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Friday, 15 July 2016

#brexit - what are the #negotiating positions the UK can take? @LSEpoliticsblog


Read this 1st bit to get into some of the mindset of a professional commercial negotiator.  Then use that understanding to consider how the various parties might approach the Brexit negotiations.

Negotiations are governed by which person has the power in the commercial relationship.

To understand where the power lies careful thinking is usually wise before negotiations start.  

Which "red lines" can't your negotiating team cross?  At what point do you walk away from negotiations (for real as opposed to a piece of negotiating theatre).   How do you signal these positions to the other side so as to allow negotiation towards but not beyond them? How far are you able to bluff on what your red lines are?  But take care on bluffing. Remember once a bluff is called you're future negotiating position is stuffed if you actually have to continue to negotiate.  

Often who has the power in a negotiation can be indicated by analysis about who is under time pressure to do the deal.  Or an assessment of who can really walk away from the deal.  Or the market reality about how unique the sellers product is.

So if you're a supplier of something that is wanted or fairly rare or only available for a short time or in demand - and you have a pushy buyer wanting special rates/terms then .....

... you might be able to decide you won't do business with the buyer if they insist on special discounts.  After all you have lots of other willing customers.  If you give one a discount then if your other customers find out they will want a discount as well and your profit rate may go down (Ceteris paribus);

 ... basically as a seller in this kind of position you can trump the buyer's "give me a discount" pitch with "Non".  

Given this fairly brief intro to some of the dynamics in commercial negotiations ....

what are the brexit negotiating positions UK can take?

Option 1 - enact article 50 then negotiate on the terms of the UK leaving the EU - from a UK Brexit perspective this has a certain attraction in terms of getting on with it and trying to calm the financial markets. Although its equally possible that as facts from negotiations emerge the financial markets might get spooked.  

The major problem with this approach is that under Article 50 the EU negotiators can just spin the negotiations out to 2 years at which point the UK is chucked out.  

So basically the EU has the ability to time out the negotiations. They have almost all the power once Article 50 is enacted.  Which of course is one of the reasons why the initial EU response to Brexit was along the lines of "OK  - fair enough - democracy has spoken - but we won't negotiate till you enact clause 50".  

Once the 2 year Article 50 clock is clicking the UK won't have a position of power to negotiate from.  The only way round that problem is to agree with the EU to turn the clock off.  The argument for a clock off agreement might be along the lines of "It has taken us over 40 years to put the various trading & commerce arrangements in place.  Time limiting how long it takes to unpick or change these is unrealistic".

My guess would be that the EU negotiators won't turn the 2 year clock off - because it gives them such a powerful negotiating position.

Option 2  - don't enact Article 50 until the EU agree to specific fundamental undertakings about the UK Brexit.  To which the EU (given its current position) would probably say "get lost". 

So one UK response to such a "Nein"  might be as follows ...

"We are still EU members and £ contributors. Till you agree to some fundamental undertakings before we enact Article 50 we'll use the full weight of our membership and legal and veto rights to make EU management very, very, very difficult.".  

Of course this is a fairly nuclear approach and relations would sink to an all time low.  But in such a situation the EU is hampered from getting on with its business till it it can get rid of the UK. And the "lets leave the EU" factions in other countries might feed off this disruption to try to get an in/out referendum in their country.

With this option the major problem is that it largely destroys the working relationships. And of course a lot of care would have to be taken over how legally binding the pre-negotiation undertakings were.  

But some may argue that the relationships are going south fast already.  And of course this option does go some way to making the negotiating power positions between the EU and the UK more even.

Option 3 - enact or don't Article 50 - Such an approach might work if the UK's aim is to exit the EU trading arrangements and create/use other trade deals with the rest of the world. Indeed there are already some arguments emerging in the media along these lines ...

"Why would we want to stay with a stagnant low growth market only representing part of Europe?  Lets create trade deals with India and China and the USA and Pacific nations and Africa - those are the markets where growth is good"

For Brexit supporters this option also has the greatest chance of delivering on their rhetoric on "Taking back Control" and on initiating the EU citizen border controls they want.

But you'll notice that some EU members are already claiming that the UK can't legally negotiate with other parties before it enacts Article 50 to exit the EU.  

Although this argument seems open to challenge given that the rest of the EU members have already "informally" met together to discuss Brexit.  (I think they used the "informally" sleight of hand to get round the technicality of them holding discussions without the UK).  

So these are the three main negotiating options I can think of if "Brexit means Brexit" in the words of our new PM.  

The Brexit negotiations are set to be a fascinating insight into political and trade negotiations.

And doubtless they'll be several books, dissertations and doctoral studies on them over the next couple of years.

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