EU Says Fishing Rights Are the Last Major Hurdle: Brexit Update

(Bloomberg) -- European Commission President Ursula von der Leyen said fishing rights are now the last major hurdle to a post-Brexit trade deal, as Prime Minister Boris Johnson warned the U.K. has a “natural right” to control its own waters.

With negotiations continuing in Brussels, von der Leyen told the European Parliament that a deal is possible, but difficult. “As things stand, I can’t tell you if there will be a deal or not,” she said. Johnson’s press secretary, Allegra Stratton, told reporters no deal remains the most likely outcome.

Optimism had been growing after the two sides agreed to continue discussions past their self-imposed Sunday deadline and the EU’s chief negotiator Michel Barnier said he saw a “narrow path” to a deal this week if differences can be bridged.

Read More: A Brexit Vote on Christmas Day? The Dash to Ratify Any Agreement

Key Developments:

• The pound climbed to its highest against the dollar in more than two years
• Angela Merkel says progress has been made, but no breakthrough
• BMW warns that no deal would cost it hundreds of millions of euros

(All times are U.K.)

Parliament Could Be Recalled to Ratify Any Deal (6 p.m.)

Parliament will begin its Christmas vacation on Thursday, with the government warning that it will recall both the House of Commons and Lords if needed to ratify any Brexit deal.

“That recall could be as early as next week,” Prime Minister Boris Johnson’s office said in a statement. “Parliament has long shown it can move at pace and the country would expect nothing less.”

If lawmakers are recalled, they will focus exclusively on ratifying any Brexit deal and meet earlier in the day if necessary, according to the statement.

France: U.K. Naval Threat Is ‘Fiction’ (5:55 p.m.)

France’s Junior minister for EU affairs, Clement Beaune, described Britain’s plans to deploy naval gunboats to protect its fishing waters as “unfortunate theater.”

Asked by L’Express magazine what France would do if Royal Navy vessels opposed French fishermen venturing into British waters, he said didn’t believe any military conflict could arise.

“If it is a tactical maneuver, it is regrettable,” he told the magazine in an interview. “It’s fiction, but of course we won’t allow our fishermen to be abused.”

U.K., U.S. Sign Post-Brexit Customs Agreement (5 p.m.)

The U.K. and U.S. signed a customs agreement to ensure businesses can continue to trade smoothly after the transition period ends.

The Customs Mutual Assistance Agreement will allow authorities from the two countries to continue to cooperate and share data to tackle customs fraud, the U.K. said in a statement.

“This deal will allow us to continue to cooperate in combating customs offenses by sharing information and good practice, and provides the legal underpinning for schemes to ease trade flows for importers and exporters,” U.K. Treasury Minister Jesse Norman said.

Johnson Declines to Say No Deal ‘Most Likely’ (4:45 p.m.)

Boris Johnson declined to repeat his claim from Sunday that the “most likely” outcome from the negotiations is no deal.

Asked at a press conference on Wednesday if that was still his view, Johnson demurred.

“That is very much a matter for our friends, they know what the parameters are,” he said. “There’s a good deal there to be done but if not, WTO, Australia terms it is and we will prosper mightily.”

Johnson’s Team Sees Progress, But Predict No Deal (2:15 p.m.)

Two of Prime Minister Boris Johnson’s officials acknowledged progress has been made in the talks with the EU, but they still see no deal as the most probable outcome.

“The most likely thing now is we have to get ready for WTO terms,” Johnson’s Press Secretary, Allegra Stratton, told reporters.

Johnson’s spokesman, Jamie Davies, agreed with that verdict, but said U.K. envoys still want a deal and are striving to bridge the gaps that remain. “We have made some progress in some areas, but it still remains that there are significant gaps,” he said.

Meat Lobby Calls for More Time (1:45 p.m.)

The British Meat Processors Association called on the U.K. government to delay implementing any Brexit-related rule changes by as long as a year to avoid putting food supplies at risk.

With the industry facing a shortage of vets to sign the 300,000 additional Export Health Certificates that will be required annually and crucial IT systems still not ready, the government needs to negotiate an “orientation phase” to keep trade with the EU flowing after Dec. 31 the lobby group said.

