By Elizabeth Piper and Philip Blenkinsop
LONDON/BRUSSELS (Reuters) -Britain and the European Union failed on Wednesday to agree any solutions to ease post-Brexit trade with Northern Ireland and exchanged threats in a standoff that could cloud a weekend international summit.
Since Britain completed its tortuous exit from the EU late last year, its relations with Brussels have soured further, with each side accusing the other of bad faith over a part of their Brexit deal that covers goods movements to Northern Ireland.
The row has been dubbed the "sausage war" by UK media as it affects the movement of chilled meats from Britain to Northern Ireland, a British province.
On Wednesday, the dispute moved up a gear, with Britain saying it could again unilaterally extend a grace period waiving checks on some foodstuffs, and the EU saying it could advance its legal action, a step that could end in tariffs and quotas.
British Prime Minister Boris Johnson wants the summit of the world's seven largest advanced economies (G7) in southwestern England to showcase what he calls "global Britain". He said he wasn't worried about the spat overshadowing the event.
But he could receive a warning from U.S. President Joe Biden, who, according to the Times newspaper, will tell London to respect a deal with the EU that was designed to protect a 23-year-old peace settlement in Northern Ireland.
British Brexit minister David Frost, who is expected to attend the summit and sit in on any talks with EU leaders, met European Commission Vice President Maros Sefcovic in London to address the issue.
"There weren't any breakthroughs. There aren't any breakdowns either, and we are going to carry on talking," Frost told reporters. "What we now need to do is very urgently find some solutions."
A senior UK source close to the talks said all options were on the table if there was no agreement, including London further extending a grace period that waives checks on some foodstuffs moving to Northern Ireland beyond June 30.
Sefcovic responded in kind, saying the EU was considering advancing its legal challenge over Britain's actions, which could result in a court case by autumn or the eventual imposition of tariffs and quotas.
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"The U.S. administration and the U.S. Congress are following this matter very closely," Sefcovic told a news conference.
"I'm sure that the G7, also the European leaders, would raise this issue because I think that what we should be focusing on right now should be the economic recovery ... and how to form and forge this new strategic partnership between the EU and the UK. Instead of that, we have these very difficult meetings."
Asked if the G7 summit would be overshadowed by the spat, Johnson said: "I'm not worried about that." He voiced optimism that a solution could be reached, adding: "I'm very, very optimistic about this, I think that's easily doable."
Preserving the delicate peace in Northern Ireland without allowing the United Kingdom a back door into the EU's single market across the Irish land border was one of the trickiest issues of the Brexit divorce. Ireland is an EU member state.
The result was the protocol, which essentially kept the province in the EU's customs union and adhering to many of the rules of its single market - both of which the rest of Britain has left.
While Brussels is upset that London is failing to honour the protocol, Britain says it has no choice because some of the checks hamper supplies to Northern Irish supermarkets.
It has also pointed to rising tensions among pro-British unionists in the province, who say the protocol undermines the 1998 peace agreement by loosening their ties to Britain.
Aodhán Connolly, director of the Northern Ireland Retail Consortium, called for rapid action to protect consumers in the province:
"We need immediate solutions to keep goods flowing now, and we need a breathing space so that the UK Government and the EU can, in the longer term, find a workable solution."