Brexit: Theresa May’s decision to keep schtum is a lesson in negotiation all lawyers could learn from

Keeping quiet is a strategy in itself

lead1

Brexit means Brexit, apparently, but it’s still extremely difficult to discern what a ‘good’ Brexit looks like.

The factors leading up to the EU referendum and those that contributed to its result are diverse. However, it takes little more than a cursory glance at the Leave campaign and to listen to various interviews with people who voted to leave to identify a key issue as immigration. There are supposedly too many people coming to the United Kingdom to work, so it follows that reducing immigration is a necessary component of a ‘successful’ Brexit.

One of the more concerning potential effects of Brexit is that British businesses will struggle: exports will fall and the United Kingdom will be unable to strike trade deals with countries outside the EU. So, a successful Brexit must see the UK export its goods to third countries. The UK may be good at a great many things but the quality of the goods it exports aren’t at the top of the list, so the country will need to remain attractive in other ways.

We have identified two key features, then, for a successful Brexit. The government must make the country unattractive to people who wish to go there to work but make their goods attractive to export. Is there any way these two birds could both be slain with a carefully thrown stone?

Theresa May and the Brexit department have received an abundance of criticism for the uncertain way that Brexit has been discussed, ‘Brexit means Brexit’, and ‘Red, white and blue Brexit’ to name but two of the emphatic sounding — but factually vacuous — statements made so far. The lack of certainty about a potential Brexit deal has seen the pound plummet to a 31-year low against the dollar. While May’s recent speech strongly hinted we would leave the Single Market, the government seems to continue to generate uncertainty. Is this because they don’t have a clue themselves?

Possibly. But maybe there’s another reason.

A weaker currency does not necessarily spell doom and gloom. It’s true things may start to seem more expensive at home, but in real terms it’s likely that they won’t have budged that much. The real benefit comes on the international place. The significantly weaker pound means that British goods are significantly cheaper to export, making them significantly more attractive to international buyers (everyone loves a sale, right?)


WANT TO WRITE FOR THE LEGAL CHEEK JOURNAL?

Submit your idea


So as the divorced, single and ready to mingle UK emerges onto the international plane, it has already removed a substantial barrier to any trade deals: price. Selling to nations with a stronger currency will improve demand for British goods and reinvigorate its market right when it needs it the most, and the weaker the currency becomes the more stronger currencies there are to play with. Of course, it can go too far the other way, but barring a major catastrophe the UK will still be some way off using stacks of money for children’s toys.

Well that’s one potential downfall of Brexit out of the way. British goods are now more attractive to other buyers. The next point to consider is how to appease the large number of people that saw immigration as a key reason for leaving the EU. One way would of course be to introduce strict border controls and this may very well work. But even with strict laws in place you will have a large number of people who want to immigrate here.

What if there was a way to make people not want to come to the UK, instead of simply telling people they can’t come in? I’m talking about economic immigrants, not asylum seekers, here as it’s axiomatic that asylum seekers do not come seeking their fortunes but come seeking safety.

The UK is a popular destination for economic migrants because of the strength of the pound. People can come, work and get paid in sterling and send money home where it will be worth more than doing the same job in that country.

But what if the pound was no longer such a strong currency? What if it was only marginally stronger or even weaker? A crucial benefit of coming to the UK to work would be lost. It would follow that by allowing the pound to fall to dramatically low levels against currencies such as the Euro, the attraction of coming to the UK to work has been lessened. Of course, once the UK has left the EU it will be able to control its borders but if the demand has decreased then the measures will surely need to be less draconian.

These are both perfectly realistic propositions and the falling pound has put the UK in just the position it needs to be in before commencing negotiations into trade agreements with the rest of the world. So, it wouldn’t be going too far to suggest that the government has been running this scheme all along. Not to mention that the Prime Minister has already shown she is a master of the waiting game, it’s what won her the job in the first place.

In doing this, the Prime Minister is giving us an excellent demonstration on how to negotiate — a valuable skill in the legal profession.

Exiting the EU is going to be one long negotiation, with various parties and a host of demands and concessions. In any negotiation, the top line, best possible result must be clear. In this context, this is — to quote May — to get “the best possible deal for UK companies to trade into the EU”. So, that’s what we’re aiming for.

But of course, the EU wants what’s best for itself, so it may not all be plain sailing. Another crucial part of negotiating is to know your best possible alternative to a beneficial outcome. In this case, the best possible alternative to negotiating a beneficial trade deal for the UK is to export somewhere else. A relatively strong currency makes this a tall order. The Brexit negotiations are currently at the ‘preparation’ phase. What the government has done in its reticence is drive our currency down and therefore increase the likelihood of us being able to trade with third countries. Suddenly, our bargaining position with the EU looks much stronger as our best alternative to exporting to it is now much more realistic.

Say what you will about this strategy, it may be frustrating, it may be confusing and it may not yield immediate results but it is certainly not stupid.

Perhaps Brexit really does mean Brexit. Or perhaps there’s a little more to it than that. Only time will tell. Until then we can rest assured that things might not be as out of control as they seem.

Luke Baxter is a chemistry graduate from the University of East Anglia who is currently studying the GDL.

Want to write for the Legal Cheek Journal? Find out more here.

Please bear in mind that the authors of many Legal Cheek Journal pieces are at the beginning of their career. We'd be grateful if you could keep your comments constructive.

