27 Snakes in a Basket: The Brexit Negotiation
Friday January 27th, 2017
Friday January 27th, 2017
This is the first in a series of 2 blogs on the Brexit negotiation strategy
When the political campaign for a Brexit started in the UK, not many people did predict that today we would be preparing for one of the most complicated negotiations ever. On June 23 the British decided for a divorce. The British anti-Europe vote translated into an uncertain political future, marked by a change in government and David Cameron stepping down. Theresa May took over, and inherited the formidable task to negotiate the UK out of the EU. But as we saw this week, the 27 restless snakes of the EU member states will not orderly move into their basket when May blows her whistle. Time is ticking away for May. 104 weeks pass quickly. In this article I state that time will prove to be May’s biggest enemy, as so far she does not have a BATNA (Best Alternative To a Negotiated Agreement) yet.
The negotiation process that slowly starts to gain momentum will be the theme of many future books on the Brexit process. It is interesting to predict how the British culture will influence these negotiations. You can expect a conservative country with longstanding traditions to manage the process carefully, and meticulously mitigate risks. Also, the generally direct Europeans will not always understand the indirect way of communicating of the English. And as you may expect from the British, their negotiators will come well prepared. The British are result-oriented and will focus relentlessly on their long-term objectives.
Based on what we have seen from her so far, this is the way Theresa May likes to operate. Although it was certainly not her idea to leave the EU, that is not relevant anymore. She has a mission now, which is to guide the UK out of the EU. At the same time she needs to protect the interests of the UK once the divorce has been completed. The new UK prime minister declared already that “Brexit means Brexit”, and that she is determined to drive, oversee and complete this process in every detail. Timing however is crucial for her. She quickly needs to show she is capable of building bridges over the North Sea, while also threatening to blow up these bridges if she doesn’t get major concessions from the EU. Apart from cultural considerations, the overall strategy and tactics of the negotiation process are most relevant today. Theresa faces one of the most complex negotiation processes ever witnessed. On one side of the table is the divided country May represents. The opinions on how the UK should – promptly or smoothly – leave the EU are strongly divided. Not to talk about Scotland that overwhelmingly voted to stay with the EU. And not to talk about the large amount of people that – even though they voted for a Brexit in the first place – now fear the consequences. But this side of the table is still well organized compared to the opposite side. Hundreds of chairs have been placed on the EU side, as nobody knows who exactly will sit down here. This side will consist of a complicated mix of European Council, the European Parliament, and the European Commission. And although ‘Europe’ takes the negotiation seats, there are 28 virtual seats for all the individual member states of the EU. These member states need to protect their own interests, while they are divided internally as well. The upcoming national elections in some key member states like France and Germany will not help to be more united on this side of the table. The final agreement will need to be ratified by the parliament of every member state of the EU, so all these parties (that are not at the negotiation table themselves) can veto. After long and tiring hours of negotiation, anybody can block the final agreement and send the negotiators back to the table.
In any negotiation, power balance is the key word. When you have the power you can make the strongest demands. And when you receive to have less power, you will be inclined to make big concessions. Think of a car sale where only one car that meets your demands is left, and the salesman knows your old car broke down. Who has the power?
In the Brexit negotiation, it seems the power balance is in the favor of Europe. A simple analysis of trade volume shows that where the UK sees 44% of their export go to ‘Europe’, the other way around this is only 10%. Let’s look a bit more careful into the interests at both sides of the negotiation table.
What the UK wants:
– They want to stop or strongly reduce their payments to the EU budget
– They want continued free access of UK citizens to the EU job market, while also
– … they want to restrict immigration into the UK
– They want continued free trade (without extra import duties) with EU member states
– They want to satisfy anti-EU feelings that the population expressed on June 23
Immigration was a big concern for the UK, and a major decision factor for people to vote against the EU. So one would expect that the free flow of people between member states of the EU (as it was there until now between the UK and any EU country) will cease to exist. At the same time, millions of UK citizens live and work in Europe. Anybody living west of the North Sea will want these Brits in Europe to retain their rights. On top, the UK wants continuous free trade with mainland Europe. It is likely that the EU will allow for free trade access, as long as the UK agrees to pay into the EU budget yearly (the same deal the EU has with Norway for example). But payments into the EU are certainly not what the UK is after.
What the EU wants:
One of the main psychological factors is that the outcome for the UK should look unfavorable or even bad. This will ensure that no more member states will have an incentive to exit the EU. The EU cannot create a precedent for the UK, as this would endanger it’s own very existence.
The power balance is definitely in favor of the EU. The EU is bigger economically, and it has the veto power behind it. Any individual member state can send an agreement between May and the EU to the trash. And although this puts tremendous pressure on Europe to close the ranks, May faces more pressure. She will have to make huge concessions to individual countries and to the whole, to avoid ending up with empty hands at the end of the article 50 negotiation period.
Read more next week, on the timing of the Brexit negotiation process and the negotiation strategy of May.