Sticking Points As Post-Brexit Talks Heat Up

Discussions between Britain and Europe on the post-Brexit trade relationship are reaching a critical juncture with just over two months to go before the end of the transition period.

Here is a look at the three main sticking points, which are blocking an agreement, raising fears of a "no deal" at the end of the year.

European fishermen have had access to British waters for centuries and negotiators initially promised a quick deal to appease European boats working in British waters, which are rich in fish.

But inflexibility on both sides of the English Channel made it impossible to reconcile two starting positions: the status quo of full access to UK waters for the European side, and total control of access for London.

The activity represents only a tiny part of both the EU and the UK economies, since Europeans each year catch 635 million euros ($738 million) in fish from British waters and Britain 110 million euros in EU waters.

But the subject is politically explosive for a handful of member states -- France, Spain, Belgium, the Netherlands, Denmark and Ireland -- which promise to stand by their fishermen.

The EU's negotiator, Michel Barnier, has recently tried to find room for negotiation from the member states and expectations are that the Europeans will budge.

Barnier's "mandate demands we keep the status quo, but everyone knows perfectly well that the status quo won't be maintained," said a European source.

But a compromise will be difficult, partly because cracks could show in the unity among fishing states: the Netherlands wants rights to deep sea fishing, while France has its eye on the coasts.

Europeans' main fear is that the UK will become an offshore rival that makes its fortune with a deregulated economy that competes unfairly with European businesses.

For example, would UK exporters be allowed more pollution when producers on the continent would have to meet strict environmental standards at a time when the fight against climate change is a big deal in Brussels.

On the environment, as well as on labour law and tax, Brussels has made a classic request of its more recent free trade agreements: that the British forgo a race to the bottom.

But the EU is going further on a subject that worries it particularly: state aid.

It fears that the UK will subsidise its businesses and economy without any controls when EU rules are very strict.

Brussels is calling for a mechanism to ensure that EU rules are somehow applied in the UK on state aid.

Both sides have finally started to make progress on the issue in recent days. The solution could lie in a consultation mechanism where each side informs the other of its plans for funding, or even in defining common rules.

In case of a failure to meet these commitments, either side could take rapid counter-measures.

In seven months of negotiations, London and Brussels have still not been able to agree on the "governance" of the future agreement, i.e. the conditions for its implementation, its monitoring and the mechanisms to be put in place in the event of a dispute.

This became of paramount importance to Europeans after the government of Boris Johnson introduced a bill in UK parliament that would reverse certain parts of the already concluded Withdrawal Agreement, which governs Britain's departure from the European Union on January 31 this year.

The about-face undermined Brussels' trust. The idea is to set up a dispute settlement mechanism similar to what exists in most trade agreements around the world.

These are usually arbitration tribunals, which issue binding decisions when one of the two parties feels that the agreement has not been respected.

But the EU wants the EU's highest court, the European Court of Justice, to intervene in all matters of the future agreement relating to European law, which the UK refuses in the name of its sovereignty.