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Audience Cost Dilemma in Sino–Myanmar Economic Cooperation

This study analyses Belt and Road (BRI) projects’ dispute settlement between Naypyidaw and Beijing in the 2010s. It primarily investigated disputes surrounding the Myitsone dam, the Letpadaung copper mine and the China–Myanmar pipelines during the Thein Sein administration. The conflicts triggered by social movements against mega projects involved the same host country, the same home country, and arose in the same period of time. Interestingly, the project outcomes varied. The Myitsone dam has been suspended since September 2011. Following China’s setback in the hydropower project, the contract for the Letpadaung copper mine was renegotiated in 2013. The construction of the China–Myanmar gas pipeline and the oil pipeline, however, was completed in 2013 and 2014 respectively. Notwithstanding a short delay in the oil pipeline operation, there was no major change in the project’s status quo. Initial terms in the Kyaukphyu deep sea port and the Yangon new city were adjusted amid the Aung San Suu Kyi-led administration. Such agreement negotiations did not constitute economic disputes before the contract signing. Despite an asymmetry in structural power, Naypyidaw could sometimes reshape the international payoffs at the cost of Beijing’s economic interests and international reputation. These changes in project outcomes contradict the general expectation that states with stronger capabilities have bargaining strength in international disputes. What accounted for Naypyidaw’s defection from BRI cooperation? More interestingly, what explains Beijing’s tolerance of Naypyidaw’s defection?

The empirical puzzle of this study originated from Myanmar’s political transition and the distortion of the usual negotiation sequence in international bargaining. Negotiators should only sign international agreements after obtaining domestic approval. Failure to secure domestic support means no agreement (Putnam 1988, 345–46). The conclusion of the large-scale developmental projects with Beijing was not endorsed by domestic audience in Myanmar. When political space opened up, societal actors in Myanmar began to challenge the bilateral agreements signed by the previous regime. The two-level game literature illustrates how the rise of societal actors reduced bargaining space and redistributed gains in cooperation. Nevertheless, the seminal work by Robert Putnam and subsequent research have yet to tackle the problems arising from a reverse bargaining sequence; that is, when a signed international agreement is disapproved by considerable domestic actors.

A reverse bargaining sequence in BRI cooperation made Naypyidaw encounter pressure from both its domestic audience and its foreign partner. The former called on the repudiation of the agreements, whereas the latter pushed for contract implementation. This study names this conundrum the ‘audience cost dilemma’ because either project continuation or project disruption would incur ramifications. Naypyidaw’s strategic decision in responding to the two audiences with conflicting interests in the disputes has not been adequately studied. Furthermore, Beijing’s concessions in the disputes were not a failure of will. Even if Naypyidaw insisted on breaking away from a BRI contract, Beijing could demand compensation and/or impose economic costs on it.¹ In other words, the societal actors in the host country, Naypyidaw and Beijing jointly reshaped the dispute outcome.

This chapter lays a theoretical framework for dispute settlement of BRI projects during Myanmar’s political transition. The second section reviews the literature on international bargaining, in particular, asymmetric international bargaining. It outlines the debate between aggregate power and contextual power in determining negotiation outcomes. The third section contextualises the asymmetric bargaining between Myanmar and China in BRI cooperation. It presents the role of societal actors under the context of a distorted sequence in the two-level game negotiations. The fourth section further discusses the credibility of domestic constraints in dispute settlement in international bargaining by drawing on the audience cost scholarship. Considering the challenge of transitional polities in demonstrating resolve, it introduces the signalling effects of social movement in international disputes. Then, the chapter turns to the theoretical framework in this study – the audience cost dilemma rooted in the reversed bargaining sequence – and introduces an audience cost mechanism that explains changes and maintenance of project outcomes in BRI project disputes. Afterwards, the chapter measures domestic audience cost in contention surrounding BRI projects.

Sources of bargaining power in international relations

Does bargaining power correspond to state capabilities? The source of bargaining power sheds light on the Sino–Myanmar BRI project disputes in this study. Realists posit that structural power is a critical factor in explaining international outcomes. Critics, on the contrary, put forward that power is contextual and relational. An international outcome, including a negotiation outcome, could not be predetermined by the distribution of power in the world system (Keohane 1986a). Realists, however, rebut that a more powerful state can influence the negotiating opponent through issue-linkage (Waltz 1986). Nonetheless, Naypyidaw’s defection from BRI cooperation seemed to contradict the Realist assumption. If contextual power can offer a better explanation for a weaker negotiating party’s leverage in an international dispute, in what ways could Naypyidaw turn the asymmetric power relationship around? This study contends that social opposition to a BRI project could translate into the host country’s bargaining edge.

State capabilities and bargaining power

Power is a predominating concept in international relations (IR), but the definition is controversial (Gilpin 1981; Waltz 1986). Robert Dahl (1957, 203) defines power as the ability of an actor to get his/her target to do something that the latter would otherwise not do. To Realists, aggregate state capabilities are a crucial factor in shaping international outcomes. Despite the difficulty in measuring and comparing state power, there is always consensus on who are the great powers of the time (Waltz 1979; Grieco 1988). Power is composed of a basket of elements, including military might, the size of population and territory, resource endowment, level of economic development, as well as political stability and competence (Waltz 1979, 131). Among a wide range of state capabilities, Hans Morgenthau (1948, 14) emphasises that military might is a pivotal resource in international politics. Kenneth Waltz (1979, 209) affirms this view and further asserts that a more powerful state could influence others’ behaviour by the use of force. In the self-help international system, states must ‘pay the cost of weakness’ (Waltz 1959, 160). As such, a more powerful state could achieve an intended outcome due to its ability to impose sanctions on the target (Lasswell and Kaplan 1952).

