Playing chicken with a 27 headed opponent

The game of chicken involves driving head on towards your opponent, as they do the same, and the loser is the one who swerves out of the way first. If neither swerves, then both lose in a much bigger sense. I was reminded of this as Michael Howard was trotting out the usual arguments for Brexit on the Today programme this morning

Howard argued that a trade deal with the EU would still happen, bringing us continued access to the Single Market, because it is in their interests. He even suggested that following a vote to leave, the rump EU should have another chance to make us a better offer that could be put to a second referendum – rather than, you know, respecting the stated will of the people to leave.

The way this argument normally progresses is that the outers say that we have a trade deficit with the EU, so they will want to maintain trade more than we do, then the inners say that our trade is 50% with them and theirs only 10% with us, so we will want it more than they do, then the outers say that Germany will still want to sell us their BMWs…

This is all dangerously close to missing the point. Trade benefits both sides; the single market benefits both sides. And when an agreement benefits both sides there is always the temptation to demand more favourable terms because the deal will still be in the interests of the other side and so they ought to agree. This leads to a game of chicken (or brinkmanship) with all the risks that implies. The Greek crisis has seen this, with a reasonable reform and bailout package being resisted on both sides in the hope that this will bring something with either more reform or more bailout. Greece has even resisted reforms that are in her interests in order to have leverage, and the election of Syriza – self-destructive as that appears – can be reasonably understood as a final, unsuccessful attempt at brinkmanship. Greece needed the agreement more than Germany did but still didn’t swerve.

Successful agreements are more likely when both parties are willing to follow the same rules and split the benefits reasonably. Any attempt to demand the lion’s share of the benefits will and should be resisted by others because if a country gains a reputation for caving in negotiations, this will cost it more than any single lost agreement. The significance of Cameron’s #EURef deal is that despite this, it bends the rules in our favour. And we still have the rebate on top. No wonder the fear among EU heads of government is of ‘contagion’ – of member after member demanding similar special treatment.

Howard’s case is that we can forego our access to the single market by right, and gain access on better terms by negotiating all over again, with the other 27 heads of government, only one of which wants to sell us BMWs. Maybe they will all swerve before we do; but maybe Malta or Latvia or Belgium won’t. Maybe Greece will hold out as leverage against Germany. And all 27 will know that it is in our interests to have access to the single market even on less favourable terms than we have it at the moment, so, y’know, let’s not swerve just yet.

Do we really want to go there? It is not enough to recognise that our participation the single market is very much in the interests of the whole of the EU, you need to understand the game theory of the process you are going to invoke.

* Joe Otten was the candidate for Sheffield Heeley in June 2017, is a councillor in Sheffield and is Tuesday editor of Liberal Democrat Voice.

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16 Comments

  • Antony Hook Antony Hook 26th Feb '16 - 2:46pm

    Good article Joe and an excellent metaphor.

    The point you make needs to be widely understood.

    Any of the 27 could veto a UK-EU trade deal and as elections in other members states approach one or more will have an incentive to do so or to seek restrictions on UK exports here or there.

  • So lets get this right, the Germans are not that bothered if they have disruption to their car sales in their largest export market in Europe, the Eastern Europe countries have loads of jobs for their returning expats to go to and the EU with twice the level of unemployment as the UK is going to play hardball with a country that has a £ 62 billion deficit with the EU.

  • ” It is not enough to recognise that our participation the single market is very much in the interests of the whole of the EU”
    It is certainly in the interests of the other 27 countries, not sure the non binding vote to ban weapons trade with Saudia Arabia this week is in the interests of those who work for BAe, or that the closing of the Ford Transit plant in Southampton and its transfer to Turkey outside the EU using British money was in the interests of British workers at Ford.

    There is only one country that counts in in the EU economically and that is Germany. What Germany wants Germany gets. Surely the Eurozone crisis has made that crystal clear.

    The principal concern of the public on our relationship with the EU is immigration, you can ignore that fact if you want, but none the less that is the reality. All the tit for tat rhetoric about trade is just that rhetoric. Let us never forget the discussion amongst europhiles about the Euro was that we would be ‘DOOMED’ if we didn’t join. Not he first time British europhile judgement has been blinded by obedience to EU dogma.

