Despite Brexit Ultimatums, U.K. and EU Lurch Toward a Deal

(Bloomberg) - Just as the UK's trade negotiations with the European Union look like they're going off a cliff, there is reason to believe that things may not be as bleak as they seem.
On the surface, the brinkmanship is clear: On Tuesday, the EU Boris Johnson dared to withdraw from the talks by October 15 if he thought a deal was impossible. As early as the very next day, the Johnson administration announced that it intended to do just that if it reached the conclusion.
Weeks followed in which testimony on both sides barely exceeded the need to keep trying, as the gap between them remains large. On Wednesday, EU Council President Charles Michel called on the United Kingdom to "put its cards on the table".
In private, however, officials are more optimistic. While politics is inevitable - and potentially final - seasoned negotiators know that sometimes the worst moments come right before a deal is reached.
They remember Johnson's phone call to Chancellor Angela Merkel in October 2019, which prompted a British government insider to point out that due to their intransigence, an agreement to leave the EU was virtually impossible. One was made nine days later.
The two sides are now trying to reach an agreement not only on their future trade relationship, but also on a number of issues, from law enforcement cooperation to transport. If no agreement is reached at the time of Britain's exit from the EU internal market and the customs union on December 31, companies at the border will have to grapple with tariffs, costs and disruptions.
"The coming days are crucial," Michel said at a press conference in Dublin on Thursday. "This is the moment of truth."
Johnson has said he will pull the plug if he doesn't see a deal coming up by Oct.15 so companies have time to prepare.
The EU, whose heads of state and government will be discussing Brexit at a summit on the same day, does not recognize this deadline and plans to continue talking for as long as possible.
Brussels officials, aware of the negotiations, propose to work out a detailed choreography in which, despite some remaining differences, both sides will find a way to continue the discussions into the second half of October.
The summit will simply be an inventory that will not stand in the way of negotiations.
"Excellent accessibility"
EU negotiator Michel Barnier told a meeting of European ambassadors on Wednesday that he did not expect the UK to leave on October 15, according to officials present.
Meanwhile, his UK counterpart, David Frost, told a parliamentary committee that the negotiations were constructive, even though "there are some really difficult things in them that have not yet been resolved".
"I think a deal is extremely achievable and could be achieved - but it is also possible that we won't get there and we have to see what the next few weeks bring," said Frost at a hearing alongside Cabinet Secretary Michael Gove.
There are also signs that both sides are getting closer to overcoming some of the biggest barriers to an agreement: what rules to limit state aid will have to be followed by the UK and what access EU fishing boats will have to UK waters.
Frost told lawmakers that the UK was ready to discuss terms for business grants that go beyond what "you normally do in a free trade agreement".
And Barnier told the ambassadors meeting that member states should be ready to be more flexible with fish, an official said. France has worked hard to keep the bloc's current access to British waters, which the Johnson administration said is unacceptable. For his part, Frost indicated that the UK could introduce new rules over a period of time.
EU officials are also increasingly confident that Johnson is willing to continue to apply the principles of the European Convention on Human Rights - something the hardliners of his ruling Conservative party previously opposed.
Barnier will arrive in London on Thursday for talks with his British colleagues.
Experienced officials in Brussels note that the mood around a negotiation is good when both sides start speaking the same language. Again, there are signs of progress.
After a phone call with Johnson on Wednesday afternoon, Michel tweeted: "The EU prefers a deal, but not at any price."
Shortly afterwards, Gove was asked for his assessment. "We're obviously very interested in getting a deal," he said, "but we're not going to make a deal at any price."
(Adds Michel comment in the seventh paragraph. An earlier version of this story has been corrected to say that Johnson's phone call was in 2019 instead of 2018.)
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