Michel Barnier on Dec. 1. 
The negotiations have been dominated by disagreement over the two issues since they started in March. People close to the talks long speculated that if a deal is to be done, it would likely see the EU give in to some of Britain’s demands on fishing in return for the U.K. signing up to tougher competition rules for business.
The EU wants to bind the British government to its rules on subsidies, labor rights and environmental standards so that U.K. firms don’t enjoy an unfair advantage over their continental rivals if they are granted tariff and quota-free access to the bloc’s single market. The U.K. is reluctant to be bound by future changes to EU rules on grounds of sovereignty.
Michel Barnier, the EU’s chief negotiator, will update ambassadors from the bloc’s 27 members on the state of the deliberations at 7:30 a.m. in Brussels on Monday. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen will hold a telephone call later in the evening. By then, the two sides want to be able to say if there’s a deal, or concede that an accord is beyond reach.
Johnson’s Dilemma
Johnson is now “wobbling,” former EU trade commissioner and Labour business secretary Peter Mandelson told Times Radio on Sunday.
“It goes to the heart of his Brexit dilemma over having a trade deal at all,” he said. “Does he go for a deal that salvages, to an extent, our manufacturing trade with Europe essentially through eliminating border tariffs and, in effect, staying closer to Europe than, frankly, he feels comfortable with. Or does he dispense with a deal, go for a clean break with our biggest export market by far, in Europe, and take a chance.”
With the negotiations moving only slowly, one EU official warned that expectations that an agreement will be reached within 24 hours are low. The EU has said that a summit of its 27 leaders that begins on Thursday now marks the effective deadline for a Brexit deal.
The U.K. will leave the European single market and customs union on Dec. 31 -- with or without an agreement. Both the European and U.K. parliaments need to ratify any accord, so one has to be reached before then to be implemented in time.
“Difficult Position”
Expectations of a deal had been growing last week, with the pound rising to its highest against the dollar in more than two-and-a-half years on Friday. But negotiations broke down late that day with the British side accusing their EU counterparts of putting fresh demands on the table at the last minute, something European officials deny.
After a one-hour phone call on Saturday, Johnson and von der Leyen agreed to resume talks in Brussels -- but both acknowledged that “significant differences” remain. One British official characterized the resumption of negotiations as the last throw of the dice.
Talks are “in a very difficult position, there is no point in denying that,” U.K. Environment Secretary George Eustice told Sky News’s “Sophy Ridge on Sunday” show. “We will continue to work on these negotiations until there is no point doing so any further, but there is no point denying that what happened late last week was a setback.”
Complicating the negotiation further, the U.K.’s Internal Market Bill will return to the House of Commons on Monday. The government intends to reinstate controversial clauses that would give ministers power to rewrite parts of the original Brexit divorce deal after the House of Lords removed them. The EU has threatened legal action over the measure.
The disagreement over the level playing field revolves around the EU’s demand to bind the U.K. to any future changes the bloc makes to its environmental and labor rules. If Britain refused to implement those changes, it would face retaliatory tariffs.
The EU also wants to require the U.K. to set up an independent regulator on state subsides that would be able to rule against decisions before any money was handed out.
While Paris’s hard line on fisheries has received the most attention, French officials have also talked tough on the level playing field. Following calls with their German counterparts, both countries are in agreement on the importance of the latter issue, the diplomat said.
The two sides are also still at odds over how any agreement would be enforced, with the EU wanting to be able to punish any breaches of the deal with retaliation in other areas -- something Britain has so far rejected.
--With assistance from Andrew Atkinson.