  • Richard Underhill 26th Feb '16 - 4:11pm

    BMW already has 2 car factories in the UK. One is in Oxford at Cowley, labelled MINI, making increasingly large family cars.
    Rolls Royce, which makes aero engines, sold the brand name of Rolls Royce Motors to BMW, for £50 million. BMW built an entirely new factory near an airport for the convenience of their wealthy customers,
    The Volkswagen Audi Group had bought the factory in Derby, but were frustrated not to get the RRM brand name. They did get Bentley.
    The Mercedes Formula 1 team are based in the UK.

  • Barry Snelson 26th Feb '16 - 4:22pm

    I don’t think the fear card has much value in persuading the public to remain. The UK is a much more important customer for vehicles, food and drink and all sorts of other goods than Norway or Switzerland. Our chicken could really punch its weight and I can’t see BMW, VW, Audi et al allowing Malta to shut them off from a very established market, if that’s what you were suggesting.
    I have been a devout European but I am wavering as the remain camp doesn’t address my big worries. The treatment of Greece, the dreadful TTIP secret negotiations, the lack of clarity as to where Europe sees its eastern boundary, border control and regulation of citizenship, the twin locations of Brussels and Strasbourg, the unaudited accounts, the democratic deficit – one of our sons lives in Bath, his MEP also represents Gibraltar . I want to vote remain but I want the Europe camp to talk to the problems and not just rely on a ‘trade will collapse’ frightener.

  • Spot on Raddiy,not just the Eurozone crisis but also the migrant crisis last summer, Germany is running the EU it’s amazing that people don’t realize it.

    In the event of Brexit there will no doubt be a mad scramble among the other 27 countries to take over the UK’s £ 10 billion contribution.

  • Eddie Sammon 26th Feb '16 - 6:01pm

    I thought similar, without realising it was part of game theory, about Cameron’s renegotiation last week. Several states were threatening to veto it and I had to say at one point: do you realise Britain will probably leave the EU if Cameron comes home without a deal?

    Britain and the EU benefit each other, but I didn’t want to say too much until the campaign started. The message needs to be spread both within Britain and outside it. Convenient nationalist myths develop that lead to all sides wanting to pull apart and develop hardline positions.

  • David Allen 26th Feb '16 - 6:29pm

    I’ll have a go at the game theory – I’m not an Outer, but I might have a slightly diferent view of the “game”. First, it’s always “hardball”, a tough struggle between trading partners who seek to maximise their individual advantage when they negotiate the terms under which they will trade. The ability to play “chicken”, and threaten dire consequences if a favourable deal is not done, can give some advantage to the “chicken” player. Cameron has just played chicken, with the threat to call for an Out vote if he did not get the rules rewritten in Britain’s favour. He didn’t play it all that hard, but he did win some small shifts in the terms to the UK’s advantage, thanks to being able to play the chicken card.

    If we leave, the game changes utterly. A Britain outside the EU has no high cards to play at all when it negotiates with the European ex-partners it has just kicked in the teeth. It is Europe which can then play chicken with much greater credibility, as its trade with Britain is only a small share of its total trade, and it will not be possible to dismiss its threat to walk away from the UK market as a pure bluff. It follows that, whilst our trade with Europe is unlikely to “collapse”, the terms are likely to shift markedly against us.

    That’s what rational game theory tells us – That we have a much stronger negotiating hand now than we could ever hope to have if we left.

    Somehow, the Brexiters have convinced themselves that the opposite is true. They somehow believe, at one and the same time, that Cameron has negotiated from weakness and gained nothing of substance – and also, that a Britain out of Europe would magically turn into a far stronger negotiator. Heroic little Britain on its own, the tail of Europe now detached from its body, would proceed to wag the dog something terrible until Mrs Merkel begged for mercy.

    It’s a fantasy. It is believable only if you hold a mystical belief in the British bulldog spirit which can triumph over inferior nations. Of course, a nation with such a delusion needs a leader with similar delusions of grandeur and of his own manifest destiny. A leader like Galloway, Farage, Gove, Lord Owen – or of course, Boris.

  • Stephen Way 26th Feb '16 - 7:12pm

    This type of argument is entirely the reason the Scottish referendum was far too close.

