(Bloomberg) -- The European Union and the UK are preparing to enter an intense phase of negotiations starting next week aimed at overcoming the dispute over the post-Brexit trading relationship well ahead of the anniversary of Northern Ireland’s peace agreement in April, according to people familiar with the matter.

The aim is to move into a negotiating “tunnel” after UK foreign minister James Cleverly and European Commission Vice-President Maros Sefcovic take stock of talks on Jan. 16, said the people, who spoke on condition of anonymity to discuss private talks.

Cleverly and Sefcovic announced earlier this week that the EU had agreed to use the UK’s live database tracking goods moving from Great Britain to Northern Ireland. This was a first sign of progress in a long-running dispute on post-Brexit trading rules and a step that paves the way for negotiations on other more complex issues, such as checks on agri-food goods, state aid and VAT.

Other outstanding issues include disagreement over the governance of the Northern Ireland protocol, with the UK demanding that the European Court of Justice be totally stripped of its role in settling Brexit disputes in the region. That remains a red line for the EU.

Peace Agreement

Stephen Kelly, CEO of Manufacturing NI, said after talks with Cleverly this week that he expected the UK and EU would announce “a deep scoping exercise, deep conversation — what’s traditionally known as a tunnel” after Cleverly and Sefcovic meet on Jan. 16.

The two sides are hoping to unlock an agreement by the end of next month, ahead of the April anniversary of the 1998 Belfast peace agreement, Bloomberg previously reported. 

While it “would be nice” to have a deal by then, “it’s not possible to put that kind of timeframe on it,” Irish Prime Minister Leo Varadkar told reporters in Belfast on Thursday. 

Beyond technical issues, any agreement would need to be sold to stakeholders in the Conservative party in London and also in Northern Ireland, where the Democratic Unionist Party is staunchly opposed to the protocol. If a new Northern Irish executive isn’t formed by Jan. 19, fresh elections are to be called by April 13 — and Varadkar said the “cut and thrust” of political campaigns would make reaching a deal on the protocol more difficult.

The dispute stems from the original Brexit deal, when both sides agreed to avoid a land border on the island of Ireland. The mechanism to that effectively placed a frontier in the Irish Sea, and allowed Northern Ireland to remain in the bloc’s single market and customs arrangements. The UK has so far failed to implement parts of those accords and in response the EU has opened several infringement procedures.

--With assistance from Olivia Fletcher and Peter O'Dwyer.

(Updates with comments by Irish prime minister in 7th and 9th paragraphs)

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