International military competition has been less intense since the end of the Cold War. It is doubtful whether military might remains a primary source of power. The evolution of the international system is characterised by ‘complex interdependence’ (Keohane and Nye 2012, 22). In a game of mixed interests, where competition coexists with cooperation (Walton and McKersie 1965, 3; Ikle 1987, 3–4), a more powerful state often refrains from fully utilising its advantage lest the opponent’s adversity hurt its own interests (Hoffmann 1975). Instead of resorting to military force, negotiation is paramount in handling international disputes (Hopmann 1996). Negotiation is a bilateral process, contrasting with the exercise of power through unilateral actions. To achieve mutual gains, negotiating parties must be willing to make adjustments to accommodate the core interests of the opposing side (Lall 1966; Milner 1997). Supposing the negotiating parties are symmetrical in all aspects, there is no need for bargaining. The negotiators are expected to split the benefits equally (Hopmann 1996). In reality, international negotiations always involve some degree of power asymmetry between countries. The distribution of gains hinges on the bargaining power of the respective negotiating parties (Hopmann 1978, 1996).

Realists pinpoint that a powerful state can enjoy the freedom to enter into a negotiation with a weaker counterpart or not. In contrast, a weaker state is compelled to seek negotiation to explore the possibilities of altering their situation (Lall 1966). Realists hold that relative state capabilities generate bargaining power which could shape an international outcome (Waltz 1979; Mearsheimer 2001; Krasner 1991; Waltz 1993). As a result, a more powerful party is assumed to capture relative gains in asymmetric cooperation (Milner and Rosendorff 1997). The spatial fix narrative² that perpetuates the economic advantages of a more powerful state in a transboundary infrastructure agreement coincides with this argument. In response to cases that weaker states could gain advantages in asymmetric bargaining, Waltz claims that powerful states ‘hardly cared about the outcomes or even noticed what they might be’ (Waltz 1986, 333).

For critics of Realists, power is contextual. A state could influence the target state’s specific behaviour depending on the scope of power that it acquires in a specific context (Baldwin 2013; Dahl 1957; Lasswell and Kaplan 1952). For instance, Saudi Arabia is likely to have a more substantial influence on world energy issues but has limited leverage over arms control (Keohane 1986b, 187). In the same vein, North Korea possesses nuclear weapons that effectively threaten South Korea and Japan, yet it cannot influence these countries’ economies (Baldwin 2013, 275). More counterintuitively, empirical cases even demonstrate that weaker states can sometimes exert influence on more powerful states. For example, Malta succeeded in extracting concessions from Britain over the lease renewal of its naval base in 1971 (see McKibben 2015, 64–66). The case studies of the Myitsone dam and the Letpadaung copper mine represent more recent examples of weaker states achieving their intended outcomes and yielding concessions from more powerful negotiating counterparts. In sum, weaker states could gain leverage in asymmetric bargaining if they possess pertinent resources in specific contexts.

Contextual factors in international bargaining

Assuming power is relational and contextual, possession of power in a specific area may be able to overturn the asymmetric bargaining structure and generate more preferable outcomes for a weaker state under a specific context (Keohane 1986b; Baldwin 2013). Existing work on asymmetric bargaining points out factors that could increase a weaker negotiating party’s leverage; for instance, alliance with a stronger power, an attractive alternative, possession of scarce resources, a strategic geographical location, or the state’s resolve to protect its vital interests.

In asymmetric international disputes, a weaker state may bandwagon a more powerful state to seek protection, especially when the opponent is a competitor of that powerful ally (Lockhart 1979, 95; Handel 1990, Ch. 3). The alliance between a weaker state and a powerful state is always contingent upon benefits that both sides could draw from the cooperation. For the powerful state, the more relative gains it can obtain from allying with the weaker state in the superpower competition, the more valuable the relationship is. For the weaker state, the stronger the commitment that the powerful state offers that helps to deter external threats, the more important the partnership is (Morrow 1991). As such, with the backing of a powerful state, a weaker state is less vulnerable when facing a more powerful opponent in a dispute. For example, Washington and London tabled a draft resolution at the United Nations Security Council in July 2008 attempting to sanction Zimbabwe for its gross human rights violations. External threats faced by Harare diminished when Beijing and Moscow jointly vetoed the resolution (United Nations Security Council 2008).³ Diplomatic protection from Beijing and Moscow compensated for Zimbabwe’s weaker state capabilities.

The availability of alternatives can strengthen the bargaining power of a weaker state in a dispute. Roger Fisher and William Ury (1991) propose the Best Alternative to a Negotiated Agreement (BATNA) as the resistance point of the negotiation payoff. BATNA can protect a party with weaker state capabilities from accepting unfavourable terms in negotiations. No agreement will be a better outcome if any proposed offer is less favourable than the best alternative outside the agreement. As a result, a negotiating party with a better BATNA can strive for more desirable terms and thus enjoy a bargaining edge that is independent of state capabilities (Hopmann 1996, 87–88). On the contrary, in the absence of a more favourable option outside the negotiating agreement, a party will then be more dependent on the negotiation. The more dependent a party is, the weaker its bargaining position will be. China’s ‘no-strings-attached’ loan agreements are perceived as attractive options compared to the World Bank’s loans that require the borrowing states to initiate reforms (see Dreher et al. 2022, Ch. 5).

