October Is Moment of Truth for U.K. Deal, EU’s Barnier Says

(Bloomberg) -- The “moment of truth” for a trade deal between the U.K. and European Union will come in October when the bloc’s 27 leaders hold a summit and want to see a draft agreement, chief negotiator Michel Barnier said.

That will allow time for countries to ratify any deal before the U.K.’s transition period expires at the end of the year, Barnier said at a European Policy Centre video conference in Brussels on Wednesday.

While there has been little progress in negotiations, he said an accord is still in reach. The U.K. must live up “in spirit and letter” to the commitments it made in the non-binding political declaration in last year’s Brexit deal if there is to be a breakthrough, he said.

“We now need clear signals” Britain will do that, Barnier said ahead of another round of talks that starts on Monday. “If we get signals next week and make progress in July, all the better -- but it will mean progress on all topics.”

Both sides are not just aiming to strike a zero-quota, zero-tariff free trade agreement by the time the Brexit transition period ends on Dec. 31, but also to reach a whole suite of agreements covering their future relationship in areas such as fishing and security co-operation.

If the two sides fail to agree, Britain will default to trading on terms set by the World Trade Organization, burdening businesses with tariffs and quotas.

July Deal?

Prime Minister Boris Johnson has said he sees no reason why a deal can’t be struck in July and doesn’t want talks dragging on after the summer. London has so far rebuffed the EU’s demands for the same fishing rights it enjoys today and for a level playing field for business that would keep Britain aligned to some of the bloc’s rules.

Barnier said the ball is “in the U.K.’s court,” but both sides will need to compromise. While the key areas of a deal would need to be agreed by the end of 2020, Barnier said the two sides would continue talking in following years in an attempt to secure a wider-ranging cooperation arrangement in issues such as foreign policy.

Barnier didn’t reject out of hand a suggestion circulating in London that the U.K. might accept a deal that allowed it to walk away from some of the level playing field conditions in return for accepting tariffs and quotas in the areas where it chose to do so. But he hinted this might not be a silver bullet.

Any agreement would still need a “robust mechanism to prevent distortion of trade,” Barnier said. “The EU will still demand strong level playing field guarantees” even if tariffs and quotas are introduced. “We refuse to compromise on our values to benefit the British economy,” he said. “The level playing field is not for sale.”

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