Brexit, Irish border, Michel Barnier, Negotiating, Theresa May

#Brexit: The UK Government’s BATNA Dilemma

Koji Tsuruoaka, Japan's ambassador to Britain, speaks outside 10 Downing Street after a meeting between Britain's Prime Minister Theresa May and senior members of Japanese companies, in LondonIt seems to us that a great deal of press and other comments about the supposed disunity within the UK cabinet about Brexit frames it slightly wrong. The cabinet is not split over what it wants from the Brexit discussions. It knows exactly what it wants.

The problem arises over what to do when it doesn’t get what it wants. and it already knows that you can’t always get what you want. The real problem is that the cabinet, in the language of professional negotiators, cannot agree on its BATNA, its Best Alternative to a Negotiated Agreement.

The acronym BATNA was coined by the US academics, Fisher and Ury, and became common currency among negotiators after they published their classic on negotiations, Getting to Yes, in 1981. The concept is simple. Before you meet the other party in a negotiation you need to work out in detail what your objectives are and, as important if not more so, what are you options if the deal you want is not available. In a word, what are your alternatives?

Knowing your BATNA is critical to a successful negotiation. It means that you can begin discussions safe in the knowledge that the discussions may not be the only game in town. If the terms on offer are not acceptable, you know beforehand what you can do. You are not locked in. Not only does having alternatives increase you leverage, it is also psychologically important. It allows you to make it clear to the other party that your are not a prisoner of the talks, you are not in a corner, you have choices.

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Article 50, Brexit, British Government, Irish border, Northern Ireland, Theresa May

That #Brexit Winding Road may be a Cul-de-Sac

This post was written on Monday Dec 4th, 2017.

may-tusk-junckerThere was a time, before the Internet and social media, when politicians could say very different things to very different audiences and get away with it. Not so today. To coin a phrase, what you say in Brussels is known in Belfast before you finish your sentence.

As I write this, at 18:30 Paris time, reports of what actually happened in Brussels today are still somewhat unclear. But it does appear that all parties thought a deal was done until the UK said no at the last minute. Speaking to Irish radio, the Taoiseach (Irish Prime Minister), Leo Varadkar said:

“The U.K. had agreed a text on the border that met our concerns … I was then contacted by [Juncker and Tusk] and confirmed Ireland agreement to that text… I am surprised and disappointed that the U.K. Govt is not in a position to agree to what was approved today”

Reports suggest that the Democratic Unionist Party (DUP) said it could not support the agreed text as it appeared to split Northern Ireland economically from the rest of the UK as Northern Ireland would, to all extents and purposes, still be in the EU’s single market and customs union while the rest of the UK would not.

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Article 50, Brexit, David Davis, GDPR, Irish border, Michel Barnier, Theresa May

Still a (very) Long and Winding #Brexit Road Ahead

This Briefing was written on 3rd Dec 2017

7EEC154E-1C26-4BA9-BD46-6E7E326308E2As we write this Briefing, early on Sunday Dec 3, it would appear that the EU and the UK are moving towards a position where the EU Council (heads of government) at its next meeting on December 14/15 will be able to declare “sufficient progress” in the Article 50 discussions to date to allow them to move on to the next stage, which will focus on the “framework” of the UK’s future relationship with the EU.

However, as one diplomat put it, until we see what has been agreed “on paper” rather than “in the papers” it is wise to withhold judgement. But it does seem that the logjam on citizens’ rights has been broken by the UK conceding an ongoing role for the Court of Justice of the European Union (CJEU) in upholding the rights of EU citizens resident in the UK after Brexit.

The UK has also agreed to meet all its outstanding financial obligations to the EU, estimated at around €50 billion net, while accepting that this money does not buy a future trade deal of any type, even if, for the moment, UK cabinet ministers are not exactly making that clear to MPs in the House of Commons. Continue reading

Brexit, British Government, Brussels, Irish border, Northern Ireland

Break, for the Border #Brexit

This blogpost was written on Nov 24th, 2017

welcometoniThe week opened with the UK cabinet agreeing that it would offer more money to the EU to settle its financial obligation triggered by its decision to leave but only on condition that the EU would agree to now move to talks about the future relationship and that the money would only be paid over when a trade deal was actually signed. This is an offer that, by Friday, even the ultra-Brexit supporting newspaper, the Telegraph, was admitting would be rejected by the EU.

