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Post-Brexit deal: We know the obstacles — how exactly do the EU-UK positions differ?

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By Alasdair Sandford with AFP
A man stand at the DFDS buffer zone before a press conference, as part of the Get Ready For Brexit campaign, at the DFDS ferry terminal at Rotterdam port, December 1, 2020.
A man stand at the DFDS buffer zone before a press conference, as part of the Get Ready For Brexit campaign, at the DFDS ferry terminal at Rotterdam port, December 1, 2020.   -   Copyright  ROBIN UTRECHT / ANP / AFP
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This article originally published on December 9 has been updated.

Despite months of tortuous EU-UK negotiations and numerous missed deadlines, significant obstacles to a deal on trade and the future relationship remained on Friday December 18.

With fewer than two weeks to go before the end of the transition period threatens to bring an economic rupture, the three key outstanding issues remain the same — fishing rights, fair competition rules and the governance of future disputes.

The European Commission says progress has been made on competition and governance, with fishing rights remaining the major unresolved subject. However, it remains unclear whether gaps can be bridged.

Here is an outline of where the parties stand going into the weekend.

Fishing rights: EU access to UK waters

The issue of fishing rights has once again returned to the fore as major sticking point in the negotiations.

The EU has insisted since the outset of the talks on linking the issue to the wider economic partnership. The UK has tried but failed to separate it from the main trade negotiations.

The disagreements concern EU access to British waters, and the amount of fish European boats can catch there once the UK leaves the EU's Common Fisheries Policy (CFP). EU boats have, until now, caught fish in UK waters worth €650 million annually.

The EU's starting position was to maintain existing arrangements, while the UK has been determined to regain "control" of its own waters as an "independent coastal state". An important factor though is that the UK sells the majority of the fish it catches to the European market.

On the amount of fish previously caught by the EU, the two sides disagree on the percentage to be returned to the UK. The EU's starting position was to give up only up to 18% of its catch, but the UK said the figure should be nearer 80%.

The question is how the catch is allocated in two separate zones: a shallow zone close to the UK coast, and a deep-sea, 200-nautical-mile zone. The issue is complicated by the fact that different countries value types of fish.

There are also wide differences over the length of a transition to new arrangements: the EU wants a 10-year phasing in period, while the UK only offered three years.

London has also argued for annual negotiations on quotas, which European fleets say would create instability and make long-term planning impossible.

There have also been concerns in EU circles that they may be hit by British plans regarding foreign-owned vessels registered in the UK, relating to calculations for fish quotas.

Although the fishing industry's contribution is tiny relative to the overall economy, its political and symbolic importance is huge and both sides have been to defend staunchly their fishing communities.

Several European coastal nations have put pressure on Michel Barnier's EU negotiating team not to give ground.

Competition and the 'Level Playing Field'

The disagreements have concerned the degree to which the UK should be obliged to respect EU rules in return for tariff-free access to European markets under a trade deal.

In the Political Declaration (the non-binding part of the UK-EU divorce deal) both sides agreed to commit to a "level playing field" in future competition, covering issues such as state aid, social and workers' rights, the environment and climate change.

The EU wants to ensure that British firms cannot undercut the bloc’s standards, or distort competition by pumping public money into domestic industries. The UK has argued that EU demands exceed those it puts on other countries in their trade deals with the bloc.

Brussels backed down from an original demand for UK "dynamic alignment" with EU rules, instead insisting on "non-regression" over standards as Britain exerts its new independence.

An "evolution mechanism" has been examined to deal with divergence, but the UK has been wary of being forced to "copy-paste" EU rules.

The EU also wants to be able to head off potentially long, drawn-out legal processes by taking punitive action against the UK if it digresses, for instance by slapping tariffs on British exports. This brought a furious response from the Johnson government which accused the EU of bringing new demands to the table — which Brussels denied.

There has been disagreement over how guarantees could be enforced in UK courts, where the EU has pushed for its companies to be allowed to sue over violations.

Both sides claim to have given ground over competition issues. On Wednesday (December 16) European Commission President Ursula von der Leyen reported that "a way forward on most issues" had been found.

"On state aid, we have made progress based on common principles, guarantees of domestic enforcement and the possibility to autonomously remedy the situation where needed," she said.

"On standards, we have agreed a strong mechanism of non-regression, that's a big step forward. And this is to ensure that our common high labour, social and environmental standards will not be undercut."

Governance: Policing and enforcing a deal

The question of enforcement took on added importance with the Johnson government's legislative plan to override parts of the EU divorce deal — measures that were contained in a binding treaty enshrined in international law.

The UK has now agreed to drop those controversial clauses in its Internal Market Bill, but the EU wants to make sure it can hold the UK to account over whatever is agreed in a new deal, setting out relations for years, perhaps decades, to come.

The two sides have been negotiating over an arbitration process, a typical component of trade deals around the world.

The UK has long rejected EU oversight, which it says contravenes the very essence of Brexit. It has been resolutely opposed to being subjected to the Luxembourg-based European Court of Justice (ECJ), which the EU sees as the arbiter of European law. The Commission is said to be ready to avoid mentioning the ECJ and European law in the text of an agreement.

However, there has been sharp disagreement over a demand by Brussels for a "cross-sector" clause to be applied should the accord be violated.

This would allow sanctions to be imposed on a different sector from the one in question. For instance, a British breach of the agreed terms on fishing could see duties imposed on UK car exports.

On Monday (December 14) Michel Barnier implied that the issue of governance was no longer a sticking point in the talks. "Two conditions are not met yet," he said, not mentioning legal mechanisms for resolving future disputes.

Two days later, in her speech to MEPs, Ursula von der Leyen also said she was "glad to report that issues linked to governance by now are largely being resolved".