On the morning of 24 June last year, we awoke to the realisation that something historic had occurred—and that no one had prepared for it. Since then, a generally strong economy was seized on as repudiation of the warnings of a Brexit-fuelled collapse. But Brexit hasn’t yet happened, and the economic indicators are now becoming inauspicious. The multifaceted negotiations to separate from the EU and forge new global agreements are unprecedented in their breadth and complexity. The first rule of any negotiation is to prepare extensively and establish clear objectives—but one year on, conversations with leading trade (and other negotiators) suggest that the talent pool in Whitehall is still far from being filled. The UK remains woefully ill-prepared, in stark contrast to their negotiation counterparts in Brussels and beyond. The reality is that negotiating many trade treaties simultaneously will be a gargantuan task that will take a very long time. The most recent model is the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU, which took seven years to negotiate, comprised 30 chapters, and ran to 2,255 pages.
How to negotiate
Negotiators must understand and empathise with their counterparts’ idiosyncrasies, history, and cultural biases, as well as those of the constituencies they represent. The hostile, almost juvenile, rhetoric from both London and Brussels over recent months has been deeply worrisome as a harmonious relationship with counterparts is obligatory. It is encouraging that, following the election, Philip Hammond, Greg Clark, and Damian Green, all key ministers with a more pragmatic approach to the task ahead now have the wind in their sails. UK negotiators now need reassure their counterparts that they are negotiating in good faith. All negotiations are about reciprocity. Negotiators need to analyse the relative value each side attaches to every issue to be negotiated, looking for items that are of high value to one side to gain and of low cost to the other side to concede. The Brexit negotiations should not be in silos limiting single market issues to one silo, nuclear issues to another, justice to another, and so on. They can then make reciprocal trades across these and many other different categories. The EU holds the stronger hand at the start of negotiations, but the UK also has some cards to play. London is the most important capital market in the world -- in the same league as New York and Singapore. It has innovative industries and is an important destiny for European goods, albeit much smaller than the market Europe offers to the UK. Going forward, the politicians need to listen to the technocrats who will be at the coal face of the negotiations, and they need to rein in the threatening rhetoric. They also need to balance an obligation to be transparent and accountable with the ability to make a concession in private that is not instantly reported—and misinterpreted—as weakness.
Fast forward to June 2018...
Yet difficulties will remain. If we imagine where negotiations might stand a year from now, we can suppose that the hostile rhetoric will have disappeared and the technocrats on both sides will have achieved a friendly modus vivendi. But many challenges will still seem intractable. Even with goodwill and constructive negotiations, both sides will be realising that they are going to be worse off after the divorce. This could be the point that the American academic, William Zartman of Johns Hopkins University, describes as a “hurting stalemate”: a moment “ripe” for the parties to reach an agreement and consider the unthinkable. One can easily imagine an agreement that would be both substantively and cosmetically better than what David Cameron achieved in 2016. It would require agreement with all the other 27 EU members, who would be clamouring for similar concessions, of course—but it could be achievable. Brussels could claim victory simply for reversing the UK’s withdrawal. The UK would have a proposal to put to a second referendum, as the electorate would have begun to feel the economic impact and realise that being outside the EU would not be the El Dorado they had been promised. Remaining, with a strong voice in the EU, could by then be a more attractive option than it was on 23 June 2016. If this were to happen, some would be frustrated that a great deal of money would have been fruitlessly spent on Brexit, but good negotiators disregard sunk-cost. They ignore what is not recoverable—and look to what will happen next.