The endowment of natural resources such as crude oil, bauxite, copper and uranium can increase a state’s bargaining advantage if its opponent depends on those resources for economic development (see Hoffmann 1975, 200). In September 2010, the arrest of a Chinese fishing boat captain by Japanese authorities in disputed waters became another episode of the contentious Sino–Japanese relations.⁴ Alongside diplomatic negotiations, Beijing tactically made use of its control of the rare earth metals that were vital to the high-tech manufacturing sector in Japan to exert pressure on the country (Bilsborough 2012). Alternatively, reducing one’s dependence on another state’s natural resources is also a strategy to improve one’s bargaining position. To this end, Vietnam developed its oil refineries in the 2000s to decrease the imports of refined petroleum from China at the time of Sino–Vietnamese maritime disputes (Cheng 2011, 395).

The control of a strategic location in relation to an opponent can turn into the weaker party’s leverage in international negotiations (Lockhart 1979, 96). A location can be strategic due to security reasons or economic reasons. A defensive location for a military base or an intersection for a trade route (Hensel and Mitchell 2005, 278) that is valued by another country can increase a weaker state’s bargaining position. In the aftermath of the 9/11 attacks against the United States, Islamabad was able to extract concessions from Washington for its geographic location, which was critical in combating the Taliban (Walt 2008, 98). In India–Nepal negotiations over the Tanakpur hydropower dam project in the 1990s, the strategic location provided the small country with bargaining advantages. Nepal possessed veto power in the project by controlling the upstream of the Ganges, where the hydroelectric plant would be built. This prompted India to sign a trade agreement with Nepal to sweeten the original agreement (Gyawali 2000).

The state’s resolve is always associated with the interests at stake in a negotiation. To strive for its core interests, a state is expected to negotiate harder and develop a more rigid position (Snyder and Diesing 1977, 190; Lall 1966, 321). In addition, a state placing a higher value on the intended negotiation outcome will invest more time, handle issues with greater care, and demonstrate a higher level of aspirations in a negotiation (Hopmann 1996, 106). In the Panama Canal negotiations between the United States and Panama in the 1960s–1970s, strong domestic opposition in the host country made up for its weakness in state capabilities. The anti-US riots in Panama turned into the host country’s bargaining resources and forced the government to stand firm to defend its sovereignty (Habeeb 1988, Ch. 4). In negotiations over the Agreement on Trade-Related Aspects on Intellectual Property Rights at the World Trade Organisation’s Doha Ministerial Conference in 2001, generic drugs in developing states was one of the controversies. Owing to the health crises at home, developing states are more eager to extract concessions from the pharmaceutical industries, which were mostly headquartered in the West. The United States finally compromised (see McKibben 2015).

Structural power and issue-linkage

Realists insist that structural power prevails in international politics (Waltz 1986). Through the tactics of issue-linkage, a more powerful state can employ threats or promises that are outside the issue under negotiation, to achieve its intended international outcomes. Threats increase the cost of no agreement, while promises increase the attractiveness of cooperation (see Ikle 1987; Moravcsik 1993). Signalling threats or promises could change the opponent’s assessment of its gains or losses in a negotiation. Threats or promises are perceived as credible only when the sender can penalise or reward the opponent (Hopmann 1996; McKibben 2015). In the late 1970s, human rights situations in Argentina were linked to foreign loans. The Argentine Government allowed the Inter-American Commission on Human Rights to visit the country for the forced disappearance cases when Washington blocked the loan for the hydropower plant (Martin and Sikkink 1993, 334–35). In the Egyptian–Israeli negotiations at Camp David in 1978, the US military aid to both states became an impetus for the conclusion of the peace agreement over the Sinai peninsula (McKibben 2015).

Asymmetric bargaining structure in Sino–Myanmar economic cooperation

Differences in state capabilities between China and Myanmar have not only been tremendous; the latter has also been dependent on the former’s economic support and political protection. Interestingly, Beijing did not adopt an issue-linkage tactic to coerce Naypyidaw to comply with its contractual obligations in project disputes. Chinese investors did not sue the host government. More surprisingly, Beijing offered concessions and even attempted to gain societal actors’ support for the project implementation. Beijing’s restraint in the disputes was not a failure of will. The aggregate power approach does not provide a satisfactory explanation for China’s responses to the Myitsone dam and the Letpadaung copper mine disputes.

In the Sino–Myanmar BRI project disputes in the 2010s, Myanmar acquired some contextual factors that could compensate for its much weaker state capabilities. Recognising Naypyidaw’s commitment to political reform, the US Congress eased economic sanctions against Myanmar in 2012. The availability of alternative sources of foreign direct investment (FDI) reduced Myanmar’s dependence on Chinese capital. Moreover, the host country’s strategic location can help China access the Indian Ocean. The transportation route from Myanmar’s Rakhine State to Shan State that enters China’s landlocked Yunnan province can enhance China’s energy security and economic development. Myanmar’s natural resources also contribute to China’s economic growth. These bargaining advantages could diminish the acute differences in state capabilities between the two countries.

Despite Myanmar’s contextual advantages, the military government should have already exploited its leverage in initial project negotiations. Furthermore, the contracts for bilateral economic cooperation had been concluded. Breaking away from international obligations entailed tremendous compensation. It would bring an extra financial burden to the country with heavy external debt. Furthermore, Myanmar’s peace process and Rohingya crisis pushed Naypyidaw towards Beijing’s orbit. In BRI project controversies, then President Thein Sein invoked domestic constraints as a ground to suspend the Myitsone dam. He claimed that his government was formed by the people and thus was obliged to act according to public demands. Likewise, the Letpadaung copper mine was temporarily halted in the wake of villagers’ vehement protests. The two-level game theory and the audience cost literature help to visualise the credibility of Naypyidaw’s signal when the host country’s political transition was underway. The ‘hand-tying’ strategy could be repudiated by the opposing side unless tangible political costs were paid by the executive. Beijing’s restraint indicated its recognition of the counterpart’s constraints.