22 Comments

JJ

‘The UK may be good at a great many things but the quality of the goods it exports aren’t at the top of the list’

Really?

‘It would follow that by allowing the pound to fall to dramatically low levels against currencies such as the Euro, the attraction of coming to the UK to work has been lessened’

This sentence implies that the government can control the exchange rate. We have a floating exchange rate, which means that the pound is at the will of market forces. Central bank intervention can have a small, but limited effect.

‘In this case, the best possible alternative to negotiating a beneficial trade deal for the UK is to export somewhere else’.

This implies a zero sum approach to trade, e.g. ‘I have three melons – if I can’t export them to the EU I’ll need to find somewhere else’. Rather than, ‘I want to grow and sell as many melons as possible.’

You are right though about May’s strategy being sound, although her rough outline a couple of weeks ago was necessary to inform the markets.

(6)(1)
Reply Report comment
Luke

Hi JJ

Thanks for your comment.

You’re right to say that the governments direct control over the exchange rate is limited. That is precisely my point, that the exchange rate is dependant on the markets. What I was getting at was that through their actions (or lack of) the government are able to indirectly affect the markets (through the creation of uncertainty) and therefore indirectly affect the exchange rate.

A zero sum approach in this situation would be drastic. What I was suggesting is that the threat of a zero sum approach may be a useful bargaining chip. But to be useful it has to be believable and in making our imports more attractive (read: cheaper) that becomes a more realistic prospect.

(2)(2)
Reply Report comment
JJ

I see your point on the exchange rate.

Don’t entirely understand your point on the zero sum approach. Are you suggesting we wouldn’t trade at all with the EU? That’s one of the things suggested by remainers – that we wouldn’t be able to trade *at all* with the EU without a trade deal or membership of the single market, which is obviously false.

Anyway, some good thoughts in this article overall. Good luck with any TC apps.

(3)(1)
Reply Report comment
Anonymous

Clearly a chemist and not an economist. Cheap pound will lead to more expensive exports, inflation and a lowering in living standards. And for all that is spouted about a boom in exports – where are the workers that will grow the crops, build the cars that will lead to this promised export boom?

(3)(10)
Reply Report comment
JJ

Lol, you make him look like a Nobel Prize winning economist:

‘Cheap pound will lead to more expensive exports’…err, imports you cretin.

‘where are the workers that will grow the crops…’ humans don’t grow crops, it’s a process called photosynthesis which you will learn about in secondary school biology.

(8)(6)
Reply Report comment
Just Anonymous

“where are the workers that will grow the crops, build the cars that will lead to this promised export boom?”

Up until 1997, the UK’s net immigration figure never exceeded the tens of thousands, and yet the UK still functioned.

Whatever your thoughts on the merits of Brexit, this idea that a country can’t function economically at all without unlimited mass immigration is patent nonsense.

(7)(1)
Reply Report comment
JF

Haha i love this idea that Theresa May is shrewdly keeping her cards close to her chest.

Already she has boxed herself into a corner with her premature exclamations regarding the CJEU and the Trump state visit, neither announcements being necessary or helpful (to anybody apart from Trump of the EU27). And she came pretty close to creating right old pickle, entirely of her own making, by giving the Supreme Court the option to adjudicate on the rights of devolved nations because of her pointless appeal.

She isn’t Gove or Johnson (thank God!), or Corbyn, but don’t let that kid you into thinking she’s competent or shrewd by the standard of any reasonable political leader (Wilsher v Essex….?) 😉

(1)(6)
Reply Report comment
Anonymous

I think everyone is aware of the fact that Theresa May keeping quiet is good for negotiations.

The only ones who don’t are those with vested interests which outweigh a smooth Brexit, i.e. The Media, for whom mass histeria is a commodity, and The Labour Party/Opposition, who are able to capitalise on bad media (however legitimate) and subsequently do well when the government appears to be doing badly by “keeping us in the dark”. Theresa May is putting the negotiations above her own popularity – the exact sort of un-vanity (real word…?) you need in a politician.

(6)(2)
Reply Report comment
almosthippy

Heh. I did geography and then the GDL before the LPC. (Yes, yes… cue all the tedious jokes about my degree being in colouring in. Yawn.)

The people I did the GDL with were, on the whole, intelligent people. Then I did the LPC and met a whole load of law grads. We spent the first 2 weeks learning how to write emails because none of them could construct a grammatically correct sentence or differentiate between writing to a friend and a client.

E.g. “Hi bob. Was awesome to see u the other day i hope your well” etc.

I wish that I was exaggerating.

(2)(2)
Reply Report comment
Anonymous

Many firms (including the MC firm I trained at) have a policy of taking at least 50% law students. Partners in commercial and IP groups often grumble about this policy as in their paraphrased words “it’s easier to teach an economist or chemist the law than a law graduate economics or chemistry”.

What I think you mean is: GDL = the sensible choice for non-law students who have been offered training contracts by firms who value their non-law expertise.

(1)(1)
Reply Report comment
A

It’s a very interesting point but i think it misses something. People who voted on the basis of immigration don’t necessarily know the facts about immigration. They may not actually be interested in the details of how many are likely/have arrived. They are perhaps more likely to be interested in the country ‘doing something’. I don’t think that this kind of subtle alteration appeals to the angry voter and I don’t think it would be a deliberate strategy for that reason.

(3)(0)
Reply Report comment

Leave a comment

Your email address will not be published.