Will the ‘madwoman’ gambit work for Britain’s PM May?

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Call it the madwoman theory of trade negotiations. If you deny me, I will press the button and we will both extinguish ourselves in "an act of calamitous self-harm." That, in short, is the strategy outlined by Theresa May on Tuesday in her speech on the coming Brexit talks with the European Union.

Britain is leaving the EU and the single market, that much is clear, but the Prime Minister says she will demand tariff-free access to the EU, even while remaining free to do trade deals elsewhere with all and sundry. If Brussels demurs, if the European Commission says that trade is not quantum mechanics (you can't be both in and out of a club at the same time), then Britain will "be free to change the basis of its economic model."

Britannia would once again rule the waves, suggested Ms. May. "We would be free to strike trade deals across the world. And we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world's best companies and biggest investors to Britain."

In other words, the British government would tear up business regulation, remove corporate taxes and transform itself into an offshore, pirate economy, grabbing investment from anyone and everyone while thumbing its nose at the EU and U.S. tax authorities and anyone else with the temerity to object. It would be Singapore, Panama and the Cayman Islands rolled into one, 30 kilometres off the French coast.

The Brexit talks are not quite the Cold War but Ms. May's cliff-edge strategy reminds me of U.S. president Richard Nixon's revealing words to his chief of staff, Bob Haldemann, on the eve of peace talks with North Vietnam: "I call it the Madman Theory, Bob. I want the North Vietnamese to believe I might do anything …We'll just slip the word to them that …Nixon is obsessed about communism. We can't restrain him when he's angry – and he has his hand on the nuclear button."

Her threat spoiled her earlier soothing words about Britain's historic ties to Europe and repeated reassurance that Britain wanted the EU to succeed in its political project, albeit without the U.K. It didn't go down very well with the target audience – European heads of government and the Eurocrats in Brussels charged with resetting relations with the U.K. Guy Verhofstadt, speaking for the European Parliament, suggested the British government was delusional for expecting that it could leave the single market and the customs union while cherry-picking the bits it liked and avoiding any obligations. The idea that Britain might become a tax haven was "not very helpful," he said.

But Ms. May's big gun, the transformation of Britain into a damp and chilly version of Singapore, has huge appeal to a small Brexit-voting constituency. Hedge fund managers in the City of London, such as Crispin Odey, a wealthy Brexit backer, would find the low-tax, deregulated world highly attractive to their own business models. The question is whether it would be politically viable in less glitzy parts of Britain and whether those post-Brexit trade deals would really come thick and fast.

Donald Trump has promised a quick trade deal with post-Brexit Britain. Yet, anyone with any knowledge of how trade works would blanch at the prospect of a quick and dirty agreement with the president-elect. The former real estate developer knows a desperate seller when he sees one. Indeed, Mr. Trump has just threatened BMW with 35-per-cent tariffs. German car makers can deliver a punch in return, backed by the 500 million-strong EU market but what can diminutive Britain, alone on the high seas, do to protect Jaguar Land Rover?

Ms. May can paint glorious pictures of Britain reclaiming its imperial heritage but history doesn't help. Britannia doesn't rule the waves and nor does anyone else. The oceans, the airspace and every corner of the globe is demarcated, regulated and jealously protected by national and supranational authorities. If Britain wants to rebuild a trading empire, it should ask itself why it has voted to leave one.

Britain is not Singapore; it is a postindustrial welfare state and it cannot afford to run an economy with expensive public services while forgoing tax revenues from business. Londoners would be fine, the capital would thrive, enjoying a new influx of plutocrats and their flight capital. But in the North of England and in Wales and the rural areas, where people voted overwhelmingly to leave the EU, the new economic model would be punishing.

That almost sounds like rough justice but kicking the voters is not Ms. May's plan. She has already set out her cherished vision of a fairer, more compassionate Britain that is less unequal and looks after those left behind by the so-called elites of the globalizing world.

Neither the Prime Minister's Brexit vision, nor her threat makes political sense. Her supporters thought they were voting for a less cosmopolitan Britain, one of neighbourhoods, hedgerows and village halls, not skyscrapers and a cacophony of foreign languages. To take her strategy to its logical conclusion would, indeed, be a catastrophic act of political self-harm.

Carl Mortished is a Canadian financial journalist based in London.