Britain and the European Union have come closer to a new trade agreement, but it was still unclear whether they would succeed, EU Commission President Ursula von der Leyen said on Wednesday.
The UK and the EU are in the final stages of talks to keep an estimated one trillion dollars in annual trade free of tariffs and quotas after 31 December, when the UK finally leaves the world’s largest trading bloc.
With just over two weeks left, British Prime Minister Boris Johnson said he hoped the EU would “see the point” and agree on an agreement respecting Britain’s sovereignty, while German Chancellor Angela Merkel said the bloc favored the deal.
Von der Leyen told the European Parliament: “I can not tell you whether there will be an agreement or not. But I can say that there is a way to an agreement now. The road may be very narrow but it is there.”
Her relatively optimistic comments about the protracted Brexit crisis helped point sterling upwards in the foreign exchange markets.
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But Von der Leyen also said that two issues were still unresolved.
“We have found a way forward in most issues but two issues are still outstanding: a level playing field and fishing,” she said. “Issues related to governance have now largely been resolved. The coming days will be crucial.”
The level playing field refers to the EU’s insistence that the UK does not subordinate it to business rules, especially not with regard to state aid. “Control” refers to the resolution of disputes.
Analysts say Johnson’s desire to turn to the left of the economy – to get out of EU state aid rules to allow Westminster to distribute subsidies to UK companies – is at the heart of the two sides’ differences.
Von der Leyen said discussions on EU vessels’ access to British fishing waters were still very difficult.
The United Kingdom formally left the EU on 31 January but has since had a transitional period during which rules on trade, travel and business remain unchanged. It will finally leave the bloc’s internal market and customs union on 31 December.
Failure to agree on an agreement would create barriers to trade between the EU and the UK, tighten borders, send shockwaves through financial markets and wreak havoc on supply chains across Europe as it also struggles with Covid-19.
Johnson, who won elections last year and promised to “get Brexit done” and that Britain would “take back control”, said he hoped the EU would “make sense and make a deal”.
He later emphasized the point at a press conference when he said: “Where we come to the EU – yes, again, it’s very much for our friends. They know what the parameters are.”
His spokesman said no trade deal was still the most likely outcome.
Merkel said the EU would prefer an agreement but is prepared in some way, adding that there was no breakthrough yet.
French President Emmanuel Macron, who is at odds with Britain over fishing quotas, said he wanted the best possible relationship with Britain.
But the two sides have not yet narrowed the gaps in two of the toughest issues: fishing rights in British waters and a level playing field.
An EU official told Reuters that the bloc had rejected Britain’s offer of phased access to its waters for three years by fishing vessels from EU countries and that the sides were “a sea apart” in the matter.
Von der Leyen praised a “major step forward” in agreeing on a so-called non-regression clause, which would “ensure that our common high labor, social and environmental standards are not exceeded”.
Sources said there were differences of opinion over “balanced equivalence”, which London saw as linking Britain to the EU’s regulatory path, and a dispute settlement mechanism to determine whether competition was distorted and solutions in that case.
Britain saw the EU’s pitch for “effective remedial action” as giving the bloc too much room to retaliate against trade.
( Jowharwith REUTERS)