Now is the time for the Government to start negotiating the negotiation

Now is the time for the Government to start negotiating the negotiation

If you’ve ever worked in sales, you are probably familiar with the scenario where you think you have the deal done (and possibly already cut your margin to the bone to get there) only to hear your customer say “Great – but now I need approval from my boss”. This is a classic case of failing properly to agree the process in advance of the negotiation. Sometimes this is done intentionally by less ethical players to drive a lower price from their suppliers (usually a short-sighted tactic that ignores the long-term value of the relationship) but just as often it is done through negligence. This pitfall is particularly relevant to the Brexit negotiations.

Although the various EU leaders have so far been united in refusing to negotiate before the triggering of Article 50, there is a good case for both sides to work constructively on the process in advance.

The EU is no doubt keen to know the UK negotiators’ remit and limits. We are still sorting through the constitutional issues ourselves with some keen for Parliament, or even the public via a second referendum, to have the final say. It may be that the authority of the UK negotiating team will be limited to deciding if they will forward an offer to a broader body for ratification. The EU negotiators will want to know if they can use that to their advantage.

For example, if the UK negotiating team does not have authority to conclude any deal, then it is to the EU’s advantage to know (and, where possible, influence) our default position if any offer is rejected. A default to remain in the EU means that the EU negotiators can play hardball and offer very little, safe in the assumption that a bad offer will likely be rejected and result in the UK staying. If the default is to leave, however, then the UK negotiators have a credible position from which to negotiate – as Hugh Bennett argued persuasively here just yesterday.

As for the EU27, it is still unclear what they will agree can be included within the scope of Article 50. Some claim that it is only about the past – how will the assets and liabilities be split and how will EU institutions located in the UK be repatriated. Michel Barnier, the European Commission’s lead negotiator, is said to want a three-tier model (“pending issues” and “transition period” followed by separate trade talks over a “final agreement”). Others, such as David Davis, would reportedly like to have the future relationship (for example, trade tariffs and regulatory equivalence of financial services) included (a process called “parallelism”).

This latter approach gives much wider scope for a value-creating agreement to be achieved (more issues on the table enables more creative solutions to be found) and can be approved by the EU27 using Qualified Majority Voting (QMV) – a far faster process than a separate trade deal that requires unanimous approval (and hence be difficult to close, as we saw with Wallonia and the CETA). QMV, however, may be contested by smaller EU members in the European Court of Justice if they feel their interests have not been respected (Article 50 is ambiguous and only mentions that the departing state shall negotiate with the EU to set out “the arrangements for its withdrawal”).

In either case, when would a vote by the EU27 take place? Must it be concluded within the two-year period specified by Article 50 (as recently suggested by Barnier)? Or could the ratification happen afterwards? Can the two year period be suspended at any stage (much like stopping the clock in an American football game where 60 minutes lasts 3 hours)? What happens if the euro suffers another crisis during negotiations and it is not the UK but the EU27 that requests we suspend negotiations?

Are we leaving a club or are we getting divorced? If we are leaving a club, then we would have little claim on the shared assets but nor would we have any responsibilities for the liabilities. If we are getting divorced, we will need to discuss who will pay the pensions of former commissioners, what happens to the 42,000 bottles of fine wine in the EU cellars and who takes ownership of Europe House in Westminster. Or will we be widowed before negotiations are complete?

Then there are some more tactical considerations. Where will the negotiations take place? What language will they be conducted in? How frequently will people meet? How many in the room at any given time? Who will sit where? What is served for lunch? All of these details can have a significant impact on the outcome.

The Government should attempt to begin negotiations on the process in advance of invoking Article 50. If the EU27 agrees, we can ensure that the two-year period is used as productively as possible and everyone can focus on the more material, longer term issues that matter. If they chose not to engage, we still learn more about their negotiating intentions and style we can expect to see at the table. Either way, now is the time formally to attempt to negotiate the negotiation.