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Economy

UK, EU Head for Supper Showdown Over Brexit Trade Deal

December 9, 2020

BRUSSELS — The leaders of Britain and the European Union were meeting Wednesday for a dinner that could pave the way to a post-Brexit trade deal — or tip the two sides toward a chaotic economic rupture at the end of the month.

Early-morning comments from both sides insisting that it was for the other to compromise only highlighted the difficult task ahead for U.K. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen. They have just a few hours over a multi-course meal to unstick negotiations that are deadlocked on key aspects of the future relationship for the EU and Britain.

British officials said they hoped political pressure from the top could break the logjam, but room was limited. 

"Unless we see some movement on the EU side, then it will be very difficult," U.K. Cabinet minister Michael Gove told Times Radio.

The bloc, however, insisted the U.K. must to move to secure a trade agreement.

German Chancellor Angela Merkel said "there is still the chance of an agreement," but stressed that the EU would not compromise on its core principles. Merkel told the German parliament that the bloc would "take a path without an … agreement if there are conditions from the British side that we can't accept." 

The U.K. left the EU on Jan. 31 after 47 years of membership, but remains within the bloc's tariff-free single market and customs union until the end of the year. Reaching a trade deal by then would ensure there are no tariffs or quotas on trade in goods on Jan. 1, although there would still be new costs and red tape for businesses.

Failure to secure a trade deal would mean tariffs and other barriers that would hurt both sides, although most economists think the British economy would take a greater hit because the U.K. does almost half of its trade with the bloc.

Months of trade talks have failed to bridge the gaps on three issues — fishing rights, fair-competition rules and the governance of future disputes.

While both sides want a deal, they have fundamentally different views of what it entails. The EU fears Britain will slash social and environmental standards and pump state money into U.K. industries, becoming a low-regulation economic rival on the bloc's doorstep — hence the demand for strict "level playing field" guarantees in exchange for access to its markets.

Merkel said "the integrity of the single market must be preserved."

"We must have a level playing field not just for today, but we must have one for tomorrow or the day after, and to do this we must have agreements on how one can react if the other changes their legal situation," Merkel said. "Otherwise there will be unfair competitive conditions that we cannot ask of our companies."

The U.K. government sees Brexit as about sovereignty and "taking back control" of the country's laws, borders and waters. It claims the EU is making demands it has not placed on other non-EU countries and is trying to bind Britain to the bloc's rules indefinitely.

"We've been clear throughout — the prime minister's been admirably clear – about what the United Kingdom needs as a sovereign independent country," Gove said. "And I think President von der Leyen will want to ensure that all EU member states recognize that a deal is in everyone's interest and that will require a degree of movement for some on the EU side."

Amid the gloom, one area of tension has been resolved. The British government has dropped plans to break international law after reaching an agreement with the EU on rules governing trade with Northern Ireland, the only part of the U.K. that shares a land border with the bloc. 

The Brexit divorce agreement struck by the two sides last year promised there would be no customs checks or other trade barriers along Northern Ireland's border with EU member Ireland. As the two sides tried to hammer out the details, British government introduced legislation in September giving itself powers to breach the legally binding withdrawal agreement in order to keep goods flowing to Northern Ireland in the event of a "no-deal" Brexit.

Britain claimed the bill was needed as a safety net, but the move infuriated the EU, which saw it as an act of bad faith that could imperil Northern Ireland's peace settlement.

Gove said resolving the Northern Ireland issue provided a "smoother glide path" towards a broader trade deal with the EU, though the bad feeling generated by the lawbreaking move still lingers.

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