Societal actors in international negotiations

While structural and contextual factors in Sino–Myanmar economic cooperation held constant, democratisation in Myanmar expanded the political opportunities for societal actors to influence foreign policy. The new stakeholders in the international agreements set off the two-level game negotiations and subsequently changed the course of events.

Traditionally, IR analysis has been dominated by a state-centric approach. In his two-level game theory, Putnam (1988) employs an innovative approach to explain an international negotiation process. He pinpoints that diplomacy (the international game) and domestic politics (the domestic game) are interlinked (see also Evans, Jacobson, and Putnam 1993). The underlying premise of the two-level game theory is that a state’s preferences are not unitary. They are constructed by pluralistic and sometimes conflicting interests among domestic political and societal actors. A negotiator has to bargain with his/her foreign counterpart to minimise international constraints. At the same time, each negotiator has to bargain with political and societal actors to maximise domestic support for an international agreement. That said, benefits in an international agreement are not only defined by the negotiator but also by domestic actors. Even if the negotiator intends to sign the agreement, he/she cannot get around domestic constituents’ endorsement (Putnam 1988). Cooperation is likely to happen if both negotiating parties see benefits of it. Interestingly, assuming both negotiating parties possess symmetrical power, the side with more domestic constraints would obtain more bargaining advantage. The negotiator could demonstrate an immovable bargaining position and shift the burden of offering concessions to the negotiating counterpart. The ‘hand-tying’ strategy to obtain bargaining leverage is commonly known as the ‘Schelling conjecture’ (Putnam 1988, 440; Schelling 1960, 28–29).

Distortion of the negotiation sequence

The two-level game theory emphasises that negotiation sequence is critical to the stability of an international agreement. First, negotiators arrive at a tentative agreement at the international level. Second, each negotiator has to seek endorsement at the domestic level. It is worth noting that domestic endorsement is more than ratification by political institutions: obtaining public support is essential. A tentative international agreement rejected by domestic actors probably leads to no agreement (Putnam 1988). Any agreement that bypasses the domestic endorsement process lacks legitimacy and may even trigger an international dispute.

BRI project disputes in Myanmar were rooted in a distortion of the bargaining sequence. When the military regime signed BRI agreements with Beijing, the domestic audience had no place in foreign policy decisions. The military junta defined the benefits of economic cooperation and dictated the decision-making process. Only after the regime change in 2011, an animated civil society transformed the single-level government-to-government negotiation into a two-level game. Citizens who perceived those agreements signed by the junta as illegitimate called for the annulment of bilateral cooperation. This time, the transitional government could no longer afford to ignore public demands. Public outcry against BRI projects forced Naypyidaw to renegotiate cooperation with Beijing. Signing the international agreement first, and then dissuading domestic constituents from opposing it, distorted the two-level game’s bargaining sequence. Naypyidaw was caught in a conundrum when domestic constituents and the international partner held opposite preferences in BRI projects. What cost would Naypyidaw pay for maintaining the status quo of a signed BRI agreement? Did Beijing perceive its counterpart’s bargaining position as credible?

Signalling effects of domestic constraints in the BRI renegotiations

A negotiating party may misrepresent domestic constraints to obtain more bargaining leverage in international negotiations (see Schelling 1960). Displaying the credibility of one’s bargaining position is foremost essential. A self-proclaimed immovable bargaining position that incurs no political cost can be dismissed as rhetoric by the negotiating counterpart. In his audience cost theory, James Fearon (1994) states that information sent by a leader becomes credible if it is tied to domestic political consequences. A political leader who makes threats to escalate the crisis and then backs down will be penalised by his domestic audience. He/she will therefore refrain from making empty threats or promises lest his/her political survival be left in limbo. Political costs at home make international signals reliable. A fundamental assumption of the audience cost theory is that the domestic audience has incentives and the ability to punish political leaders for their unpopular foreign policy decisions. Even if domestic actors are satisfied with the overall performance of the government (Smith 1998), they are motivated to sanction their leader for three reasons. First, citizens perceive the executive’s failure to fulfil international commitments will damage ‘national honour’ (Fearon 1994). Second, the domestic audience cares about the political leader’s capability. Making empty threats exposes the leader’s incompetence (Smith 1998). Third, considering the importance of international reputation in negotiations, citizens may censure a leader who backs down on commitments because such actions impede the state’s credibility in future negotiations (Tomz 2007).⁵

Building on the conventional audience cost literature, more recent research contends that citizens are less concerned about the consistencies of their state’s foreign policy, not restricted to international military crises: instead, they are more concerned about whether the executive’s preferences align with theirs, regardless of whatever prior threats or promises have been made by the incumbent. Some domestic constituents may even support their leader to defect from international commitments if those commitments contradict their preferences (Chaudoin 2014b; Kertzer and Brutger 2016; Slantchev 2006). The relaxation of the audience cost application helps to comprehend Naypyidaw’s domestic constraints in the disputes surrounding BRI projects in Myanmar.

