Britain and the European Union traded threats on Friday over a Brexit free trade deal, warning that unless the other side gave ground there would be no deal – a scenario that would convulse global trade as the world aims to exit the coronavirus lockdown.
The United Kingdom left the European Union on Jan. 31 but the main terms of its membership remain in place for a transition period until the end of this year, giving it time to negotiate a free trade deal with the bloc.
Thus far, talks have not gone well.
“We made very little progress towards agreement on the most significant outstanding issues between us,” UK chief negotiator David Frost said after a week of talks.
The main sticking point has been so-called ‘level playing field’ rules to harmonise regulation, which the EU says are needed to ensure Britain does not undercut its standards, but which Britain rejects as binding it to European laws.
Frost said the major obstacle to a deal was the EU’s insistence on including a set of “novel and unbalanced” proposals on the level playing field.
The EU’s chief negotiator Michel Barnier said Britain had refused to engage in full conversation about the issue, and that there had been little progress.
“As soon as the EU recognises that we will not conclude an agreement on that basis, we will be able to make progress,” Frost said. “We very much need a change in EU approach for the next round beginning on 1 June.”
EU sources said there had been little progress on the negotiations that will shape post-Brexit trade between the EU and Britain in almost everything from fishing and farming to pharmaceutical rules and tariffs.
“Both sides agreed to disagree,” said one diplomat following Brexit in the EU hub Brussels as the penultimate round of scheduled negotiations wrapped up on Friday before a deadline at the end of June.
Both sides are then due to assess progress so far and agree on whether to extend the talks, which London has refused to do.
BREXIT NO DEAL?
After years of Brexit political chaos in London, investors and companies are trying to work out if London and Brussels are simply ratchetting up the rhetoric or are so far apart that there could be a cliff-edge at the end of 2020. Time is ticking and the EU has a strict timetable.
With no extension, the EU says any talks would need to wrap up around October to allow enough time for ratification of any new deal by the bloc’s parliament and the 27 national capitals.
EU sources said fundamental disagreements persisted on the level playing field guarantees of fair competition, fisheries and oversight role of the EU’s top court, among other issues.
Goldman Sachs said it still expected a minimalistic trade deal to be sealed this year, which would give Johnson the opportunity to publicly declare his mission of leaving the EU’s orbit accomplished.
However, the investment bank also said unresolved issues could be pushed into a new “implementation phase” of any new trade deal, meaning some EU rules would continue applying to Britain beyond the end of this year. Negotiations on many aspects of a broader new relationship would de facto continue.