Five flashpoints in Brexit trade talks

Brussels and London on Tuesday each agreed their negotiating positions for post-Brexit trade talks, teeing up months of high-pressure haggling to get a deal done by the end of the year.

Here are some of the expected flashpoints in the upcoming talks, with the danger of economic chaos if both sides cannot swiftly come to agreement.

– Level playing field –

This is the crux of the problem facing the talks. Europe is demanding that any agreement includes “robust commitments” to uphold standards on employment, the environment, climate change and competition, including state aid.

This insistence on a so-called “level playing field” is to stop Britain gaining what Brussels sees as an unfair competitive advantage by relaxing rules.

The mandate approved for EU negotiator Michel Barnier says an agreement should “uphold common high standards… with Union standards as a reference point”.

But Britain insists it will not be bound by EU rules — arguing that the whole point of Brexit was to be free of them — and says it “will not agree to measures in these areas which go beyond those typically included in a comprehensive free trade agreement”.

Prime Minister Boris Johnson’s government — which has not yet published details of its own negotiating terms — says both parties should “recognise” their respective commitments to maintaining high standards in these areas and simply agree to avoid using such regulation “to distort trade.”

– Fishing –

The EU’s chief negotiator Michel Barnier has identified fishing as one of the EU’s top two priorities, along with the level playing field.

His mandate says any trade deal “should aim to avoid economic dislocation” for EU fishermen by upholding “existing reciprocal access conditions, quota shares and the traditional activity of the Union fleet”.

This is a far cry from Johnson’s pledge to reclaim “full control” of British fishing waters and drew a swift rejection from his spokesman, who insisted that on December 31 Britain would “automatically take back control of our waters and others’ right to fish in them”.

The topic is urgent for certain countries, notably France, where fish and seafood caught in UK waters account 30 percent of sales for fishermen.

London says it is open to “annual negotiations with the EU on access to waters and fishing opportunities, and will consider a mechanism for cooperation on fisheries matters”.

But French European Affairs Minister Amelie de Montchalin said this was “not the best approach”, insisting fishermen needed to be able to plan further ahead than annual talks would allow.

– Financial services –

Access to European markets is a key bargaining chip for Brussels because of the importance of the financial sector to the British economy.

City of London firms will lose “passporting” rights to operate automatically in the bloc. Instead they will have to be granted “equivalence” — and the EU’s negotiating terms say it will decide on this “on a unilateral basis”.

– State aid –

When it comes to the level playing field, the EU is especially demanding on state aid provisions, saying its rules must apply “to and in the United Kingdom”.

Brussels wants London — in cooperation with the EU commission — to set up an independent authority in the UK that would ensure that European anti-subsidy laws would be enforced in Britain.

This will be interpreted as a major violation of British sovereignty by the Johnson government and against the spirit of Brexit.

– EU court –

The European Court of Justice is the EU’s highest court and became a hated symbol of EU over-reach for Brexiteers over the course of Britain’s 47-year bloc membership.

The EU’s negotiation mandate vastly reduces the role of the court, proposing that an independent abritration panel be set up to rule on the majority of disputes.

But the ECJ will still have a role when a dispute requires a ruling on a matter of EU law, as the Luxembourg court is the highest authority on the subject.

Even an indirect involvement of the court could raise objections in Britain. The new deal should have “dispute settlement arrangements appropriate to a relationship of sovereign equals,” the British plan says.