The week closed with howls of rage from British politicians, often Brexit supporting, when the EU announced that UK cities were to be excluded from consideration from the prized European Capitals of Culture competition for 2023. An example of the EU punishing the UK, Brexiters argued, apparently ignorant of the rules that only cities from EU, EEA or applicant countries can be so nominated. Why would the EU subsidise cultural activities in a city in a country that had left the EU?

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Article 50, Brexit, David Davis, Irish border, Negotiating

#Brexit: “Sometimes it seems like they haven’t thought all this through”

This article was written on 17th Nov 2017

Hammond BoJoAnother week, another seven days that leaves us little wiser as to what happens next. With each passing day it becomes ever clearer that the UK government fundamentally misunderstands the position it has placed itself in as regards exiting the European Union.

This misunderstanding is such that, as of today, there would appear to be only two possibilities open to the UK.

The first is to leave the EU in March 2019 without an agreement as to its future relationship with the EU and, therefore, obliged to conduct trade with the EU within the framework of the World Trade Organisation (WTO) rules.

The second possibility is to accept a free trade agreement modelled on the agreement the EU has recently signed with Canada. That agreement basically covers trade in goods, resulting in a reduction in tariffs of some 98%, and mutual recognition in regulated professions such as architects, accountants and engineers, and easier transfers of company staff and other professionals between the EU and Canada.

However, it has little to say about services, such as financial and legal services. As such services constitute a significant portion of the UK’s trade with the EU the “Canadian model” is of limited value, certainly as compared to the access the UK enjoys today to European markets through membership of the internal (single) market and the customs union.

It is the UK government that has put itself in this position with its decision that Brexit had to mean not only leaving the EU’s political structures but also meant leaving the internal market, the customs union and common commercial policy and putting itself outside the jurisdiction of the Court of Justice of the European Union (CJEU). It didn’t have to be that way but the UK’s prime minister, Theresa May, decided that such an ultra-interpretation of the Brexit referendum vote was the best way to manage the internal politics of the Conservative Party.

As has become clear since, this choice may well have resulted from a complete ignorance of the way the European Union is constituted and how it actually works. Those UK cabinet members actually charged with managing the UK’s exit from the European Union have very little actual experience of dealing with the EU. David Davis, the UK’s chief Brexit negotiator, spent 20 years on the back benches in parliament before being appoint Brexit Secretary in June 2016.

Such was Davis’s lack of understanding of the EU when appointed that one of his first announcements was that he planned a trip to Berlin to negotiate a trade deal with Germany, seemingly unaware that individual EU member states cannot negotiate trade deals with non-EU member states. The EU does that on behalf of all its members.

But Davis’s lack of understanding on trade matters merely speaks to a greater lack of understanding on the part of practically all UK politicians as to the constitutional nature of the EU, not helped by the fact that very few of them speak any European languages. The EU is a rules-based, legal order with complex decision making processes. This is the only way a bloc of 28 member states can work. Politics cannot trump this legal order. Legislation, once enacted, cannot be disregarded for the sake of some short-term political expediency. The CJEU ensures that decisions and legislation conforms to the Union’s legal and constitutional order.

The UK’s concept of parliamentary sovereignty is very different. Whatever parliament decides, it decides. Adverse decisions of the courts can be quickly overturned. A UK government with a solid parliamentary majority can do pretty much anything it wants.

This leaves UK politicians believing that, in the end, politics will always trump legal considerations. This belief has informed their approach to the EU exit process. They see the process as a classic “give and take” negotiation. I compromise, therefore, you must reciprocate with a compromise.

Davis said as much in a BBC interview on Friday last. He told his interviewer that the UK has “been offering some creative compromises and not always got them back”, insisting that “nothing comes for nothing”. He suggested there needed to be more give-and-take from the other side. “I want them to compromise, surprise, surprise, nothing comes for nothing in this world,” he said. “But so far, in this negotiation, we have made a lot of compromises. On the citizens’ rights front, we have made all the running.”

The problem for Davis is that the EU does not see the UK exit process as a negotiation in the same way as he does. They see it as something to be managed, as damage limitation, as the protection of the legal order.

For example, the UK continues to see the EU’s insistence that it settles its financial obligations, obligations the UK signed up to as a member of the EU, as something to be bargained against a future trade arrangement. The EU sees it as paying what you already owe and will not allow the UK to “double bubble” that money, buying future benefits with money owed from past obligations.

Likewise, when it comes to future trade relations between the EU and the UK. By now, even if they have never said so explicitly, it is clear what the current UK government wants: a trade deal that gives the UK de facto membership of the internal market and the customs union but without the financial and legal obligations that come with membership.

