Barnier’s Narrow Path: How a Brexit Deal Could Be Done This Week

(Bloomberg) -- Brexit negotiators got back to work in Brussels this week as they push to complete a trade accord before the U.K. leaves the European Union’s single market on Dec. 31.

Following a weekend of intense diplomatic activity, Michel Barnier, who leads the EU team, told ambassadors from the bloc that he can see a pathway to a deal -- if the two sides can resolve what he called their significant differences.

Here’s how the deal might get done.

What are the issues that are still to be resolved?

There are two main topics holding back a deal: the so-called level playing field and fishing rights. Of those two, the level playing field is the one that’s really fundamental.

At issue is how to ensure that businesses on both sides of the Channel face a similar regulatory burden when selling into the EU’s single market.

The EU is concerned that Britain could cut back on labor or environmental standards to become a low-cost competitor to European firms. The U.K. wants to make sure it has the freedom to set its own rules as a sovereign nation, even if they diverge from the EU, because that was the point of Brexit.

How do you square that circle?

Barnier’s boss, European Commission President Ursula von der Leyen, argued last week that the U.K. will be free to set its own rules, but it will also have to accept that it will see a corresponding restriction in its access to the EU market if it chooses -- as a sovereign nation -- to diverge from European standards.

The two sides have come together over the course of the negotiations. Initially, the U.K. didn’t want to commit even to the EU’s existing standards. Meanwhile, the bloc demanded the right to take unilateral and automatic action if the U.K. failed to follow not only current EU standards but any it toughens in the future.

The U.K. has now accepted it won’t reduce its current standards, and the bloc has suggested that retaliatory tariffs or quotas should come only after arbitration and dispute resolution, according to two officials.

In a sign that a solution may be on the horizon, the U.K. submitted a compromise proposal over the weekend and has hinted it is ready to accept this kind of arrangement as long as it retains the sovereign right to legislate as it sees fit. That still leaves negotiators to pin down what sort of retaliation would be allowed.

And if that’s done, the question of fish falls into place?

Not necessarily.

From the outset, officials involved in the negotiations have said that the deal could ultimately come down to a debate on how to carve up fishing rights in the final days.

The Europeans accept that the British will have a bigger share of the catch of the fish in their domestic waters, but beyond the question of exactly how big that share should be, there are crucial details to be ironed out.

Barnier told the ambassadors on Monday that he is still negotiating what the new quotas will be, and how often access will have to be renegotiated. The British have pushed to make it subject to annual talks. Barnier also warned that the U.K.’s plans to toughen ownership rules to restrict which vessels can carry the British flag are also problematic.

So what’s the timetable?

Barnier said that if fishing rights can be settled, then the deal could come this week. But he warned that there’s also a risk the talks could drag on right up to the Dec. 31 deadline, and could eventually end in failure.

France’s junior minister for EU affairs, Clement Beaune, said he doesn’t think the negotiations should go beyond this week because it would leave too little time for dealing with the consequences -- whether that’s ratification or a collapse.

People close to the British team had been talking about a deal as early as Tuesday to give the U.K. Parliament time to ratify the accord before it breaks up for the Christmas vacation. On Monday afternoon, however, an official said there had been no significant progress in recent days despite British efforts to invigorate the process.

What’s the latest mood?

“Obviously, no deal is a possible outcome,” Prime Minister Boris Johnson’s spokesman, Jamie Davies, told reporters on Monday. That marks a step back from Johnson’s warning on Thursday that a no-deal split was a “strong possibility.” But after a moment of optimism on Sunday, both sides are once again talking up the difficulties ahead.

“The U.K. has set out a very reasonable ask, in line with precedent, and that’s what the negotiating teams continue to work toward,” Chief Secretary to the Treasury Steve Barclay told Sky News on Tuesday. “It needs the EU to move, to respond to the precedent they have given to other countries.”

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