EU chief says UK trade pact closer but success not certain

Britain and the EU are in the final stretch of talks to keep an estimated one trillion dollars of annual trade free of tariffs and quotas beyond 31 December, when the United Kingdom finally transitions out of the world’s largest trading bloc.

With just over two weeks left, Prime Minister Boris Johnson said he hoped the EU would “see sense” and agree a deal that respected Britain’s sovereignty, while German Chancellor Angela Merkel said the bloc favoured agreement.

European Commission President Ursula von der Leyen told the European Parliament: “I cannot tell you whether there will be a deal or not. But I can tell you that there is a path to an agreement now. The path may be very narrow but it is there.”

Her relatively upbeat comments on the long-running Brexit crisis helped nudge sterling upwards on currency markets. However, von der Leyen also said two issues were still unsolved.

“We have found a way forward on most issues but two issues still remain outstanding: the level playing field and fisheries,” she said. “Issues linked to governance now have largely been resolved. The next days are going to be decisive.”

The level playing field refers to EU insistence that Britain does not undercut it on environmental, labour and social standards, as well as state aid, while governance covers the resolution of disputes.

Von der Leyen said discussions about access to UK fishing waters for EU vessels were still very difficult.

Britain formally left the EU on 31 January but has been in a transition period since then under which rules on trade, travel and business remain unchanged. It finally exits the bloc’s single market and customs union on 31 December.

Failure to agree a deal would erect trade barriers between the EU and Britain, snarl borders, send shockwaves through financial markets and cause chaos in supply chains across Europe as it also struggles with COVID-19.

Johnson, who won an election last year on the promise to “get Brexit done” and for Britain to “take back control”, said he hoped the EU would “see sense and do a deal”.

“All that that takes is for them to understand that the UK has a natural right, like every other country, to want to be able to control its own laws and its own fishing grounds,” he told parliament.

British officials have been more downbeat than their counterparts in the EU, with one saying after von der Leyen’s remarks: “We’ve made some progress, but we are still very far apart in key areas. Still not there.”

Merkel said the EU would prefer a deal but is prepared either way, adding there was no breakthrough yet.

French President Emmanuel Macron, who is at odds with Britain over fish quotas, said he wanted the best relationship with London.

But the two sides have yet to narrow gaps on two of the thorniest issues: fishing rights in British waters and the level playing field.

An EU official told Reuters the bloc had rejected Britain’s offer of phased access to its waters over three years by EU fishing vessels and the sides were “an ocean apart” on the issue.

Von der Leyen hailed a “big step forward” in agreeing a so-called non-regression caluse, which would “ensure that our common high labour, social and environmental standards will not be undercut”.

“Difficulties still remain on the question of how to really future-proof fair competition,” she said.

Sources on both sides of the negotiations said disagreements stuck on “balanced equivalence”, which London saw as tying the Britain to the EU’s regulatory orbit, and a dispute resolution mechanism to determine that competition was distorted, as well as how to remedy that.

Britain saw the EU’s pitch for “effective remedial measures” as giving the bloc too much leeway to retaliate on trade.

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