This is part 2 in a series of 2 blogs on the Brexit negotiation strategy. Read part 1 here.
In the previous blog in this series, I argued why the power balance in the Brexit negotiation is on the EU side. And before diving into the negotiation strategy of Theresa May, let’s see how Europe is using the power balance in their favor so far.
The EU strongly responded to May’s first steps on the negotiation stage last week. The message was: “Theresa, you are either in or you are out. And since you decided not to be in, you’re out already. No cherry picking.” It is a strong signal. Europe should not make public threats, but Europe can underline the message that the euro cannot be managed out of London when London is not part of the EU. Jean-Claude Juncker couldn’t have been more clear when he said: “If Britain wants access to our internal market, all the rules around the internal market must be totally respected. You cannot have one foot in and one foot out. If we start to dismantle the internal market by agreeing to the demands of a country that wants to leave, then we will be bringing about the end of Europe.”
Xavier Bettle put it even more sharply: “We are not on Facebook, where things are complicated. We are married or divorced but not something in between.” Challenge for May is to convince her critics that we are on Facebook, and that of course there is room for nuance: a divorce under certain specific conditions is what she is after in the end.
As in any negotiation, the factor time plays a crucial role. Also in the Brexit negotiations, where time will turn out to be the biggest enemy of Theresa May. How does that work? Article 50 of the Treaty of the European Union states that a country has two years for withdrawal from the EU. Once she triggers article 50, Theresa May faces a firm deadline. In 2 years she has to successfully negotiate the formal Brexit with the 27 member states of the EU. If the Article 50 negotiation ends without agreement on the terms of withdrawal (including the agreements on British access to the EU market), the UK reverts to trade with Europe according to the rules of the World trade Organization (WTO). This is far worse for the UK than the current arrangements when the UK is part of the EU.
This is also where the BATNA of Theresa May comes in. She has no alternative to a negotiated agreement yet, other than getting the status of any country trading with the EU. And as every negotiator knows, you need to organize a strong BATNA to achieve success in a negotiation. A weak BATNA is worse, and no BATNA is a situation under which you don’t want to negotiate.
When a deadline approaches, the one with the least power will usually be the one who has to make the biggest concessions. And here’s where May’s tactics unfold. Organize your biggest concessions already before the negotiations officially start, as any moment later than triggering article 50 will weaken your power base considerably. This should secure a strong BATNA: individual agreements with your most important trade partners. Then use the remainder of the formal negotiation time (2 years) to help the EU get unified behind an overall agreement. While this happens you gradually pull in further concessions to show the pro-Brexit voters that you listened well to them.
Advice to May
May already started the negotiation process in a way that fits a tough negotiator from a masculine culture. Theresa did put her initial demands high and made her so-called ’Unreasonable Demand’. She knows very well that the EU will not support cherry picking. While she knows this, but she needs to ask for it firmly. This way she is seen as a credible negotiator. She needs to show her followers back home she is representing them well. This move should ensure she has the back up of her people. In the meantime she threatens the EU with the most unpleasant situation for them: a non-unified EU. May is smart enough to know that cherry picking will be tolerated by the EU. She is not in a position to make too strong demands. She cannot afford to lose valuable time negotiating principles like these.
What else should May do in the pre-play between today and the day that article 50 is evoked? Here’s my advice to May:
- Agree on the principle of free flow of people between the EU and the UK. Also impose extra conditions on Europeans settling themselves in the UK (bring a certain amount of money, specific expertise or some form of social security). The free flow of people between the EU and the UK is an important principle for both parties. Put this agreement in place first. And make sure this is pending certain conditions that you will define in a later stage of the negotiation process.
- Agree to free trade with the EU member states. Get this in return for yearly contribution to the EU budget, as the EU will demand. As May’s constituency will not support the latter, apply the negotiation tactics of ‘Funny money’. Call this payment a ‘trade stimulation’ or a ‘minimum trade guarantee deposit’. This way the UK doesn’t lose face but still pays – hidden – membership fees to the EU.
- Apply the tactic of agenda manipulation. Ensure to pull in your biggest concessions only in the last phases of the negotiation, when the EU smells they made a good deal. First negotiate the items that make the EU look unified and strong (continued payment, free flow of people and trade, no voting rights for the UK on EU matters). The later gain concessions that make you look strong and independent (entry barriers for people entering the UK).
- Make deals on the free flow of people and trade with the most important member states of the EU in an early stage. This is your exchange money (and your BATNA) in case you cannot reach agreement with the total EU. As the EU needs to stay unified in the process, these few countries will trigger others to follow. Most important member states of the EU to speak to are Germany (trade), Spain, France and Ireland, as most of the 1.2 million UK citizens living abroad live there.
- Find a strong ally to strengthen your power at the negotiation table. By the time this article gets published, word is out Theresa succeeded already. Her flirt with the new President of the United States has certainly influenced the power balance in her favor.
As in any negotiation, you have to focus on interests (not positions), and work towards a win-win agreement. May is in the least strong position in this negotiation. May should avoid any win-lose tactics (although in the media she has to satisfy the no-voters of June 23 with powerful demands). Work with the EU, behind the screens and in public, and keep your eyes on the final agreement. The 2-year deadline approaches.
And here’s where the British culture will help. In a stubborn and independent way fight your way forward, step by step. Keep your eyes focused on the end result. Act firmly, independently and determined to reach your goal. If one culture can do this, it’s the Brits!