European Union to implement new trade deal with UK from Jan 1: Report

By Gabriela Baczynska and Guy Faulconbridge

BRUSSELS/LONDON (Reuters) - European Union member states have started to prepare their procedure to implement a new trade deal with the United Kingdom from Jan. 1, three diplomatic sources in the bloc told Reuters, indicating that agreement could be imminent.

Both sides are racing to avoid a turbulent split when Britain leaves the EU's orbit on Dec. 31, 11 months after it formally quit the bloc and entered a transition period keeping it in the EU customs union and single market.

The two sides have given a dizzying array of conflicting signals: Britain on Wednesday said that two significant issues - fishing and competition - still remained to be resolved and that there had not been sufficient progress for a deal.

 

But during a meeting with the EU's executive, the European Commission, which is negotiating with Britain on behalf of all the 27 member states in the bloc, national diplomats in Brussels were told to be ready for a meeting on Thursday should a deal come.

"It seems the deal is pretty much there. It's a matter of announcing it today or tomorrow," said one EU diplomat.

The diplomat said the Council, which represents the member states in Brussels, had started preparations to enable a "provisional application", or fast-track implementation, of the agreement.

Sterling stood up 1% on the day, above $1.35, and up 0.7% against the euro at 90.36 pence. [GBP/]

 

"NOT SUFFICIENT"

While EU sources have repeatedly signalled a deal may be near, British sources said on Wednesday that talks remained "difficult" and underscored the differences.

British Housing Secretary Robert Jenrick told Sky News that "at the moment there isn't sufficient progress" at the talks.

The Commission declined to comment.

Irish Prime Minister Micheál Martin said the gap on how much fish EU boats could catch in British waters was still wide.

"On balance, I think given the progress that has been made that there should be a deal," Martin told the national broadcaster RTE. "A no-deal would be an appalling shock to the economic system on top of COVID-19."

Britain's mass-circulation Sun newspaper said a deal was "in sight" but being held up by a last-minute disagreement over batteries.

British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen are in close contact and were expected to hold another call on Wednesday.

Investors were expecting swings in sterling as overnight volatility was holding above 25%.

Johnson, who is also grappling with a deepening COVID-19 outbreak and a border crisis at Dover, Europe's busiest truck port, has said he will not sign up to any deal that undermines British sovereignty.

Walking away from the talks might win applause from many Brexit supporters in Britain but could cause severe disruptions to the goods trade that makes up half of annual EU-UK commerce, worth nearly a trillion dollars in all.

 

BORDER CHAOS

Britain, which joined the EU's precursor in 1973, has often had stormy relations with Brussels, hub of a Franco-German-led project that sought to bind the ruined nations of post-World War Two Europe into a global power.

The scale of possible Brexit disruption has been laid bare by France closing its borders to Britain for 48 hours, citing a new coronavirus variant now raging there. This has left thousands of European truckers stranded in southern England, and disrupted food supplies.

Ireland's Martin said that, if there was a breakthrough on Wednesday or Thursday, officials in Europe could be working on the text on Friday - Christmas Day.

"I'm still reasonably optimistic but there's no news to report to you this morning," Britain's Jenrick said. "There's still the same serious areas of disagreement whether that's on fisheries or the level playing field."

The 'level playing field' is trade jargon for ensuring fair competition. EU leaders fear that, after Brexit, the United Kingdom could ease its own regulation to undercut competitors and gouge EU market share. Enforcement is an important issue.

Besides competition, the sides are haggling over how much EU fishing boats can catch in Britain's waters: essentially, how many sole, sand eels and mackerel EU boats can haul in per year, and when and how to renew such agreements.

 

(Reporting by Guy Faulconbridge, Kate Holton, Sujata Rao, Elizabeth Piper, Gabriela Baczynska, Michael Shields, Padraic Halpin; editing by Timothy Heritage and Kevin Liffey)