As Davis put it in a speech in Berlin last Thursday night:

“We will be a third country partner like no other. Much closer than Canada, much bigger than Norway, and uniquely integrated on everything from energy networks to services. The key pillar of this will be a deep and comprehensive free trade agreement – the scope of which should beyond any the European Union has agreed before. One that allows for a close economic partnership while holding the UK’s rights and obligations in a new and different balance.

It should, amongst other things, cover goods, agriculture and services, including financial services. Seeking the greatest possible tariff-free trade, with the least friction possible. And it should be supported by continued close cooperation in highly-regulated areas such as transportation, energy and data.”

Where does this “deep and comprehensive free trade agreement” actually differ from membership of the internal market and the customs union? The answer lies in the words about holding the “UK’s rights and obligations in a new and different balance”, code for the UK wanting three of the four freedoms of movement – goods, capital and services – while closing down the free movement of people. Except if you are a banker, for whom Davis has promised to negotiate a special free movement deal (here). Too bad if you are a Polish plumber.

The UK does not just want to cherry pick the single market and the customs union, it is asking for the whole cherry orchard.

Even if the discussions between the UK and the EU get beyond the three Article 50 issues, then the UK is going to have to face the reality that best that will be on offer is a Canadian-style free trade agreement. The EU will not compromise the integrity of the single market and the custom unions for the benefit of a third country, the UK.

To paraphrase some words from Davis’s Berlin speech: the EU will not put EU prosperity at risk for the sake of UK politics. 2018 looks like being a long, slow, steep learning curve for the UK that short-term political choices made in the interest of party management can have long-term adverse economic consequences.

But the discussions may not get beyond the Article 50 issues. Ireland wants a written commitment that there will be no hard border on the island after Brexit. The UK has committed to this but doesn’t know how to deliver on it. As the Irish Taoiseach, Leo Varadkar said on Friday after a meeting with Theresa May: “Sometimes it seems like they haven’t thought all this through”.

Not just on Ireland, but on all things Brexit, that becomes more obvious by the day.

 

 

Brexit, Irish border, Michel Barnier, Northern Ireland

Is the UK’s #Brexit Cheque really in the post…?

This article was written on Nov 12th 2017.

13589652_f520It is becoming increasingly difficult to see Brexit ending well. Indeed, the process could hit the wall within weeks. Why? The complete and utter inability of the UK government to agree what it wants out of Brexit and, as a result, how to conduct the exit process. This should not be surprising given the closeness of the Brexit referendum vote: 52% to 48%, with the 52% only representing 37% of the total electorate.

It would appear that, when it comes to Brexit, the UK electorate roughly breaks down into three, though it is impossible to say exactly what weight to give to each of the three.

1. First, there are those who are totally opposed to Brexit and want to see the decision reversed.

2. At the opposite end of the spectrum are those who want, in the words of arch-Brexiteers, Boris Johnson and Michael Gove, the UK to become “a fully independent self-governing country”, irrespective it would seem, of the costs involved.

3. The third bloc, probably where most pragmatic businesses people are to be found, believe that if Brexit is to go ahead, then the economic disruption should be kept to a minimum, preferable through continued membership of the EU’s single market and the customs union.

On balance, and many of the polls show this, there is probably a majority in the UK who support leaving the political dimension of the EU but remaining within its economic dimension. The problem is that, what we might call the “economic remainers”, are split between the main political parties while the “Britain First” group of Johnson and Gove effectively control the Conservative Party, and thus the government.

Their control is such that within the past few days, the prime minister, Theresa May, has announced that she will bring forward an amendment next week to the European Union Withdrawal Bill which will embed the UK’s decision to leave the European Union at 12:00 midnight, Brussels time, on March 29th, 2019 in law. Irrespective of what happens between now and then.

The fact that there is no internal agreement within the UK as to the meaning of Brexit makes, as we note above, managing the process difficult, if not impossible. How do you get to where you want to go when you can’t decide on your preferred destination?

The first phase in the exit process is the Article 50 negotiations. The essence of Article 50 is found in the following language:

A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.

The EU has identified three issues that must be resolved during the A50 discussion with the UK before talks can move to the issue of the “framework for its future relationship with the Union”. They are: settlement of the UK’s outstanding financial commitments with the EU; the rights of EU citizens in the UK and UK citizens in the EU; and issues relating to the island of Ireland, where the only land border between the EU and the UK will exist, post-Brexit.

