It's basically a trap, at least from the perspective of playing as Germany, I'll get to that in a minute.
Britain isn't flushing away political power at all by using the trade influence decision. When the Netherlands caves to either Britain or Germany they get ALL the political power that was sunk into the trade influence. Every single ounce of political power spent by Germany, Britain, AND the Netherlands itself goes to the country it caves to, unless it maintains trade neutrality in which case Netherlands gets all of that pooled PP.
What makes it a trap for Germany is that both Britain and the Netherlands will be pumping their political power into boosting British influence, and the focus weight for Netherlands to commit to a political path seems extremely low(because them joining the allies will bypass caving to the British, while still giving britain the pooled PP). Germany can't sustain competing against the combined PP spending of Britain and the Netherlands. I've ran a few games as Germany specifically for the purpose of seeing if I could get Netherlands to cave to Germany and become fascist, and I've never been able to do it.
It's one of those systems that sounds good in theory, but actually sucks in practice. If a winner in the influence war was automatically declared by say, January 1, 1940, then the system would work way better and it would actually be feasible for Germany to buy into it.
