* UK would choose between two options before transition ends
* How UK could exit EU customs arrangement not yet finalised
* Level playing field, fisheries not completely settled
* PM May trying to sell deal to her cabinet on Wednesday (Adds detail on draft accord from EU sources)
By Gabriela Baczynska
BRUSSELS, Nov 14 (Reuters) - The draft accord reached between the EU and Britain envisages a July 2020 decision on what would have to be done to safeguard an open Irish border after the post-Brexit transition runs its course and if a new trade deal is not in place, EU sources said.
Britain would then have two choices. One would be extending the transition period once beyond December 2020, possibly until the end of 2021. The other would be going into a “bare-bones” customs arrangement that would cover all of the United Kingdom but in which its province of Northern Ireland would be aligned more closely with the EU’s customs rules and production standards, three diplomatic sources said in Brussels.
British Prime Minister Theresa May was trying to convince her cabinet on Wednesday to accept the draft EU divorce deal, which her opponents say threatens both her government and the unity of the United Kingdom.
Under World Trade Organisation rules, however, Northern Ireland and the rest of Britain would remain part of the same customs area under the draft deal, EU sources stressed, an effort to appease May’s Northern Irish Unionist allies who prop up her minority government in London.
The EU sources said the customs arrangement option included clauses to ensure a “level playing field” by stipulating the UK would have to align itself with EU rules on state aid and competition, environment and labour standards - anathema to hardline Brexiteers in her divided Conservative Party.
For the EU, this measure is crucial as otherwise it fears Britain could gain open access to the bloc’s cherished single market with no tariffs or quotas and without needing to observe the same standards. This could lead to British goods in the EU being offered at prices undercutting the bloc’s own producers.
France is spearheading a group of EU countries in demanding guarantees to prevent any such outcome, the sources said.
Northern Ireland would remain inside the EU customs union, the sources said, as an emergency fix to keep the Irish border open if a separate deal on future trade relations with the EU has not been reached by the end of the transition period.
They said ways for Britain to exit the customs arrangement were still not finalised and would require more negotiations. The EU wants any such exit to be approved jointly through a common EU-UK arbitration mechanism - the Joint Committee.
Under the preferred EU option, should the two sides be unable to agree, they would seek guidance from the bloc’s top court, the European Court of Justice (ECJ).
But May’s government wants to be able to walk away unilaterally. Powerful Brexiteers in her party vow to reject any deal that would keep Britain in an EU customs zone indefinitely, hampering its freedom to pursue independent trade deals.
Ending the jurisdiction of the ECJ in Britain was also a central promise of the “Leave” campaign that narrowly won Britain’s 2016 referendum on EU membership.
The British side has not yet shared any details of the deal.
Another open issue is fisheries, according to the sources. The EU wants to maintain the current mutual access to fishing waters, which often means EU countries and companies fishing in UK waters. London wants to take full control of its fisheries.
France, Belgium, the Netherlands and Denmark were among those EU states pushing for firm guarantees of access to UK waters.
The three sources, however, said that this issue was left outside the “bare-bones” customs arrangement in the draft Brexit deal. The two sides would only agree to work this out by July 2020, they added.
All in all, EU sources have said they felt like the bloc has given quite some ground to UK demands in the negotiation, though that would not be the way May’s critics see it.
May’s cabinet will convene on Wednesday at the same time as 27 national envoys of EU member states in Brussels. They will look at the proposed deal and wait to see if the British cabinet has approved it.
Should that happen, the EU’s 27 national ministers for European affairs would meet in Brussels on Monday to start preparing what is expected to be a Nov. 25 EU leaders’ summit to rubber-stamp the deal, sources in Brussels said.
If the European Parliament and, much more uncertain, Britain’s House of Commons ratify the deal, it would give Britain a status-quo transition period after Brexit Day on March 29, 2019. It would settle the divorce bill and ensure the rights of some 3 million expatriates in the future, among other things.
But both the EU and UK have also stepped up preparations for the most damaging scenario in which they fail to finalise the deal and Britain crashes out from the bloc with no agreement in place to manage the fallout. (Reporting by Gabriela Baczynska; Editing by Mark Heinrich)