Non-democracies are not exempted from paying audience costs

Political costs borne by leaders accentuate the credibility of their bargaining position in international negotiations (Tomz 2007). Seemingly, leaders in democracies are more vulnerable to audience costs as an electoral result is a primary source of political legitimacy (Fearon 1994; see also Kurizaki and Whang 2015; Uzonyi, Souva, and Golder 2012; Prins 2003; Pelc 2011). Noting that domestic ratification is a prerequisite for an international agreement to enter into force, it is questionable if a leader can hide information about the negotiations from the public. Voters who disapprove of the incumbent’s foreign policy decisions have incentives to change the government. The availability of public opinion data gives democratic leaders fewer opportunities to misrepresent their preferences in international crises. Opinion poll data provides credible information about citizens’ views of leaders’ empty threats (see Snyder and Borghard 2011). Additionally, the office-seeking opposition can bolster the credibility of states’ preferences in international crises because it is improbable that the opposition will collaborate with its political competitor to deceive a foreign government (Schultz 1998).

The essence of the signalling effect of audience costs is domestic constituents’ ability to penalise leaders’ foreign policy blunders. Can audience costs bind leaders in non-democracies? Autocratic leaders are less sensitive to public demands, if not indifferent to them. Moreover, they can suppress dissenting individuals and groups who defy the governments (Chung 2007, 58; Fang and Owen 2011, 159). Jessica Weeks (2014, 2008) points out that autocratic leaders’ foreign policy options could be conditioned by the domestic audience under certain circumstances.⁶ She introduces a three-tier audience cost mechanism that enables an autocratic leader to signal resolve in international negotiations. First, the domestic audience must be able to coordinate among themselves to sanction their autocratic leader for irrational foreign policy choices. Second, domestic actors have incentives to punish their leader. Third, to achieve intended foreign policy outcomes, the foreign opponent must be convinced that domestic constraints of its autocratic counterpart are credible and not manipulated (Weeks 2008).

The domestic audience’s ability to hold their leaders accountable explains how ruling elites and nationalist citizens can exert pressure on autocratic leaders. Autocracies are not homogeneous (Weeks 2008, 2014).⁷ Ruling elites in non-personalist dictatorships, whose appointment and promotion are not determined by the leaders, could have the ability to prevent the leaders from making irrational foreign policy decisions. For instance, political leaders in the former Soviet Union and post-Mao China practised collective leadership. Leaders were accountable to the politburo. If politburo members could overcome the coordination problem, they could sanction the leader or even remove the leader from office. The reshuffle of senior officials is a visible sign of the political costs paid by an autocracy. Going beyond ruling elites, nationalist citizens can restrain the diplomatic choices of autocratic leaders by filling the streets amid disputes with foreign countries. Domestic actors in autocracies share similar incentives as their counterparts in democracies to penalise leaders for damaging national honour, indicating leaders’ incompetence, undermining the state’s reputation and contradicting citizens’ preferences (Weeks 2008; Weiss 2014). The signal recipient should observe the political costs to be paid by their counterpart. Without credible public opinion polls or competitive political opposition, visible protests or collective actions could display audience costs borne by a leader. A study on audience costs in China amid conflicts with the United States and Japan argues that Beijing could signal its resolve by tolerating patriotic street protests (Weiss 2014; see also Slantchev 2006). Anti-foreign sentiment could run amok and turn against the incumbent. If Beijing acquiesces to the mass protests, it signals its preference to escalate the contention and therefore provokes a high level of audience costs in the negotiations with the opponent. The foreign counterpart observes the contention that corroborates Beijing’s position and makes concessions in the disputes.⁸

To date, the signalling effect of audience costs in transitional polities is underexplored. Drawing insights from Weeks (2008) and Weiss (2014), this study argues that societal actors in Myanmar could limit Naypyidaw’s foreign policy options during the country’s political transition. Due to the systematic violations of the four procedural criteria for democracy – competitive elections, universal suffrage, guarantee of civil and political rights, and a civilian government that is free from military control (Mainwaring, Brinks, and Pérez-Liñán 2001) – Myanmar in the 2010s should be classified as an autocratic regime. Nonetheless, the polity was moving towards democracy as the government attained continuous improvement in the four aspects before the military seized power again in 2021.

The political transition allows alternative information to flow and expand the political space. On the domestic audience’s incentives: an increase in quality information on foreign policy also makes the domestic audience more likely to punish leaders for decisions that are contradictory to their policy preferences (Slantchev 2006; Potter and Baum 2014). On the domestic audience’s ability: an opening political system prompts societal actors to engage in social movements in order to pursue policy change (see Tarrow 2011; Wilson 1961). Social opposition to BRI projects became obstacles to domestic ratification in the two-level game negotiations. A protest is a bargaining tool of societal actors to ‘disrupt the power relationship and use this as leverage to make changes’ (McAdam 1982; see also Wilson 1961). Unlike most of the nationalist protests that take on foreign rivals, movements against BRI projects also targeted Naypyidaw as part of the joint ventures of the mega projects. Therefore, anti-BRI project protests could jeopardise the political process and cause political instability in Myanmar. This enhanced the credibility of Naypyidaw’s position on BRI project disputes. Chinese investors also observed contention on the ground and engaged with the impacted community and societal actors.

