Why “No Deal” Is Key

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What? another Brexit post? Yeah… well, what can I say.  I really wanted to write about this for a while.

In the current Brexit debate MPs in Westminster have a plethora of arguments to forward their political agenda.  Some are reasonable, some are wishful, some are quite ridiculous, while others are outright impossible.  But from all of them emerges the ultimate self-harming argument of all – that put forward by the opposition leader and some cross-party MPs: Taking “no deal” off the table.

Why is this the ultimate self-harming outcome from a Brexit negotiation?  Let’s imagine you are going to buy a house. The house has mould in the basement, burst  pipes, leaky roof, and needs rewiring.  But you promised your loved ones that you would buy it for them, so here you are negotiating with the seller.  Your opening bid has to be very low, because the place is falling apart, right? And then, when the seller asks you for more money, you start telling him to fix certain parts of the house in exchange.  If he refuses, you say: “OK. Thanks, but no thanks… I won’t be buying the house” At which point, either you get a better deal from the seller, or you genuinly avoid paying more than the house is worth.

You don’t have to be Pablo Restrepo (my MBA negotiations teacher at McGill) to know that that is how any normal person should approach a house purchase negotiation.

What would happen if you sat down with the seller and told him: “Regardless of the outcome of the negotiations, I am buying this house”? Even if that were true, and you knew that, and you promised your loved one you would do it… YOU DON’T TELL IT TO THE SELLER!!!!!!  If you did, there is a large chance that the negotiations will go somewhat like this:

You: I’ll pay you $100K

Seller: No, $500K

You: $200K, but fix the roof

Seller: No, $500K

You: $300K, but fix the damp, and the roof

Seller: No, $500K

You: $400K, but fix the electricity, damp, and roof

Seller: No, $500K

You: OK, $500K, but fix the pipes, electricity, damp, and roof

Seller: No, $600K

At which point, any normal person would walk away… but you already said you were buying it regardless.

Well, the UK government started the negotiations by offering $50 billion in exchange for… ermm, actually, not very much.  In fact they offered $50 billion in echange for nothing at all.  Fortunately, there is this phrase that Michel Barnier tends to repeat quite often, and like so much I wrote an article about it : Nothing is agreed until everything is agreed”,  which means that should negotiations go south, the UK can walk away from them, and save itself a hefty sum.  It is this ability to walk away from failing negotiations that will ultimately protect the UK from a bad deal.  Think of it as an eject button on a fighter jet that is downward-spiralling.

Now, it turns out many MPs from all parties, and most notably the leader of the opposition are demanding that the UKs ability to walk away from failing negotiations be removed as an option, and to put it in law, which would make the EU fully aware of this decision.

Feel free to write in the comments what possible outcomes you see happening if this proposal were to materialize.

Ta-ta for now.

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