Brexit Negotiators Home In on Landing Zone Despite Disputes

(Bloomberg) -- U.K. and European Union negotiators have started to sketch out the broad outline of an agreement on their future relationship as both sides look to the other to make compromises to seal the deal.

After talks in Brussels ended this week a day earlier than planned, officials close to the negotiations said the two teams are beginning to coalesce around a general “landing zone” that could form the basis of an agreement on trade and other areas of cooperation.

The two sides will regroup in London next week. While both acknowledge major sticking points remain and time is short, the negotiators have so far managed to retain the air of optimism that has surrounded the talks since a telephone call between Prime Minister Boris Johnson and the EU leadership last month injected fresh momentum, the officials said.

The teams are conscious of the need to make swift progress. Johnson has called for an accord by the end of July, while the EU has identified a summit of leaders in mid-October as the last possible moment for a deal to be reached, to allow for the several weeks then needed to ratify it.

The two sides are heading for a stripped-down agreement that includes a free trade deal eliminating tariffs and quotas, but it will probably fall short of the broader accord the bloc had originally proposed, an EU official said, speaking on condition of anonymity because the talks are confidential.

Judges, Fish

The bloc has signaled that it is prepared to back down from its demands to keep the same access to British fishing waters it enjoys today and for the European Court of Justice to have a role in policing any agreement.

Negotiators are also looking at ways to distance the U.K. from the direct jurisdiction of the ECJ, even if, under the bloc's rules, it has to remain the ultimate arbiter of EU law.

The EU's chief negotiator, Michel Barnier, has also signaled that the bloc is ready to rethink its position on the level playing field. The rules, designed to ensure fair competition between the two sides, are one of the biggest points of contention in the talks. Barnier has suggested he is open to discussion about whether Britain will be required to follow the EU's framework for state aid.

The EU is now looking for the U.K. to make similar conciliatory moves, including accepting that the entire agreement must have a single dispute resolution structure. That's something the British side has so far rejected, because it would give the bloc leverage to retaliate in different areas if the U.K. broke the terms of one part of the agreement.

In a statement released after talks broke up on Thursday, Barnier said “an agreement is possible and in everyone's interest,” and underlined that he had taken on board the U.K.'s red lines on “no role for the European Court of Justice in the U.K., no obligation for the U.K. to continue to be bound by EU law, and an agreement on fisheries that shows Brexit makes a real difference.”

‘Equivalent Engagement'

“The EU expects, in turn, its positions to be better understood and respected in order to reach an agreement,” Barnier said. “We need an equivalent engagement by the U.K.”

David Frost, the U.K.'s chief negotiator, said the informal format of the talks had “given extra depth and flexibility to our discussions” and that he was committed to getting an understanding on the principles underlying an agreement in July.

“The negotiations have been comprehensive and useful,” he said. “But they have also underlined the significant differences that still remain between us on a number of important issues.”

One official cautioned that fishing is proving particularly difficult to resolve, and that a lot of work remains to be done.

Speaking at a press conference in Berlin, German Chancellor Angela Merkel said she was keen to see a deal. “As before, from the German side we continue to have an interest in a contractual result,” she said. “But we must also prepare for” a no-deal outcome.

Britain will leave its transition period at the end of 2020 after Johnson decided not to take up the option of extending it. Without an accord, the U.K. and EU will default to trading on terms set by the World Trade Organization, meaning the return of tariffs and quotas.

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