THE key obstacle to a reasonable Brexit negotiation is Michel Barnier, the EU’s Brexit negotiator.

Barnier still insists on a role for the European Court of Justice, a non-starter for UK prime minister Theresa May. Barnier also insists on an exit bill and “principles” before trade agreements start. Principles include agreement on rights of migrant, social welfare, taxes, environmental and consumer protection standards. Good luck with that.

To top it off, the EU now demands fishing rights to UK waters in return for nothing.

Queues and Shortages

Please consider Barnier warns UK of queues and shortages if Brexit talks fail.

In a wide-ranging speech ahead of Article 50 exit talks, Michel Barnier warned Britain it must agree “principles for an orderly withdrawal” before trade talks, including its financial dues and the rights of 4m UK and EU migrants.

Brushing aside one of Mrs. May’s red lines over the future role of European judges, Mr. Barnier explicitly stated the EU’s demand that interim measures “will be within the framework of European law” and the European Court of Justice. Such a transition could not allow Britain to pick and chose access to areas of the single market.

In one of the most provocative parts of his address, Mr. Barnier tackled head-on Mrs. May’s assertion that “no deal is better than a bad deal”, setting out a bleak vision of the “serious consequences” from leaving without agreement.

“More than 4m British citizens in the EU and European citizens in the UK faced with complete uncertainty about their rights and their future; the reintroduction of binding customs controls, which will inevitably slow down trade and lead to queues of trucks at Dover; serious disruption to air traffic; an overnight suspension in the movement of nuclear materials to the UK,” he said.

Fishing Rights

Also consider EU Fishing Fleet Urges Post-Brexit Access to UK Seas.

Fishing groups from nine EU countries have demanded continued access to UK waters after Brexit and warned that UK fish supplies could otherwise lose tariff-free access to the continent.

EU countries rely heavily on access to UK seas, with some vessels catching up to 80 percent of their fish there. Some UK fishing groups and politicians have demanded that Britain remove foreign vessels after Brexit to improve catches for UK fishermen.

Alain Cadec, chair of the EU’s fisheries committee, warned that it was “out of the question” for the EU to continue to allow tariff-free access for British fish “if they do not provide our vessels access to their waters”.

His comments mirror a leaked report from the European Parliament which revealed that the EU is determined to maintain access to UK waters for its vessels and will not seek to change the division of fishing quotas, which many UK fishermen find unfair.

Ivan Lopez Van der Veen, a representative of Cepesca, the largest Spanish fishing association, said: “If you don’t want to pay 30 per cent tariffs [on UK fish coming into the EU] — which is what the World Trade Organisation sets — you will have to negotiate. That negotiation should be completely tied to access to UK waters.”

“The UK has the stronger position, but is that really how you want to leave the EU? By blackmailing us on the way out?” asked Mr. Van der Veen.

Blackmail Irony

What a hoot. Barnier clearly attempts to blackmail the UK with threats of queues and shortages but demands the UK do nothing in response.

Deep Divisions

Telegraph writer Peter Foster explains Why triggering Article 50 will expose the deep divisions inside the EU’s 27 states.

Thus far, the EU 27 have remained publicly united, rejecting a British offer to settle the question of expat rights ahead of negotiations last December and rebuffing British attempts to wind up French and German trade groups to push their politicians for a sensible deal.

But as one EU ambassador privately acknowledges, EU unity has held largely because it has been untested. It is not just the UK that has been busy fighting a phony Brexit war these last nine months over the politics of Brexit, the same is true of Europe too.

So when Mrs. May triggers Article 50 the Brexit process becomes real – for both sides.

The British will probably have to give up on the idea that sovereignty can be repatriated without trade-offs, but the European side will face tests of its own.

The Poles and Hungarians are seething about political heavy-handedness in Brussels, the Greeks are chafing about German-imposed austerity, the Italians want more help on immigration, the Germans want to avoid paying for everyone else, the rich northern states are no longer unequivocal supporters of Free Movement and the some in the core EU still cling to dreams of a united Europe that are rejected by half the continent.

If the UK side is clever, these divisions are waiting to be exploited as a deal takes shape that will affect the interests of all member states differently – if the EU 27 wishes to remain united, it will have to make compromises internally that will be to the UK’s benefit.

Too much internecine strife in the EU camp risks causing delays that will run down the two-year clock on the negotiations or cause the scope of the talks to contract to include only the narrowest aspects of the UK-EU ‘divorce’ where the 27 can reach agreement.

British negotiators must be realistic. They must not, as Mr. Cameron did with Germany, overplay their hands – but the notion that the coming negotiation will be plain sailing for the European side is a simply wrong.

Will Cooler Heads Prevail?

Wolfgang Münchau believes A Sensible Brexit Deal is More Probable Than You Think.

It would be reckless to predict that all will go smoothly. On the contrary; this will be as bitter and hard fought as any of the big battles of the past. What I do see, however, is that both sides have more to lose than to gain. This is a larger issue than the observation that the UK has relatively more to lose than the EU. That is trivially true, but not critical.

More to Lose

Münchau is correct that both sides have more to lose, but is way off base in proposing the UK would lose more if negotiations broke down.

1. The EU exports more to the UK than it imports from the UK.
2. The British Pound collapsed making import tariffs far less of an issue for the UK than the EU.
3. Fishing rights are a major bargaining point for the UK.
4. The €60 billion Brexit bill is a major bargaining chip for the UK. It can walk away and pay zero if it wants.

The EU has one and one bargaining chip only: Access to the alleged “single market”.

The EU also has two enormous problems:

1. Michel Barnier insists on certain things that Theresa May cannot possibly give up.
2. The EU has a very strong, and arguably irrational, desire to punish the UK.

It would make economic sense for a deal to be worked out. But will it? In a reasonable timeframe?

Color me skeptical in calling a deal likely given all the things that Barnier threw into the pot.

Here is the debate: Divorce Proceedings Begin March 29: Brexit Debate, Mish vs Financial Times

I would prefer to be wrong on this one.

Mike “Mish” Shedlock