Despite another day of intensive talks, Brexit negotiators failed on Monday to resolve persistent disagreements that have dogged future-relationship discussions since they began in March.
In a joint statement issued on Monday evening, the European Commission president Ursula von der Leyen and the UK prime minister Boris Johnson, said the conditions for finalising an agreement were not there.
The leaders, who are expected to now hold face-to-face talks in the coming days to try to thrash out a compromise, highlighted the three outstanding obstacles to a deal: EU access to UK fishing waters, the level playing field to ensure fair competition and the governance of any deal.
Here the FT considers the main sticking points:
Mr Barnier told national ambassadors at Monday morning’s closed-door meeting that the two sides remained “objectively” far apart on the fishing issue.
The disagreements concern not just quotas and access rights to UK waters, but the fundamental question of the EU’s demand to link a deal on fish to the wider economic partnership.
The negotiations are broadly over how much of the €650m-worth of fish that EU boats catch annually in UK waters should be returned to UK fleets, both within the deep-sea 12-200 nautical mile zone and the shallower coastal 6-12nm zone for smaller boats.
A person familiar with the talks said the UK had offered three years of “status quo” access for the 12-200nm zone, but no access at all for 6-12nm — which is particularly politically sensitive for France and Belgium where small family-run boats are key to coastal communities on both sides. The zone is also home to lucrative species such as scallops and langoustine.
After the three years proposed by the UK, it wants to revert to annual negotiations — a position the EU rejects. Britain also rejects EU demands to link fishing access rights to the wider trading partnership, which the EU wants in order to be able to take retaliatory measures in non-fishing sectors if there is disagreement on fishing rights.
Although the UK proposal would allow three years of access rights to the 12-200nm zone, the proportion of stocks EU boats would be able to catch would be significantly reduced.
The EU calculates that the UK proposal amounts to it surrendering 80 per cent of the €630m-worth of fish caught each year in the 12-200nm zone, so almost all of the non-coastal stocks quotas, in exchange for three-years fishing access to those waters.
By contrast, the person added, Mr Barnier has offered to cede €87m in deep-sea stocks and €15m in coastal stocks, which even if expanded upon slightly — as some fishing member states expect — still places the two sides on what one EU diplomat conceded were “different planets”.
The discussions appear to have been further antagonised by a new UK move to ensure that after January 1 foreign-owned vessels registered in Britain would no longer qualify as British for the purposes of obtaining fishing quota.
The move has particularly concerned the Dutch and Spanish, with one EU diplomat saying in moving to curb international ownership UK prime minister Boris Johnson was “doing a Maduro” — a reference to the self-sufficient economic policies of the Venezuelan leader Nicolás Maduro.
UK officials said that Britain had long been clear that vessels should have genuine economic ties to the flagged country, adding that this was also a concern for EU countries such as France.
UK officials said they had wanted to discuss the issue with Brussels for months but that this had been hampered by the EU’s unwillingness until recently to negotiate on the basis of joint legal texts.
Level playing field
The EU insists that any agreement must commit both sides to detailed, enforceable restrictions on state aid to make sure the UK cannot use subsidies to hand its companies an unfair advantage — Mr Barnier has said this is vital given that the trade deal would grant tariff-free access to the EU’s single market.
The bloc is also insisting on safeguards to tackle competition distortions that could arise if EU and UK labour and environmental laws diverge over time.
Brussels wants the right for EU companies to challenge alleged level playing field violations in the UK courts. The two sides are split more generally over how any LPF guarantees would be enforced in the UK.
The EU also wants the right to take rapid unilateral measures to protect its market — for example by imposing tariffs on UK goods — if it thinks the UK is guilty of backsliding on regulatory commitments. Brussels argues that traditional arbitration processes are too slow to protect sensitive sectors.
But Britain counters that the demands stray beyond trade deals the EU has signed with other countries and are an affront to its sovereignty.
One idea the two sides are examining is the creation of an “evolution mechanism” that would foresee consultations if the two sides’ regulatory standards diverge, with either side able to curtail access to its market as a last resort.
But Britain has argued that the EU proposals are too prescriptive and would pressure the UK to copy and paste EU rules.
Governance and dispute settlement
Brussels wants to be able to take action quickly against the UK if it breaks commitments it has made under the trade deal. The issue that has become even more relevant since Mr Johnson decided in September to violate last year’s divorce treaty with the EU with new laws that override the withdrawal agreement in relation to Northern Ireland.
One crucial disagreement is over Britain’s resistance to cross-retaliation powers that would, in the event of a dispute, allow either side to take action against one economic sector to punish rule-breaking concerning another.
An example often cited by EU officials is that tariffs could be imposed on UK manufacturing should Britain renege on any fisheries agreement.
Mr Barnier told MEPs and ambassadors on Monday that the UK was still resisting this kind of “cross suspension” weapon.