The ‘audience cost dilemma’ in the Myanmar transition

A distorted bargaining sequence in a BRI project agreement turned cooperation into a dispute. The conclusion of the international agreements took place without securing the domestic audience’s ratification in Myanmar. When state–society relations were reset during Myanmar’s democratisation, domestic opposition pushed Naypyidaw to renege on Sino–Myanmar cooperation. The transitional government was entangled in an ‘audience cost dilemma’. Either paying domestic audience costs or international audience costs in an economic dispute would be undesirable. If the transitional government adhered to public demands to overturn a BRI project, it would need to pay a sizable compensation to Beijing for a breach of contract. Other foreign policy ramifications might follow. Conversely, if Naypyidaw implemented a BRI project, it would spark social discontent and possibly even derail the political transition. As such, neither paying international audience costs nor domestic audience costs would be a good solution. The ‘audience cost dilemma’ made Naypyidaw’s policy decision more unpredictable. Therefore, divergent outcomes of the hydropower dam, the copper mine and the pipelines resulted under the Thein Sein administration. Even though the Aung San Suu Kyi-led administration was trusted by the domestic audience, it could not settle the Myitsone dam dispute, owing to the audience cost dilemma.

Naypyidaw was not neutral in the economic disputes. Although it could no longer dictate foreign policy formulation, it had its preferences over maintaining or changing the status quo of the agreements. It could selectively tolerate or repress social opposition to push up or contain the level of audience costs (Weiss 2014). Naypyidaw’s protest management could signal its preference over a BRI project dispute (see Table 2.1). If Naypyidaw opted for paying domestic audience costs, it would repress protests. By restraining domestic audience costs from growing, Naypyidaw could indicate its preference for international cooperation at the cost of its legitimacy. If Naypyidaw opted for paying international audience costs, it would tolerate protests. By letting domestic audience costs surge, Naypyidaw could stand firm and demonstrate its prioritisation of domestic legitimacy. It could signal to Beijing that implementing the project in accordance with the original agreement would be out of its reach. In this hand-tying approach, Naypyidaw would extract concessions from Beijing in the BRI project. Its tactical response to the conundrum is understudied by existing audience cost scholarship.

Table 2.1: Protest management and Naypyidaw’s diplomatic objectives.

	Protest toleration	Protest repression
Domestic preference	align	diverge
Domestic legitimacy	increase	decrease
Audience costs	to pay international audience costs	to pay domestic audience costs
Signal to Beijing	standing firm	tying hands
Diplomatic objective	project suspension	project renegotiation

Source: Author’s summary.

Audience cost mechanism in BRI project disputes

This study draws inspiration from Weeks (2008) and develops a three-layer mechanism that unravels Naypyidaw’s preferences in the audience cost dilemma amid the host country’s political transition.⁹ First, an anti-BRI project movement could generate a high level of audience costs, observed by the turnout and geographical range of actions. Public disapproval of the project could diminish the prospects of retaining office. Naypyidaw, therefore, would hesitate to maintain a BRI project’s status quo. Reaction from opposition parties, including ethnic parties, would help to affirm the credibility of Naypyidaw’s bargaining position. Second, the executive indicates its commitment to changing a BRI project’s status quo. If an opposition party did not comment on the project controversy, it would signal that Naypyidaw’s hand-tying strategy was deceptive. Conversely, if an opposition party demanded project suspension or renegotiation, it would imply Naypyidaw’s bargaining position was credible. Naypyidaw’s audience cost dilemma complicated its decision-making process. Protest management signalled its diplomatic intention – continuing cooperation with Beijing (paying domestic audience costs) or discontinuing cooperation with Beijing (paying international audience costs). Third, Beijing was convinced that domestic constraints would threaten the host country’s political stability and might hamper its own economic interests. Otherwise, Beijing would not consent to change the original payoffs in an agreement. Beijing’s concessions in exchange for project continuation presented its assessment of domestic constraints in Myanmar. Additionally, a shift in diplomatic strategy to engage with societal actors involved in the project indicated Beijing’s acknowledgement of Naypyidaw’s domestic constraints.

Table 2.2 summarises interactions among Myanmar’s societal actors, Naypyidaw and Beijing in a BRI project dispute. It also highlights the observable evidence in regard to actions taken by each party. Furthermore, Figure 2.1 illustrates changes or maintenance of status quo in a BRI project. A high level of audience costs (X) may change a BRI project’s outcome (Y) with the presence of two other conditions: Naypyidaw’s diplomatic objective (A), and Beijing’s perception of its counterpart’s constraints in the dispute (B) – that is, [X + (A + B) = Y].

Table 2.2: Audience cost mechanism in Sino–Myanmar economic disputes.

	Explanation	Observable evidence
Audience costs	Domestic audience opposed a committed Chinese project by organising collective actions. The popular movement generated a high level of audience costs for political leaders.	Political mobilisation: number of participants and the geographical scope of actions; and Opposition party’s reaction: position on the status quo of the signed agreement.
Executive’s preference	Entangled in an ‘audience cost dilemma’, Naypyidaw’s preference for project continuation or discontinuation was indicated by its response to an anti-Chinese project movement and any public statement made.	Protest management: toleration or repression of anti-Chinese project movements; and Self-imposed immovable bargaining position: unilateral announcement to increase the audience costs.
Beijing’s perception	Beijing’s perception of domestic constraints in Myanmar for continuing the Chinese projects.	Concessions: changes in the contract in Myanmar’s favour; and Diplomatic strategy: diplomatic engagement with societal actors.

Source: Author’s summary.

Figure 2.1: Audience cost mechanism of changes and maintenance of project outcomes in BRI projects in Myanmar.

Source: Author’s depiction.

