The North's access to the single market could be “jeopardised” if Article 16 of the Northern Ireland protocol is triggered, Taoiseach Micheál Martin has told the Dáil.
Mr Martin urged caution against the belief that it is a certainty that the British government will move to invoke the article.
In London, British Brexit lead negotiator David Frost echoed Mr Martin’s comments, saying Europe should "stay calm and keep things in proportion" in a row over post-Brexit arrangements in the North.
Further talks would be held as the EU and UK struggle to overcome differences over the protocol, he said.
Mr Frost told the House of Lords that triggering Article 16 — which would effectively suspend elements of the arrangements — would be the UK's only option if the dispute was not resolved. He said there was "a real opportunity to turn away from confrontation, to move beyond our current difficulties and put in place a new, and better, equilibrium" in the talks.
He said it was "not inevitable" that Article 16 would be triggered.
Mr Martin, in the Dáil, said he wanted to “sign a note of caution that we don’t automatically assume that anything is going to be triggered”:
Mr Martin said access to the single market is important to people and businesses in the North and warned that any triggering of Article 16 “would ultimately jeopardise, in the short term, that access”.
He told TDs that “what’s important now is that we double down on dialogue and engagement. And that’s what is happening.”
Mr Martin reiterated his view last week that it would be “reckless and irresponsible” for the British government to trigger Article 16.
He said European commissioner Marius Sefcovic had come forward with a package of proposals that were far-reaching and comprehensive, which would form the basis for a further set of negotiations with the UK.
Earlier, Tánaiste Leo Varadkar warned British prime minister Boris Johnson that the UK will not end up with a better deal if it triggers Article 16.
“The message I’d send to Boris Johnson is that we have an agreement in relation to Northern Ireland, we have an agreement in relation to trade with the European Union — don’t jeopardise it,” Mr Varadkar said.
In the House of Lords, Mr Frost said: "In my view, this talks process has not reached its end. Although we have been talking nearly four weeks now, there remain possibilities that the talks have not yet seriously examined, including many approaches suggested by the UK.
"If, however, we do in due course reach that point, the Article 16 safeguards will be our only option."
He added: "I can reassure the House that if Article 16 were to be used, we would, of course, set out our case with confidence and explain that case to any interested party."
The UK government has set the EU a December deadline to find a solution on the Northern Ireland protocol, which was agreed as a way to maintain a free-flowing land border on the island of Ireland after Brexit.