LONDON/BRUSSELS • British and European Union negotiators paused trade talks on Friday to call in their leaders to try to narrow gaps and get an agreement over the line, less than four weeks before Britain completes its Brexit journey out of the bloc.
After failing to agree the basis for a deal, Britain's Mr David Frost and the EU's Mr Michel Barnier said they would brief their leaders to seek new impetus for the talks, which stumbled last Thursday when London accused Brussels of making new demands.
Prime Minister Boris Johnson and European Commission president Ursula von der Leyen were due to try yesterday to break the impasse, which sources said was centred on French demands over fishing rights in British waters.
It is the latest twist in the months-long negotiations which have barely moved on the three thorniest issues - fisheries, ensuring fair competition guarantees and ways to solve future disputes.
But so far, neither side has walked away from the talks, suggesting that both are still holding out some hope of securing a deal governing almost US$1 trillion (S$1.3 trillion) of annual trade to avoid a disorderly end to more than 40 years of British membership of the European club.
"After one week of intense negotiations in London, the two chief negotiators agreed today that the conditions for an agreement are not met, due to significant divergences on level playing field, governance and fisheries," they said in a statement on Friday.
"On this basis, they agreed to pause in order to brief their principals on the state of play of the negotiations. President von der Leyen and Prime Minister Johnson will discuss the state of play tomorrow afternoon."
Earlier on Friday, there were contradictory reports of how far the talks had progressed, with some EU officials saying they were very close to reaching an agreement while British officials said the negotiations had reached a very difficult point.
Ultimately, it will be for the politicians to decide whether they want to shift the negotiating positions and compromise to find grounds for a deal, or to walk away.
The EU has challenged Britain to decide what future it wants for itself outside the bloc's single market and Customs union.
Britain formally left the EU on Jan 31, but since then, has been in a transition period under which rules on trade, travel and business remain unchanged.
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What's at stake if Brexit talks collapse
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LONDON • Negotiations between Britain and the European Union over a post-Brexit trade deal are heading into a crisis weekend as both sides try to salvage an accord.
If no agreement is reached, it would be a hammer blow for businesses and consumers on both sides.
Decades of free movement of goods, services, people and capital would come to an abrupt end when Britain leaves the EU's single market and Customs union on Dec 31.
Companies would face tariffs, quotas and potential chaos as they move goods across the border; finance firms in the City of London would lose their passports to offer services across the EU; and consumers would see their rights to live on the other side of the English Channel curtailed.
Here are some of the issues officials will be looking closely at.
THE ECONOMIC HIT
Without a trade deal, the British economy would suffer a near-term shock of about 1.5 per cent of gross domestic product (GDP), according to Bloomberg Economics.
The Office for Budget Responsibility, Britain's independent spending watchdog, forecasts a 2 per cent GDP decline.
TARIFFS
Instead of frictionless trade with a market of more than 400 million consumers, British firms would revert to trading with the EU under World Trade Organisation (WTO) rules in 1995.
That means imports and exports to the EU would be subject to WTO-negotiated tariffs - essentially a tax on goods.
The EU's average tariff rate is 3 per cent, but some products would attract higher levies: British carmakers would face a 10 per cent tariff on all auto exports to the EU, while farmers exporting dairy products would see a 35.4 per cent charge.
Tariffs could also lead to increased prices for companies and consumers.
Some 85 per cent of food products imported from the EU would attract tariffs of 5 per cent or more.
About 43 per cent of Britain's exports, valued at about £300 billion (S$538 billion), go to the EU each year, and the bloc is the source of 51 per cent of its imports.
CITY OF LONDON
Finance firms will lose their passports to offer services across the EU, whether there is a trade deal or not, forcing them to shift staff and beef up their operations in the bloc.
Their access to customers would depend on the EU judging British rules to be equivalent to its own in 40 areas. Failure to reach a trade accord would set back that process.
CUSTOMS
Businesses exporting to the EU will have to file Customs declarations with or without a trade deal.
To move goods from Dover to Calais - Britain's busiest crossing point with the EU - trucks will need a government-issued permit indicating they have the correct paperwork and will not be held up by French officials. Border delays would threaten to throw manufacturers relying on parts arriving just-in-time into chaos, including companies in car-making and aerospace, while fresh food produce might rot as trucks line up to clear Customs.
BLOOMBERG
If the two sides fail to reach a deal, the five-year Brexit divorce will end messily just as Europe grapples with the vast economic cost of the Covid-19 outbreak.
A no-deal exit is the nightmare scenario for businesses and investors, who say such an outcome would snarl borders, spook financial markets and sow chaos through supply chains that stretch across Europe and beyond.
The discussions soured last Thursday when a British government source said the EU had disrupted talks by trying to force further concessions and France, which fears losing many of its rights to fish in British waters, warned it might rebel.
The EU has denied making new demands.
French European Affairs Minister Clement Beaune told Europe 1 radio there was still a risk that talks would fail. But he added: "I want to tell our fishermen, our producers, the citizens who are listening that we will not accept a deal with bad terms. If a good agreement cannot be reached, we will oppose it. Each country has a veto right, so it is possible... We will do our own evaluation of this draft deal, if there is one."
REUTERS
