What can we learn about negotiating from the Brexit Trade Deal?
Setting aside politics (this is a ‘No Politics’ Blog) I have been fascinated by the negotiation of Britain’s exit from Europe. A lot of it took place in the public domain and a some of it behind closed doors and I am very much looking forward to the books that journalists and insiders will write about it once the dust has settled. In the meantime, what can we learn about negotiating techniques from this exercise, or what could both parties learn from the many experienced demurrage negotiators we have in this business?
It has been four and a half years since the Referendum and the withdrawal agreement and the trade agreement have both been signed off. I hope you do not have such long negotiations of your demurrage claims but for agreements of this size and complexity I do not think it’s bad going, considering the EU/Canada Trade Deal took over seven years.
Red Lines
I must admit I have not kept track with all the red lines on both sides of the argument and which of them have been revised but throughout this process both sides have declared red lines. Is this a good strategy? Should the bottom line be declared at the outset or do you save it for the negotiation table? Clearly these negotiations were influenced by politics and both sides had to keep their respective electorates happy. Maybe the PR at home was worth it.
I am not in favour of declaring red lines for a couple of reasons.
Firstly, it signals to the other side how far you can go. I remember a counterparty sending me a list of outstanding claims but had left their own notes in the spreadsheet. Hardly a red line on the same scale but the note said something like “can accept 50/50 when we have meeting”. This was a useful piece of information for me and not sure what the outcome of that claim was but by disclosing their position like this I think it gave me an advantage.
Secondly red lines limit the discussion and if there is nowhere to go it could lead to agreeing an unsatisfactory deal or no deal at all.
No deal is better than a bad deal – be careful what you wish for
This leads me on to the next point. We often heard this from the UK side that no deal was better than a bad deal which inferred that the UK would walk away and trade on World Trade Organization (WTO) terms if they were not happy. Were these threats believable? There are some observers who felt that from the outset when PM David Cameron tried to renegotiate terms that the EU did not believe that UK would ever leave. Cameron obviously did not bring back enough concessions to satisfy the majority in the Referendum so maybe that is true. On the other hand, some observers felt that the EU took it seriously and Cameron got more concessions as a result.
When Theresa May was in the chair it was felt by some that ‘No Deal’ was an empty threat and it was only in December 2020 that a ‘No Deal’ threat was taken seriously by both sides that a deal was struck. Obviously, all this is conjecture and I am waiting for that book!
What can we learn from this? To relate it to a demurrage claim I have often seen counterparties threaten legal action if they do not get their way in a negotiation. If you are going to use a threat like this you must be prepared to use it. If you consistently threaten legal action but don’t carry it out, then you will be found out and this is not a tool you can use again.
Thankfully, most claims in this business are settled without the need to involve the courts.
Fishing
Fishing was one of the very last things to get resolved and this was clearly a compromise by both sides.
We heard the expression “compromise is not a dirty word” a few times during these negotiations and the full quote is from Sir Nicolas Winton who said ‘Never forget that compromise is not a dirty word. Life depends on compromise.’
I am reminded of another quote allegedly by the author Larry David who said of Senator Henry Clay “You’re unhappy. I’m unhappy too. Have you heard of Henry Clay? He was the Great Compromiser. A good compromise is when both parties are dissatisfied, and I think that’s what we have here.”
Judging by the fishermen both sides of the channel this is a compromise where both parties are equally unhappy.
The overall trade Deal between the EU and UK is worth UK£660 billion. According to a twitter thread from @chrisgiles_ Economics Editor at the FT the UK fisheries industry is worth about UK£437m or about the same as the value added by Harrods. I don’t profess to understand the numbers, but Fishing is a drop in the ocean if you pardon the pun!
Fishing clearly has a political value that far outweighs the financial value for both sides.
To equate this to our demurrage negotiations I see this as a point of principle! Have you ever held up a negotiation because of a point in a claim that was not huge in value but to concede it could cost you more in the long run? You need to be aware of these small points and if it is not going to cost you a lot it may be worth conceding as you could gain more value from your opponent in other parts of the negotiation.
I may return to this subject in future as negotiation skills are a fundamental part of our business and there are many aspects to the Brexit deal that we could relate to.
Do you have any views on what I’ve said, or you have got other aspects of negotiating you want to share? Remember please keep party politics out of it and don’t antagonise the Brexiters or the Remainers!