    Those who believe in “in” and that very much includes me, need to sell the benefits rather than exaggerate the risks. If there is a brexit there will a trade deal, our EU trade deficit makes that in the remainder’s interests. There will be sabre rattling, especially I predict from the French, but the Germans will hold sway as they did with Greece. It is the trade deals with non-eu states where I feel we will suffer as we will lose the collective value of the whole EU.

    If we keep telling people the other EU states will try to harm us it will do nothing to make people disposed towards them and by extension our continued membership…

  • David Allen 26th Feb '16 - 7:48pm

    Stephen Way, I think you are half right. Certainly we must not exaggerate the risks – and I don’t think that in my post above, I have committed that sin. But nor should we let the Brexiters get away with claiming that there are no risks, or indeed making the nonsensical claim that Britain is likely to thrive and romp away commercially once it is free from the “dead hand of Brussels”. As you point out, we may suffer most in our dealings outside rather than inside the EU if we Brexit.

    Far too many people would like to follow emotion and get back to 1940, when we stood alone and triumphed. If we don’t point out that this is fantasy, far too many people will try to live the fantasy.

    And yes, the Scots didn’t like the feeling that they were being told by the English that if they left the UK, the English would take revenge. Yes, there is a parallel pitfall with the EU referendum now. I would suggest that, since the risk message must not be buried, what needs to be done is to convey it with care. One way to do that, without angering the listeners, is to make your point that it is trade outside the EU that will suffer if we try to go it alone.

    A parallel option will be to say something like “We can’t know how the rest of Europe will react if we Brexit. But, remember that they have already spent a lot of time and energy agreeing to make concessions to David Cameron. If we then turn down those concessions and walk away, causing chaos in all sorts of ways – Well, how would you feel if that kind of thing happened to you? You would feel like the British had just kicked you in the teeth, wouldn’t you? Well then, how nice do you suppose the Europeans are likely to feel like being, in the years after Brexit when we slowly try to re-negotiate all our complex trading relationships with them?”

  • Barry Snelson 26th Feb '16 - 8:05pm

    Stephen,
    Well said. The Scots reacted angrily to the ‘threats’ of disaster if they voted yes – because they are humans. If the remain camp keep pushing ‘you’re all doomed if you vote go’ then that will have the same effect. There are some serious questions to answer on Europe. If they are impossible to answer – that’s an answer in itself.

  • Stephen Way 27th Feb '16 - 9:21am

    @Joe
    My point is that we are in danger of hardening waverers into an out position by constantly pushing the idea that Brexit would make the remainder of the EU “against” us. Some would probably welcome the opportunity to proceed with closer integration whilst still trading with us. The same happened in the Scottish referendum where those wanting to keep the Union kept pushing the horrors of an Independent Scotland. It played hugely into the SNP’s hands.

    My view is that we could survive and even thrive outside of the EU but I believe the benefits of staying, and having a strong decision making voice at the top table, outweigh any benefits of leaving. If the debate is allowed to continue focusing on the negatives the outers will increase in support as they have the evocative and easy to spin cards to play and a substantial part of the media in their camp.

    As for the game of chicken there are advantages to our position you have not listed. The numbers of Eastern European workers (who I have no issue with) who could be forced out if one of that block decides to veto a trade deal, the additional taxes we could place on air travel to EU holiday destinations encouraging travel to Turkey, Egypt Florida etc. The ability to encourage more car production within the UK to avoid import duties, the fact that without a trade agreement those companies based in the EU but relying on a significant portion of trade carried out in the UK could face different tax rules on that portion of their trade, the list is huge on both sides these are just those that came into my head over a bowl of weetabix, and therefore the risks to both sides of a trade war is huge. Trading with us is easy compared to the other major parties. Russia is volatile, China and the US have accompanying transport issues. The benefits of achieving an expedient solution would outweigh the benefits of dragging them into a game of chicken for both parties.

  • Surely one of the problems with using the Chicken example is that, on at least 2 occasions, the EU has swerved first when voters said no at a referendum?

    Stephen Way is right, trying to frighten people will not endear the EU to them. Even if they vote Remain because of the scare tactics, there will probably be a feeling of resentment because of the threats.

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