Gary Klesch: How British politicians should prepare for Brexit negotiations

Gary Klesch: How British politicians should prepare for Brexit negotiations

Generally speaking, divorce discussions become easier once the parties have reverted to their respective corners a few times, consulted with their lawyers and realise that first of all, the only people who do well out of divorce are the lawyers and secondly, the parties involved yearn for an end to the endless bickering, posturing and discussions. Until there is a signed settlement agreement, the intellectual focus by the parties is on preserving appropriate value for one’s self. Once agreement on all open issues is reached and the document is signed, then and only then do the parties begin to re-build their lives and begin the life after divorce. For many different countries and legal jurisdictions, this process is very well understood and, like the result or not, has some degree of certainty about the process… and especially what to expect.

The Brexit negotiations are a horse of a different colour. There are not a lot of international treaties such as the Treaty of Rome that contemplate upfront a divorce mechanism in any detailed way. Yes, there is a clause dealing with notifying the European Union if a member state wishes to exit, but frankly, no one has gone down this path before, so there are no precedents or common understanding how the divorce might work. To a very large extent everyone on both sides is flying blind. The early jockeying by the respective parties, Britain and the EU, is like watching an aboriginal mating dance with lots of fanfare, but no mating!

There have been suggestions, and even discussions, of a soft or a hard Brexit. One starts to wonder what the respective proponents of either soft or hard Brexit are trying to suggest or convey. Is soft easier than hard? But for whom? Which side benefits more from a hard exit and which side benefits from a soft exit? Somehow the various proponents have drawn a picture that says soft is easy and hard is not. That a soft exit means less demands from Britain on the EU so that the EU will be more accommodating and hard exit means whatever Britain asks for from the EU will be met with a strong rejection. I can’t imagine that the EU will be accommodating to anything Britain proposes simply because more time needs to go by, lawyers need to be consulted, posturing needs to occur, and ultimatums given. I never thought about it, but maybe there are soft divorces between married couples and hard divorces between married couples. However, it has never been identified or defined as such.

Part of any divorce is the imperative to understand “your other half’s” needs and wants. Yes, it is sort of a mating dance, but the strategy that each party will deploy is not totally a surprise. In the case of the EU, the British negotiators need look no further for seeing how their counterparts will negotiate than to read Yanis Varoufakis’s book titled “Adults in the Room”. If accurately reported, the book is a road map for how the EU will negotiate with parties that are not in favour with the EU. While the Greeks needed to borrow from the EU to stay afloat and stay in the EU, the dynamics of seeing how the EU representatives behaved toward an unwanted problem is very telling. Granted, Yanis kept beating the drum of the debtor’s prison and “extend and pretend” dynamics; nonetheless, the EU could not accommodate Greece’s request for debt forgiveness as any meaningful debt relief would set a precedent that the EU couldn’t live with. What is very telling in the book is that there really is only one person who has to be satisfied for any EU requests above all others, Chancellor Angela Merkel. In fact, the book demonstrates how everyone else in the EU including EU ministers either quake in their boots at offending Chancellor Merkel or make unfulfilled promises without checking with her. Clearly Chancellor Merkel is the gate keeper past whom everyone must pass if favours are needed from the EU.

Ultimately, Chancellor Merkel will decide those terms of the Brexit acceptable to her and the EU. Until she is ready to finalise a deal, all other politicians and commentators will posture, threaten, bicker and make ultimatums all of which should be ignored. The temptation is for everyone to pitch in as if their opinion or position matters. With all due respect to the various protagonists and antagonists, all of the posturing really is a waste of time. The real challenge facing Chancellor Merkel is how to construct an exit deal that does not send a signal to other EU Member States that leaving the EU is very easy. That could lead to others deciding to exit especially if times are or will become difficult for a Member State and the EU continues to demonstrate its lack of flexibility. In hindsight, I’m sure that the EU regrets not being more accommodating or creative to David Cameron’s request for flexibility. On the other hand, Theresa May is hoping for a negotiation that would lead to a fair deal and an orderly exit. Sorry to say, the EU is not looking to make a fair deal in Britain’s eyes and have an orderly exit. Why would they?

However, the most obvious reason for EU to be more accommodating is because of the trade potential with the UK, not to mention that there is a very educated pool of talent in the UK. Moreover, the City of London with its financial and regulatory infrastructure is not easy to replicate in spite of the drum beats from some European countries to do so. It has taken decades for the City of London to the reach the global status as a financial centre to rival New York and Tokyo. It would take a vast amount of money and decades for any European City to replicate London. Are these advantages in the UK enough to make Chancellor Merkel think twice and be more flexible than she otherwise would be? It is very difficult to predict the outcome and that is demonstrated by various EU participants expressing vastly differing views. Some want to charge Britain an exit fee, while others want a trading relationship with Britain, all of which demonstrates that the EU is not homogenous.

So where is Britain likely to end up? My guess is that after lots and lots of public promises and speculation (read endless bickering, posturing and ultimatums), Britain will either exit the EU in two years’ time with no agreement in hand or seek an extension to the discussions. The former is manageable and probably being planned for, while the latter is a continuation of a long, drawn out process of divorce. While it may seem to the local Brit that there is disharmony and vast differences of opinion inside Britain, think about the other 27 countries in the EU with all of its citizens wondering maybe this is a time for change. It is truly strange how someone (Britain) needs to go through the untrodden process of exiting the EU only to get Brussels to understand that maybe not all is right inside the EU and maybe the EU needs to change as well. Sad that someone needs to be the guinea pig only to have others enjoy the benefits. Unless that is, more moderate forces led by Macron play a more leading role in Brexit and try to moderate the outcome and thereby reposition the EU.