LONDON — Britain and the European Union on Wednesday failed to break the deadlock in critical negotiations about a post-Brexit trade deal and, with wide divisions remaining between them, set a new deadline for Sunday to reach a decision on the future of the talks.
A meeting over dinner between Prime Minister Boris Johnson of Britain and Ursula von der Leyen, the president of the European Commission, the bloc’s executive body, ended without significant progress, with large gaps left remaining between the two sides, and no clear path to bridging them.
Wednesday’s three-hour meeting had been set up with the goal of ending months of deadlock in trade negotiations, talks that remained stalled just three weeks before Britain completes the final stage of Brexit, by leaving the European Union’s economic area at the month’s end.
But in a statement Ms. von der Leyen said that despite “a lively and interesting discussion” the two sides’ positions “remain far apart.”
“We agreed that the teams should immediately reconvene to try to resolve these essential issues. We will come to a decision by the end of the weekend,” she added.
The announcement of a new Sunday deadline still keeps alive hopes for a final push to strike the elusive trade agreement that many analysts had expected to emerge, theatrically, not long before the Dec. 31 deadline. Discussions will now continue this week on a final deal that could determine the shape of Britain’s relations with continental Europe for decades to come.
But the lack of progress at Wednesday’s dinner is another setback to a negotiation that has been stuck for months.
Economic and political logic suggests that the British prime minister badly needs a deal. But having campaigned for Brexit on the basis of reclaiming national sovereignty, Mr. Johnson faces a tough task in reaching any agreement acceptable to both the bloc and Brexit supporters back home.
On Thursday, European Union leaders are set to gather in Brussels with other important issues on their agenda, like the next seven-year budget, the coronavirus recovery fund, the rule of law and possible sanctions on Turkey. European leaders were not planning to discuss Brexit, though Ms. von der Leyen is expected to brief them on her talks with Mr. Johnson.
Had the Brexit trade discussions collapsed on Wednesday night, the political focus on both sides would have shifted to how to cope with the failure to strike a deal, and how to limit disruption in January when an abrupt switch in the terms of commerce could leave ports blocked and trucks stranded.
But the German chancellor, Angela Merkel, remained upbeat on Wednesday, saying “there is still the chance of an agreement.” She stressed, though, that the European Union would not accept any deal “if there are conditions from the British side that we can’t accept” or that threatens the single market.
Given the complexities and acute political sensitivities around any deal, neither side ahead of the meeting had been raising expectations that a breakthrough would be reached over Wednesday’s dinner of pumpkin soup and — appropriately for negotiators divided over fishing rights — scallops and turbot.
The Irish foreign minister, Simon Coveney, has expressed his belief that there will be some “thin” deal, a bare minimum agreement, but that the last hurdles are always the most difficult. “I think the negotiating teams and senior politicians will find a way of getting a deal,” he said, “but at the moment we’re in a difficult place as we try to close it out.”
But even Mr. Coveney, who is a good barometer of European sentiment, is becoming more gloomy. He said Monday night, after a meeting of bloc foreign ministers, that the mood was shifting toward preparations for going forward without a deal. There is “a great deal of frustration on the E.U. side, not just within the E.U. negotiating team” but “also across member states,” Mr. Coveney said.
One outstanding issue was resolved on Tuesday when London dropped a threat to break its withdrawal treaty — and to breach international law — over how it would implement rules on the flow of goods between Britain and Northern Ireland.
Yet the main issues that have prevented them from striking a trade deal have remained difficult to resolve: fishing rights, the rules on state subsidies and “level playing field” provisions to ensure fair competition between British and European companies, and the mechanisms to enforce them.
While access to fishing stocks is an extremely contentious political issue for Britain, France and other coastal European nations, the other issues are probably more difficult to resolve, because they touch on the hypersensitive principles of sovereignty.
The biggest gap is over the terms of fair trade, because officials in Brussels fear that, as a large economy on Europe’s doorstep, Britain could adopt lower labor or environmental standards, flood the European market and undercut continental companies.
On this point, Mr. Johnson faces a dilemma. Negotiators in Brussels want the right to impose tariffs on imports should Britain diverge from Europe’s standards. Given that Britain says it does not, in general, intend to adopt lower standards, it might never have to confront such a situation. But if Britain fails to strike a trade deal, it would definitely face tariffs.
Rather than a dry and technical trade issue, Mr. Johnson sees this as a European attempt to tie Britain to the bloc’s future rule book, trampling the national sovereignty that was at the heart of his vision for Brexit.
Mr. Johnson told lawmakers on Wednesday that a good deal was still possible. But he added that if Britain failed to follow future European rules, Brussels wanted the “automatic right to punish us and to retaliate,” adding that no British prime minister should accept such terms.
Hard-liners within his own party have amplified that argument, appealing to him not to compromise in the discussions with Ms. von der Leyen.
“The reality is that this is all about sovereignty,” Iain Duncan Smith, a former leader of the Conservative Party and a Brexit enthusiast, wrote in The Daily Telegraph. “From the beginning, it has been clear, whilst the U.K. wants a trade deal, E.U. wants to control us. Either the U.K. is sovereign or it is not.”
Yet the price of exercising complete sovereignty could be very high. Failure to strike a trade deal could well be exploited by pro-independence campaigners in Scotland, where a majority of voters opposed Brexit in a 2016 referendum. It would also wipe an additional 2 percent off British economic output while driving up inflation, unemployment and public borrowing, official forecasts said last month.
While European nations would suffer, too, none — with the possible exception of Ireland — would be hit as hard as Britain. Senior French officials, like the Europe minister, Clément Beaune, have said that France is ready to veto an unsatisfactory deal, and Dutch officials have suggested that the European Union’s chief negotiator, Michel Barnier, is coming very close in his negotiations to crossing “the red lines” of his mandate in terms of the allowable concessions to reach a deal.
Ms. Merkel stressed the need for Britain to adhere closely to the bloc’s rules on labor, the environment and fair competition, as well as for mechanisms to police any agreement.
“We must have a level playing field not just for today, but we must have one for tomorrow or the day after, and to do this we must have agreements on how one can react if the other changes their legal situation,” Ms. Merkel said. “Otherwise there will be unfair competitive conditions that we cannot ask of our companies.”
The Europeans are adamant that the mandate will not change and that Mr. Barnier has their confidence. While European nations may have differing priorities, their leaders say that they will not break the solidarity shown so far, and that their formal role will be simply to endorse any deal Mr. Barnier can reach — or acknowledge that the talks have failed.
Though Thursday’s meeting was seen as an opportunity for European Union leaders to approve a Brexit trade deal, some analysts believe that an accord could still be agreed and ratified in the last days of the month.
How this gets resolved — to what degree Britain must keep to rules set in Brussels and how to settle any disputes that arise — remains at the heart of the continuing disagreements. But selling any deal that emerges is another matter entirely.
Stephen Castle reported from London, and Steven Erlanger from Brussels.
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