, overseas trips, and various other incentives and compensation as they scrambled to obtain pandas.

The two official sources for giant pandas in China operated independently. One was the Ministry of Forestry, which worked with the CWCA. The other was the Chinese Association of Zoological Gardens (CAZG), an NGO affiliated with the Ministry of Construction.‡‡ The CAZG had access to 21 zoos with 60 pandas, nearly twice the number controlled by the CWCA.

To procure pandas, a foreign zoo generally began by approaching one of the two NGOs. The zoo and NGO negotiated a letter of intent specifying, among other things, the particular animals to be transferred and arrangements for payment to China.§§ Depending on the NGO, the document was then sent either to the Ministry of Forestry or Ministry of Construction for approval. An approved contract passed through the Ministry of Foreign Affairs to the State Council. Giant pandas remained so tied to Chinese diplomacy that any transfer agreement had to receive final approval from the Premier himself.25

§ This term was commonly used to refer to any international transfer or movement of pandas, yet few of these transactions actually involved a two-way exchange of animals. ** The 1972 gift to the U.S. was not America’s first exposure to giant pandas. In 1929, President Teddy Roosevelt’s sons shot a wild panda in China and returned to the U.S. with it for display. From 1934 to 1939, seven giant pandas were acquired by three U.S. zoos: Brookfield (near Chicago), St. Louis, and Bronx (New York). In 1941, Madame Chiang Kai-Shek, the wife of the former leader of nationalist China, donated a pair of pandas to the Bronx Zoo. This was actually the first recorded diplomatic gift between the U.S. and China. Chi Chi, the WWF’s inspiration in London, was destined for an American zoo in 1958 but not allowed into the U.S. since Washington had broken off all trade with China when it became Communist. †† The first panda birth outside China occurred in Mexico in July 1981. ‡‡ The Construction Ministry compiled the International Studbook of the Giant Panda listing all pandas in captivity. §§ Note that in the U.S., it was illegal for a zoo to sign a contract with a Chinese government entity.

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During the second half of the 1980s, conservationists in China and the U.S. became increasingly concerned about the treatment of pandas in international transfers and the dwindling population of pandas in the wild. In the U.S., panda advocates voiced doubt about the diligence with which Chinese authorities used foreign funds provided expressly for panda conservation.26 In China, officials in some circles began to give more thought to how to use panda loans to further breeding and conservation research. Meanwhile, the giant panda continued to enjoy worldwide popularity and high demand. In the U.S. alone in 1988, at least 30 institutions were negotiating or planning to negotiate with China for pandas.27 VI. Negotiating the 1987 Loan The negotiations that culminated in the 1987 loan of the two pandas, Basi and Yuan Yuan, from their home zoo, the Fuzhou Zoo in Fujian Province, took nearly 10 years for the San Diego Zoo to complete.28 The ZSSD dealt with the Ministry of Forestry and CWCA, the organizations through which it had arranged all of its previous animal exchanges. (These arrangements were, literally, two-way exchanges.) The ZSSD agreed to bend some Zoo policies for animal care in order to meet Chinese preferences and practices for pandas. As part of this arrangement, Myers also made a gift to the Chinese, although he did not publicly disclose its nature. The ZSSD sent a 17-person delegation, including six couples, to China for the signing ceremony. In a rare public comment on the negotiations, Myers told one journalist: “We deal in friendship, and friendship means trust. … Nine, ten years ago, the thought of pandas or golden monkeys … may have been considered unrealistic. … Our friendship with the Chinese has allowed us many unbelievable animals.”29 VII. The Impact of the Panda Visit To accommodate Basi and Yuan Yuan in 1987, the San Diego Zoo renovated the existing 1,200 square-foot, clouded leopard enclosure at a cost of $850,000.30 Workers improved the landscaping and installed air conditioning, large picture windows, and two sleeping areas.31 The pandas had to be kept apart. They were expected to consume 4.5 tons of bamboo during their visit. The Zoo could grow that amount on its grounds, but backup supplies were also secured. Over the course of the pandas’ July 23-February 10 visit, the Zoo expected a 50% increase in visitors.32 The annual visitor total in 1986 had been 3.35 million.*** (See Exhibit 5 for attendance at comparable San Diego attractions.) Since the increased volume would affect traffic near the Zoo, highway approaches were reconfigured, and satellite parking with shuttle service was set up. The Zoo had only 3,150 regular