Brexit negotiations: The UK and EU are still far apart

Thousands of people take to the streets in a series of 'March for Europe' rallies in protest against the referendum vote to leave the EU
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At the start of the third round of Brexit talks, only one thing seems clear: the division between Brussels and London.

The EU's chief negotiator Michel Barnier said last June that the third round of negotiations should be about clarification, but after the U.K. published a few papers outlining its position, it is evident that there's a lot of work to do to bring both sides to an agreement.

With only two more rounds scheduled, CNBC takes a look at some of the most recent developments and pressing issues ahead of the third series of Brexit talks.

1. European Court of Justice

The U.K. proposed to put an end to the court's direct jurisdiction. This means that the rulings taken by the European Court of Justice (ECJ) will no longer be binding in U.K. law. However, this results in a legal headache.

Andrew Hood, former legal advisor to David Cameron and senior director of Dechert LLP, told CNBC: "Imagine you're producing a car in the U.K. and selling it to the EU. The law that applies through the Great Repeal Bill will be EU law but the ECJ might interpret it one way and the U.K. Supreme Court another. Effectively, even though the manufacturer is based in the U.K. and the EU law is no longer binding on the U.K., the manufacturer will have to obey the ECJ interpretation of the rules if the car is to be sold in the EU."

"How do you keep these two regulatory systems?," Hood wondered, "It's not easy," he said.

"All this proposal does is show the differences of opinion," Hood added.

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At the same time, the U.K. wants a third body to oversee bilateral issues including the highly contested issue of citizens' rights. The EU wants the European Court of Justice to keep overseeing the rights granted to EU citizens even if they have chosen to live in the U.K.

Irish Prime Minister Leo Varadkar said earlier this month that the EU should accede to Britain's wish to have a third institution.

2.Irish border

Michel Barnier told his British counterpart to state clearly the country's position on the Irish border regarding the common travel area and the Good Friday agreement. The U.K. heard and said recently that it will not introduce a hard border between the Ireland and Northern Ireland after Brexit.

However, the proposal was received with some skepticism in Brussels.

Brexit making it harder for restaurant staff: Expert
Brexit making it harder for restaurant staff: Expert

Allowing Irish and Northern Irish citizens to cross the border without passport checks will technically mean they will be crossing the border into the U.K. illegally and questions Prime Minister Teresa May's argument that the U.K. will take back control of its borders.

The U.K. also wants to keep a "frictionless" flow of goods with the EU – something that officials in Brussels do not understand how it can work given that the U.K. wants to be outside the single market and the customs union.

3. Financial Settlement – 'Brexit bill'

The U.K. government has recognized that it will have to pay a price before leaving the European Union – even the pro-Brexit minister Boris Johnson has admitted it. The U.K.'s head of foreign affairs said Friday that the U.K. will pay money to the EU as it leaves the Union. He had previously stated that Brussels could "go whistle" over an exit bill.

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The money is a key demand from the Europeans so the projects that the U.K. supported will not lose funding and U.K. workers in European institutions will receive their benefits, including pensions.

The Daily Telegraph said earlier in August, citing three sources, that Prime Minister Teresa May was ready to pay up to 40 billion euros ($47.29 billion) to leave the EU. Numbers from the EU place the bill between 60 to 100 billion euros ($70.94 - $118.23 billion).

4. Transition deal

The U.K. has also said that it wants a transition deal after negotiations are over (in March of 2019) so U.K. companies can continue to trade with the EU without an abrupt end to the current situation. However, such a period should not be lengthy.

The EU does not oppose a transition period. "Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms," the EU said in its negotiation guidelines. However, during that transition period, the U.K. might still be subject to EU laws, including the restriction to close trade deals.

Meanwhile, the pound suffers

Market is becoming 'bored' by UK politics, Brexit: Pro
Market is becoming 'bored' by UK politics, Brexit: Pro

Most analysts recognize that the publication of the U.K. position on several issues have not dissipated fears and doubts. If anything, the future is even more unclear. The pound fell 1.4 percent against the dollar since the U.K. began publishing those positions in mid-august.

Data from the Confederation of the British Industry showed Thursday U.K. retail sales declining in the year to August.

"Despite the warmer weather at the start of the month, retail sales have cooled as higher inflation continues to squeeze consumers' pockets. Meanwhile, deteriorating sentiment regarding the business situation has combined with falling headcount among retailers," Anna Leach, CBI head of economic intelligence, said in a statement.

The third round of talks concludes on Thursday.

The next round is scheduled for September 28 and the final one for October 9. After that, London and Brussels are set to discuss how they will trade together after March 2019.