Measuring audience costs in Myanmar’s transition

The audience cost mechanism highlights that a high level of domestic audience costs is an independent variable that explains the changes in a committed BRI project’s status quo. It is essential to pressure the executive to align with domestic constituents’ policy preference and convince the foreign opponent to make concessions in the dispute. However, gauging the level of audience costs remains problematic. In democracies, opinion poll data on foreign policy is a major source of evidence of audience costs (Baum 2004). Unfortunately, no opinion poll regarding public support/disapproval of the Myitsone dam, the Letpadaung copper mine, the China–Myanmar pipelines and other BRI projects was conducted in Myanmar. In non-democracies, street protests help to signal public resentment towards a foreign policy decision (Weiss 2014). This study postulates that political mobilisation could be an indicator to attest to audience costs. It develops a political mobilisation model to calibrate audience costs for project continuation during Myanmar’s political transition in the 2010s. The number of participants and geographical scope of actions are employed to capture the level of political mobilisation. The higher the level of political mobilisation, the higher the level of audience costs will be.

The selection of the number of participants in protests and the geographical scope of actions are drawn from Charles Tilly’s WUNC (worthiness, unity, number and commitment) model, which measures the strength of a social movement (1999, 260–63). ‘Worthiness’ requires the suffering of people or endorsement from respectable social leaders. ‘Unity’ refers to a direct affirmation of identity and beliefs. ‘Number’ is the scale of support, the number of participants, the number of cities and financial resources that a movement can mobilise. Lastly, ‘commitment’ is the perseverance to advance the cause’s mission, and the resistance to repression. Based on these criteria, he introduces a formula to calibrate a social movement’s strength as a product of the multiplication of worthiness, unity, number and commitment (a social movement’s strength = W × U × N × C). Nonetheless, such a formula is not accompanied by a scorecard for the measurement of an empirical social movement’s strength. Considering the elusiveness of W, U and C and the challenges in quantifying each dimension,¹⁰ this study measures a movement’s strength with N only. Particularly, the number of participants and the spatial diffusion of actions that can provide more objective information for comparison.¹¹

This study measures audience costs in Myanmar with two dimensions, namely the number of participants and the geographical scope of actions. Each dimension is measured on a 3-point scale. The number of participants is coded as small, medium or large, and a value of 1, 2 or 3 is assigned to each level accordingly. Similarly, the geographical scope of actions is coded as local, regional or nationwide, and a value of 1, 2 or 3 is assigned to each level correspondingly. To put the 3-point coding into context, Tables 2.3 and 2.4 illustrate the criteria for allocating a value to the number of participants and the geographical scope of actions. The number of participants is measured by an aggregate turnout in movement. Data was drawn from media reports, and information from organisers or key informants. The actual number of participants could be much higher. If a movement reportedly involved 5,000 people or less, it would be regarded as a small turnout. A value of 1 will be assigned to it. If a movement that reportedly involved 5,001–10,000 people, it would be regarded as a medium turnout. A value of 2 would be assigned to it. A movement that reportedly involved over 10,000 people would be regarded as a large turnout. A value of 3 would be assigned to it (see Table 2.3). How the geographical scope of actions is coded depends on the pervasiveness of the actions across the country. If the actions concentrated around the project area and spread to the vicinity, it would be regarded as a local movement. A value of 1 would be assigned to it. If the actions went beyond the administrative division or state, it would be regarded as a regional movement. A value of 2 would be assigned to it. If actions took place in Yangon, as well as at least two divisions or states, it would be regarded as a nationwide movement. A value of 3 would be assigned to it. The involvement of activists and civil society organisations (CSOs) in Yangon was essential because most of the national CSOs were based in the commercial capital and the largest city. Yangon-based activists and CSOs could mobilise more people in other divisions and states to amplify their cause through their established networks (see Table 2.4).

Table 2.3: Aggregate number of participants.

Value	Size	Number of participants
1	small	1–5,000
2	medium	5,001–10,000
3	large	over 10,000

Source: Author’s measurement.

Table 2.4: Geographical scope of actions.

Value	Scope	Description
1	local movement	actions concentrated around the project area and within the administrative division/state
2	regional movement	actions at division/state level and in Yangon
3	nationwide movement	actions taking place in at least two divisions/states and in Yangon

Source: Author’s measurement.

The level of political mobilisation is a product of the number of participants and the geographical scope of actions (political mobilisation = number of participants × geographical scope of actions). The range of the product of the number of participants and the geographical scope of actions is from 1 to 9. Both the number of participants and the geographical scope of actions must reach a strong magnitude to generate a high level of audience costs to condition the executive’s diplomatic options. If a movement had a low turnout (value: 1) and was confined to parochial actions (value: 1), the product of political mobilisation would only be 1. If the number of participants increased to 10,000 but the actions were still confined to the local level, the maximum value of political mobilisation would remain at 3. In the same vein, if the movement participants were less than 5,000, even when actions that took place in more than two divisions/states and Yangon, the maximum value of political mobilisation would be limited to 3.

Low level of pressure: If the political mobilisation against a BRI project stayed at 1–3 points, only a low level of domestic audience costs would be generated. Naypyidaw could ignore the actions concerned. The executive would maintain the status quo of a committed BRI project. Even if Naypyidaw claimed that it was compelled to renegotiate the project, Beijing would dismiss the counterpart’s rhetoric.

Problematic with room to manoeuvre: If the political mobilisation ranged from 4 to 6 points, a medium level of domestic audience costs would result. The campaign became problematic for the executive. Nevertheless, the executive would still have room for manoeuvre. The executive might suppress a movement and pay domestic audience costs that were still manageable by the government. Conversely, depending on its preference, it might capitalise on a movement and demand a change in a negotiated international agreement.