“There is mounting anxiety in the meat sector over the wall of red tape and extra costs that exporters will now inevitably run into,” the BMPA said in a statement. “This is so serious that many firms who have been happily supplying customers in Europe for years will simply lose that business.”

Johnson: ‘Every Hope’ EU Will See Sense (12:30 p.m)

Prime Minister Boris Johnson told the House of Commons he has “every hope” the European Union will “see sense” and reach a trade accord.

“All that it takes is for them to understand that the U.K. has a natural right, like every other country, to want to be able to control its own laws and its own fishing grounds,” he said. “Whatever happens in the next few days, I know that this country will prosper mightily on the terms that we agree with our European friends, whatever they may be.”

Merkel: ‘Progress, But No Breakthrough’ (12:20 p.m.)

“The Commission is again negotiating, with all our agreement, in these hours and days until the end of the week, to see if there can still be a solution,” German Chancellor Angela Merkel told the lower house of parliament. “There has been progress, but no breakthrough. I think we stand by our opinion that an accord is better than no accord, but we are prepared for the latter.”

BMW Warns of No-Deal Risk (12:01 p.m.)

BMW AG warned that a no-deal Brexit would cost the German carmaker hundreds of millions of euros.

Chief Financial Officer Nicolas Peter said on Wednesday that he’s concerned about the state of the negotiations between the U.K. and EU. The 10% tariffs on autos that would follow a hard Brexit would cost BMW a “mid-three-digit” million-euro amount per year, Peter said. BMW would try to offset the losses by raising prices on cars imported to the U.K. and any Oxford, England-made Mini vehicles sold on the continent.

Read more: BMW Warns Hard Brexit Poses Major Risk to Earnings Momentum

Pound Jumps Amid Deal Optimism (11:45 a.m.)

The pound climbed a third day to its highest level in over two years as optimism the U.K. and EU may reach a trade deal coincided with a weakening dollar.

Sterling rose as much as 0.7% to $1.3549, surpassing a high recorded on Dec. 4 to reach its strongest level since May 2018. Bloomberg’s gauge of the greenback fell a third day, the longest run in about two weeks, as risk sentiment improved.

EU Approves Contingency Plan on Fisheries (11:01 a.m.)

EU governments approved a legal framework for how to grant fishermen authorization to continue working in U.K. and EU waters if there’s no trade agreement in place on Jan. 1, according to an EU statement.

European Parliament will vote on the measure this week in an effort to have it adopted by the end of the year.

EU Endorses Transport Contingencies in Case of No-Deal Brexit (9:54 a.m.)

EU ambassadors endorsed proposals to prepare the transport sector if the bloc and the U.K. fail to strike a trade deal, according to an EU statement on Wednesday.

Germany, which holds the six-month rotating presidency of the EU, will begin talks with the European Parliament to adopt the legislative acts before the end of the year.

Progress on Level Playing Field (8:39 a.m)

European Commission President Ursula von der Leyen was more upbeat on the state of the talks away from the question of fisheries, saying the two sides had found “a way forward on most issues.”

She outlined what had been agreed on the other major sticking point, that of the playing field for fair competition, which for months has looked like it could scupper a deal.

“On state aid we have made progress on common principles, guarantees of domestic enforcement and the possibility to autonomously remedy the situation where needed,” she said.

“On standards we have agreed a strong mechanism of non-regression -- that’s a big step forward -- and this is to ensure our common high labor, social and environmental standards will not be undercut,” she said. “Of course difficulties remain on how to really future-proof fair competition.”

And she said issues around how to enforce the overall deal were now “largely being resolved.”

Fisheries May Not Be Resolved, von der Leyen Says (8:32 a.m.)

European Commission President Ursula von der Leyen told the European Parliament that an intrinsic aspect of the negotiations may not be agreed on. That would almost certainly mean no overall trade deal.

“On fisheries the discussion is still very difficult,” she said. “In all honesty it sometimes feels that we will not be able to resolve this question.”

She said fishing rights in U.K. waters and the level playing field for competition were the last big remaining issues, and there had been progress on the latter.

“There is a path to an agreement now,” she said. “The path may be very narrow, but it is there and it is our responsibility to continue trying.”

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