When it comes to the settlements of the UK’s outstanding financial commitments to the EU the two sides are approaching it from mutually incompatible positions. The EU sees it as a simply a matter of the UK paying what it owes, a settling of accounts. Once outstanding accounts are settled then what happens in the future can be discussed. There can be no future discussion until all outstanding bills are fixed, or at least an agreement is reached on how the bills will be fixed.

The UK see it as a negotiation. We will pay what you say we owe provided we get future benefits for our money. There must be a quid-pro-quo. The UK has made an initial offer of €20 billion and now says that it will not increase that figure until the EU agrees to trade talks. Even then, it would find it politically impossible to increase the figure without an actual trade deal to show for it.

This was the week that EU patience with what it sees as UK gameplaying finally snapped. At a press conference last Friday, after what can only be described as two days on non-negotiations, the EU’s chief negotiator, Michael Barnier, said that the UK has two weeks to make a serious proposal on its outstanding financial commitments, put at roughly €60 billion by the EU, or else he would not be able to report “sufficient progress” to the heads of government of the remaining EU27 member states in December to allow talks to proceed to what the UK insists on calling “trade” but which Article 50 refers to as the “framework for its future relationship with the Union”. A big difference in understanding as to the substance of the next phase of discussions, if the process ever gets to that point.

As of today, it seems extremely unlikely that there is any sort of political consensus with the UK cabinet to do what Barnier asks. On the contrary, in a complete misreading of the EU’s position, there is a belief on the part of many of the “Britain First” grouping that the EU is so desperate for the UK’s money that it will fold and give the UK the trade terms it wants if only the UK would walk away from the negotiating table. David Davis appeared to confirm this when he said in a TV interview Sunday that the EU should not to expect a figure or a formula by which the UK’s obligations would be calculated.

Even if a solution could be found on the money, this week also saw what is probably the most intractable of the three issues, borders on the island of Ireland, take centre stage. A leaked document on Thursday last revealed that Ireland and the EU were demanding that Northern Ireland remain in the single market and the customs union to avoid a hard border between the two parts of the island, a demand immediately rejected by the UK government, which is dependent for its survival on the votes of the Democratic Unionist Party from Northern Ireland.

The UK accepts that there should be no return to a hard border in Ireland, which would put the peace process at enormous risk. But it can offer no concrete solutions as to how this can be done outside the customs union and the single market. “We’ll find other ways around that”, was all that the UK’s Brexit negotiator, David Davis, could offer when asked in the same TV program mentioned above.

However, the reality is that there is no way around it. If Northern Ireland is outside the customs union and the single market then a hard border is inevitable if the EU is to protect the integrity of its internal market from goods being smuggled from Northern Ireland into Ireland, and onwards into the rest of the EU. Magical thinking and as yet undiscovered technological solutions are not going to solve the problem.

Conservative politicians and sympathetic commentators were quick to assert that the “newly hardened” Irish position, as they deemed it, was the result of Sin Fein/IRA pressure on the Irish government. No such thing.

This has been the Irish position all along. It is just that, as with other matters, the UK government has not been paying attention to what the Irish have being saying, just as they have not been paying attention to what the European Parliament is saying on citizens’ rights.

The Irish don’t have a veto on the final Article 50 agreement, if ever one is reached. But they do have a veto on whether or not “sufficient progress” has been made in the Article 50 discussions to allow the process to move on to the discuss the “future framework”.

They are not about to throw that leverage away.

The Irish position is simple: with its extreme definition of what Brexit means, out of the EU, the single market and the customs union, the UK created the problem. If it wants the process to move forward, it had better solve it now.

Post-dated commitments that it will be solved in future trade discussions will not be accepted. Like post-dated cheques, post-dated commitments too often bounce.

Indeed, that might be a useful metaphor for where we are. The EU (and Ireland) wants guaranteed, certified cheques now if the process is to progress. But all the UK is offering is post-dated cheques, with the figures to be filled in a later date.

Article 50, Brexit, British Government, Irish border, Negotiating

Breaking up is so very hard to do #brexit

Brexit4Over the past number of years, I have been involved, on the management side, in many European-level labour negotiations. But one particularly comes to mind.

The employees’ representatives on the other side had cancelled an agreement that had been in place for close on 20 years. It wasn’t a perfect agreement, it had drawbacks for both parties, but it worked reasonably well in practice.

Further, it was always possible to negotiate small, but important, changes to the agreement as circumstances evolved, old provisions became outdated and new issues and organisational changes needed to be taken into consideration.

In other words, the other side did not need to cancel the agreement but could, instead, have worked on improving it. But they were advised that negotiating a new agreement would be easy and that it would be a lot better than what they then had. Five years on, a replacement is not yet in place.

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