MNI EXCLUSIVE: EU-UK Talks Lack Time, No Landing Zone

Negotiators are running out of time to secure a UK-EU Free Trade Agreement following their failure to even outline a general 'landing zone' in the recent round of negotiations, EU officials told MNI, adding that a breakthrough will be needed in early September if legal texts are to be finalised before final talks in early October.

Rules on state aid are still the main area of disagreement, and the chances of that changing by early September are not looking bright, officials said.

"I won't say it's 'make or break but it's important. If we don't have an agreement at the Sept. 7 round then we have a big problem," said a well-placed EU source

"If we do manage to unblock in September, technical work will continue because you can't wait until the late September-early October round. We will work around the clock to get the text finalised," the source added.

"If we don't have a final text by October then it is not possible."

Without an agreement, EU-UK trade will switch to World Trade Organisation rules at the end of the Brexit transition period on Jan. 1, 2021.

In the event of a Sept. 7 deal, member states would have to agree to allow the European Parliament to ratify the text, avoiding possible long delays as 27 individual national parliaments pore over the wording, but even so still a lengthy process requiring legal scrutiny and multiple translations.

If not, "we're in a protracted CETA scenario," said another EU official, referring to the years-long process for ratification of the European Union's trade deal with Canada.

LANDING ZONE

Some EU officials say the UK government's absorption in the Covid crisis and also UK chief negotiator David Frost's seeming lack of a direct line to Prime Minister Boris Johnson have been key factors, a second source said

There remains the possibility that Germany, current holders of the rotating EU Presidency, might intervene to unblock progress in the talks but sources say that is unlikely to happen before the early September talk. The EU "must stick to our mandate and principles," the first official said, adding: "No landing zone is being discussed."

NO AUTUMN MINI-DEALS

Officials have also ruled out "mini-deals" to smooth UK-EU trade flows after the end of the year, noting the lack of an EU mandate for them. They accept talks could go on even after October if no deal is reached, but warn the pressure to achieve a deal will ebb and efforts at a trade agreement at some later point will likely run into the sand.

"The longer you have disruption the less pressure there is for a trade deal. Business and agriculture will adapt," the first official said

One source also dismissed the recent media furore following the EU's determination that the UK investment banking sector will not enjoy 'equivalent' status so that it can access the EU single market for financial services as "noise".

"There was so much media excitement over the new and updated framework for the investment banking sector -- so the investment bank sector now has no equivalence".

"The big financial institutions and the financial services providers have adapted to the post-Brexit reality and to zero equivalence. So, it's just talk. The banks are prepared for no deal. The industry understands that. They have adapted and now have subsidiaries on the continent," a source familiar with the discussions on financial services added.