The United Kingdom and European Union Brexit trade talks are in a deadlock, with both sides criticizing each other's negotiation stance.
'Progress Remains Limited' Between UK, EU
The U.K. officially left the EU Jan. 31, but the transition period lasts until Dec. 31, which means U.K. is still bound to some EU rules. This is the fourth round of Brexit negotiations between London and Brussels.
On Friday, Michael Barnier, the EU chief negotiator said: “in all areas, the U.K. continues to backtrack on the commitments it has undertaken.”
Barnier says the U.K. doesn’t want to talk about “cooperation on foreign policy, development and defence ... I still don’t understand why?”
U.K. chief negotiator David Frost has also said “progress remains limited."
Brexit Overshadowed By Pandemic
The U.K. and the EU have had to deal with the global coronavirus pandemic, which has seen Brexit trade negotiations fall to the wayside.
“The Brexit issue, like so much else, has fallen under the radar due to the COVID19 crisis, but negotiations are going on, albeit slowly,” said Per Hammarlund, chief emerging markets strategist at SEB AB in Stockholm.
Before the end of June, a decision needs to be made as to whether the transition period should be extended by two years to allow more time for negotiations of the final agreement, adds Hammarlund.
UK, EU Stuck In Messy Divorce Negotiations
“Today, negotiators of the divorce agreement should have been ready with a proposal for such an extension, but it appears as if they have hit a wall,” says Hammarlund.
In exchange for an agreement, the EU wants the U.K. to continue to follow some of the EU rules to ensure a level playing field and for the European Court of Justice to have jurisdiction in the U.K, adds the analyst.
FXTM research analyst Lukman Otunuga said the clock is "dangerously ticking closer" to the June 30 extension deadline, increasing fears over a no-deal Brexit.
“Given how the coronavirus chaos has exposed the UK economy to downside shocks with a technical recession on the horizon, more drama and uncertainty around Brexit is the last thing the economy needs,” adds Otunuga.
The analyst expects the British Pound to remain vulnerable, depressed and unloved as Brexit fears and growth concerns haunt investor attraction toward the currency.
Brussels and London disagree on fishing rights, security and governance.
The U.K. is resisting EU demands for continued long-term access to British waters. The EU wants fishing rights in British waters.
"There have been no significant areas of progress" on fishing, "economic fair play, trade fair play" or governance, said the EU's Barnier.
He adds the UK-EU talks can't "go on like this forever."
SEB's Hammarlund said that none of this is acceptable to the British.
"Now everyone hopes that a scheduled meeting between Boris Johnson and Ursula von der Leyen later this month will be able to resolve the knots."
British fishermen have argued that joining Europe led to the decimation of the fishing industry and now see a golden opportunity to right that wrong, according to Foreign Policy.
Talks between the U.K. and the EU are set to continue Oct. 31 when the two hope to find "some common ground" and come to an agreement.
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