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The Irish Foreign Affairs Minister said he believes that a deal is possible between the two sides over the post-Brexit protocol, but added that trust has been compromised by the UK approach.
Under the protocol, Northern Ireland effectively remains in the EU’s single market for goods.
This helps to avoid a hard border with Ireland but increases checks and barriers to trade on goods crossing the Irish Sea from Great Britain, making it a source of tension in unionist communities.
The UK and the EU have been locked in negotiations over the implementation of the protocol and Brexit Minister Lord Frost has said the difficulties caused mean that use of Article 16 would be justified as a safeguard.
When trust is compromised, progress is threatened and the recent UK approach to the protocol has unfortunately called that trust into question
This would suspend parts of the agreement and risk a major escalation in tensions with the EU.
Mr Coveney was giving evidence to the Seanad Brexit Committee, where he said that he wanted to see future relations between the EU and UK develop positively.
He added: “In order to achieve this, parties must work together in a spirit of partnership and trust.
“When trust is compromised, progress is threatened and the recent UK approach to the protocol has unfortunately called that trust into question.
“I believe the remaining issues can be resolved, however to do so we need to get a much more positive, much more stable and much more trusting EU/UK relationship.
“We have some way to go to get there.”
Mr Coveney told the committee that Northern Ireland was better off with the protocol.
“Northern Ireland has this unique opportunity to access a very large UK single market, but also a much larger EU single market.
“There is potentially a pull factor into Northern Ireland in terms of foreign direct investment – if the protocol was stable and predictable you could access both markets from Northern Ireland.”
Asked to give an update on the current negotiations, Mr Coveney said there had been a “change in tone” from the UK two weeks ago.
He added: “This certainly suggested to the EU that negotiation was worth investing in, because before that really the negotiations were going nowhere.
“I am more hopeful than I have been. I spoke to Lord Frost last week. He did remind me that they still regard Article 16 as a perfectly legitimate tool to use.
“They are effectively suggesting that if they can’t get the compromise they are looking for from the EU they may act unilaterally and use Article 16 to set aside elements of the protocol that they don’t believe are necessary.
“I don’t believe that the EU will respond well to that. In fact I know they won’t. They will respond very robustly and they will regard it as a fairly serious breach of good faith.”
He added: “There’s still quite a big gap between the two sides, but at least the negotiations are focused on trying to find landing ground.
“We should give those negotiating teams time and space and also the confidentiality of what goes on that hopefully can facilitate the building of some trust, because trust is possibly the biggest problem.
“I think the EU is concerned that if they make a concession it will be banked and Lord Frost’s team will take that and look for more.
“I think the UK has got to give something here too. All of the concessions have been moving in one direction only.”