Legitimacy crisis: If the value of political mobilisation reached 9 points due to a high level of turnout and nationwide actions, a high level of domestic audience costs would be produced. In this situation, the executive would be caught in a legitimacy crisis for defying public expectations. If the executive did not change the status quo of the project in accordance with public demands, it would bear severe political consequences at home (see Table 2.5 and Figure 2.2). Naypyidaw might shelve the project to allay social discontent. Nevertheless, it would still be possible for Naypyidaw to extract concessions from Beijing at the expense of its legitimacy.

Table 2.5: Level of audience costs.

Value of political mobilisation (number of participants × geographical scope of actions)	Level of audience cost	Description
1, 2, 3	low	low level of pressure
4, 6	medium	problematic, but with room for manoeuvre
9	high	legitimacy crisis

Source: Author’s measurement.

It is noteworthy that the activities in the anti-BRI project movements were not restricted to protests. This study contends that non-political actions with a political purpose (van Deth 2014; see also Chan 2022), such as political boycotting or buycotting, wearing clothing of a specific colour on the day of action and attending cultural events, can help to capture public views on an issue in a transitional Myanmar. The nature of a political activity, regarding the authorities’ level of acceptance, could greatly affect the participant turnout. Hence, cultural and non-confrontation activities with a political purpose that could mobilise ordinary citizens would be considered part of a social movement. The empirical chapters further discuss the forms of political activities and their impacts on mobilising support.

Figure 2.2: Intensity of political mobilisation and audience costs.

Remarks: Political mobilisation (PM) value (number of participants × geographical scope of actions); Audience costs (AC): level of audience costs.

Source: Author’s depiction.

Concluding remarks

This chapter provides a theoretical framework that explains variations in project outcomes in Sino–Myanmar BRI project disputes in the 2010s. The revival of societal actors in Myanmar challenged the bilateral economic agreements signed by the military regime. Anti-BRI project movements set off the two-level game negotiations. Domestic constraints turned bilateral economic cooperation into disputes. Paradoxically, they were transformed into a source of contextual power that narrowed the acute power imbalance between China and Myanmar. Moreover, the audience costs incurred from acting against public demands helped to visualise Naypyidaw’s involuntary defection to yield concessions from Beijing.

This study introduces a contextualised model of political mobilisation to measure audience costs generated by the opposition to the BRI projects. Diverse dispute outcomes in the Myitsone dam, the Letpadaung copper mine and the China–Myanmar pipelines demonstrated that audience costs alone could not guarantee that Naypyidaw would act in accordance with the domestic audience’s preferences. Naypyidaw’s ‘audience cost dilemma’, which emerged in the political transition, complicated its diplomatic decisions. At a time when the high level of political mobilisation could turn into a legitimacy crisis, Naypyidaw could not afford to pay domestic audience costs. It would be less likely that the executive could maintain the status quo of the project. Even if the executive were inclined to continue the projects, it would probably demand project renegotiation in order to gain the domestic audience’s acceptance. Nevertheless, Beijing still held the legal right and structural power to influence Naypyidaw’s policy preferences. Its responses depended on the credibility of the signal sent by the Myanmar counterpart.

The next three chapters present the application of the theoretical framework to the empirical cases of the Myitsone dam, the Letpadaung copper mine and the China–Myanmar pipelines that show how political mobilisation by Myanmar’s societal actors, Naypyidaw’s preference and Beijing’s perception intertwined to produce divergent project outcomes.

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1. 1 Beijing is willing to impose informal economic sanctions on the target states to achieve its policy goals. See footnote 2 in Chapter 1.

2. 2 See footnote 4 in Chapter 1.

3. 3 The draft resolution, initiated by the United States and the United Kingdom, called for an arms embargo and financial and travel restrictions on President Robert Mugabe and other leaders in Zimbabwe (United Nations Security Council 2008).

4. 4 The Sino–Japanese conflict over the detention of a Chinese fishing boat captain erupted after a Chinese trawler collided with two Japanese coastguard vessels in disputed waters in the East China Sea in 2010 (Bradsher 2010).

5. 5 For a summary of the critique of the domestic mechanism of audience costs, see Joshua Kertzer and Ryan Brutger (2016).

6. 6 Bahar Leventoglu and Ahmer Tarar (2005, 422) also note that an autocratic leader could be politically vulnerable to bearing higher domestic political costs when negotiating with a democratic leader with high popularity and no looming election.

7. 7 Jessica Weeks (2008, 2014) differentiates dictatorships into four types, namely non-personalist civilian regimes (machines), non-personalist military regimes (juntas), personalist regimes led by civilians (bosses), and personalist regimes led by military officers (strongmen). Autocratic leaders’ decisions over making war and peace vary in these different regimes.

8. 8 Jessica Weiss (2014) bypasses the condition of previous threats or promises made in international conflicts and argues that nationalists evaluate leaders’ competence by their own foreign policy preferences. See also Alexandre Debs and Jessica Weiss (2016).

9. 9 Differing from previous studies on the two-level game and the audience cost in a democracy (e.g. Knopf 1998) and in a non-democracy (e.g. Weiss 2014), the ‘audience cost dilemma’ in a transition polity adds a unique context to the subject of study.

10. 10 In terms of worthiness, it is hard to determine whether a social movement that has endorsement from a well-respected opposition leader or a movement that is rooted in entrenched injustice has a higher level of worth. In terms of unity, it is difficult to decide whether a movement participated by members from the same community or a movement that mobilises participants with different identities under the same cause has a higher level of unity. In terms of commitment, it is difficult to evaluate whether protesters who brave repression in one action or protesters who constantly participate in a movement have a higher level of commitment.

11. 11 Weiss (2014) also discussed the scale of anti-foreign protests by referring to the number of participants and the number of cities involved in the actions.