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EU threatens trade war after Brexit talks fail to break deadlock

Lord David Frost, the UK's chief Brexit negotiator. Photo: Aaron Chown/PA Images via Getty Images
Lord David Frost, the UK's chief Brexit negotiator. Photo: Aaron Chown/PA Images via Getty Images (Aaron Chown - PA Images via Getty Images)

The European Union threatened a trade war if the UK continues to fail to implement checks on goods entering Northern Ireland (NI) under the Brexit agreement.

Britain's Brexit minister David Frost and European Commission (EC) vice-president Maros Sefcovic failed to break an impasse between the two sides after discussions in London on Wednesday.

The pair have been clashing over when the UK will implement agreed checks on goods moving to and from NI, which remains in the EU single market. Britain is said to be mulling delays to checks, which the bloc believes violates the terms of the Brexit deal.

Sefcovic, who said Britain had agreed that the protocol was the "best solution" after talks concluded, warned on the souring relationship with the UK.

Speaking during a press conference, Sefcovic said the relationship between the pair was at a "crossroads" and that the bloc’s patience was wearing "very thin" as it considers all available options.

"If the UK were to take further unilateral action in the coming weeks the EU will not be shy in acting swiftly, firmly and resolutely to ensure the UK abides by its international obligations," he warned.

He said "fundamental gaps" remained in the UK’s implementation of the deal. “These gaps need to be filled by a mutually agreed compliant path with concrete deadlines and milestones for the UK to fulfil its existing obligations.”

Sefcovic, who insisted he didn’t want to deliver "ultimatums" to the UK, added that the number of checks taking place at NI ports would be “corrected” provided there are “adequate” numbers of trained personnel to work with EU experts on the ground.

Sterling, which had been trading up earlier on Wednesday, fell 0.4% against the euro (GBPEUR=X) to €1.15. It also dropped 0.3% to trade at $1.41 against the dollar (GBPUSD=X), after hitting $1.42.

Lord Frost said there were "no breakthroughs or breakdowns" with the block on the implementation of the NI Protocol, including treatment of sausages and chilled meats, following "frank and honest" discussions.

"What the EU is insisting on is we should operate the protocol in an extremely purist way," Frost said. "The reality is that it’s a very balanced document that’s designed to support the peace process and deal with the very sensitive politics in Northern Ireland."

While talks between the pair will continue, the Brexit minister did not rule out the UK triggering Article 16 of the Northern Ireland Protocol, saying there are a "range of options" under consideration.

Article 16 of the protocol is a safeguard clause that gives the UK and EU unilateral powers to take action if the application of the protocol raises serious economic, societal or environmental issues that are "liable to persist, or to diversion of trade".

"What we really now need to do is very urgently find some solutions which support the Belfast Good Friday Agreement, support the peace process in Northern Ireland and allow things to return to normal," Frost said.

Watch: What is the Northern Ireland Protocol and why are the EU and UK fighting over sausages?

The UK and EU have been going back forth over Northern Ireland since Britain left the bloc earlier in January. Relations have hardened in recent days after the EU threatened to stop sales of sausages to NI.

The NI protocol – part of the UK-EU deal designed to avoid a hard border on the island of Ireland – keeps the territory in the EU’s single market for goods, meaning new rules and restrictions on trade between Great Britain and NI.

The UK has been reluctant to implement these checks. The government has said it will unilaterally not enforce EU-mandated checks in NI later this year on products such as meat, despite agreeing to in the Brexit deal.

As a result, Brussels has threatened trade sanctions – a hardening of its stance that has been dubbed "sausage wars" in the press. Sefcovic said the bloc would act "swiftly, firmly and resolutely to ensure that the UK abides by its international law obligations" if Britain decided to delay checks on chilled meats on 30 June.

Read more: FTSE 100 heads lower ahead of Biden's UK visit for G7 Summit

Lord Frost had called on the EU to show "pragmatism and common sense" in resolving the issue. He warned the EU that time was "running out" to reach an agreement ahead of Wednesday's meeting.

"Further threats of legal action and trade retaliation from the EU won’t make life any easier for the shopper in Strabane who can’t buy their favourite product," Frost said ahead of the meeting. "Nor will it benefit the small business in Ballymena struggling to source produce from their supplier in Birmingham."

Former French European affairs minister Nathalie Loiseau, now an MEP, said the EU had the power to impose quotas on UK exports if it continued to make unilateral decisions on how the NI protocol was implemented.

According to reports, prime minister Boris Johnson is contemplating a delay to the enforcement of checks as talks between the UK and EU hit a stalemate. Many issues remain outstanding, including checks on animals, goods and medicine, the Telegraph reported. The grace period is due to expire at the end of June.

Brussels has already mounted legal action against Britain for breaching the terms of the NI protocol. In March, the bloc started legal actions after the UK government changed how the protocol was being implemented without EU agreement.

With Lord Frost travelling to Cornwall for the G7 Summit on Wednesday, the US could be dragged into the mix. President Joe Biden, who has Irish roots and is also travelling to the UK for the summit, has previously been outspoken on the issue of Ireland and Brexit.

Watch: No breakthrough in sausage trade war as UK and EU hold 'frank and honest' talks