The European Union and the U.K. braced for a new round of negotiations over trade barriers in Northern Ireland, after a British challenge and fresh concessions from the bloc signaled glimmers of progress in defusing tensions.

The two sides will talk in London over the coming days, with Maros Sefcovic, the EU’s chief Brexit negotiator, voicing optimism that in the next weeks the two sides “will jointly arrive at an agreed solution that Northern Ireland truly deserves.”

Sefcovic unveiled a set of proposed adjustments to the Northern Ireland protocol on Wednesday that would slash customs checks into the territory by half and cut sanitary inspections on many retail goods including ham and sausages by 80%.

“We have put a lot of hard work into this package, explored every possible angle of the protocol, and at times went beyond current EU law,” Sefcovic said Wednesday evening at a news conference. “In effect, we are proposing an alternative model for implementation of the protocol.”

The EU’s proposals, which offer significant concessions on the Northern Ireland protocol that governs the movement of goods in and out of Northern Ireland, offered the prospect a trade war could be averted, but the bloc’s offer didn’t address key U.K. demands, including the oversight of the European Court of Justice.

The U.K. government said it will study the new EU proposal seriously. “The next step should be intensive talks on both our sets of proposals, rapidly conducted, to determine whether there is common ground to find a solution,” it said in a statement.

As part of the U.K.’s departure from the bloc, Britain signed up to the protocol, which kept the province in the EU’s single market—unlike the rest of the U.K. This allowed the U.K. to shed EU regulations without creating a hard border on the island of Ireland.

Sefcovic’s package, described by EU officials as not being a take-it or leave-it offer, leaves a host of sticking points for the new talks. Failure to clinch a resolution could pave the way to tit-for-tat economic retaliation, reopening the wounds from the fraught Brexit negotiations.

A New Protocol

The EU procedures for medicines would remain largely unchanged, allowing medications, including generics, to be brought in from the U.K. without going through any additional checks regulatory hurdles when they reach Northern Ireland.

“On one hand, the flow of goods between Great Britain and Northern Ireland would be facilitated for goods that are to stay in Northern Ireland,” Sefcovic said. “On the other, robust safeguards and monitoring mechanisms should be put in place to make sure they stay in Northern Ireland.”

The EU insists it won’t renegotiate the accord, which is a binding international treaty, despite U.K. Brexit minister David Frost saying in a speech Tuesday that the protocol is flawed and offering a replacement “forward-looking” version.

But the EU isn’t ready to accept Frost’s rejection of the authority of the European Court of Justice over trade between Britain and Northern Ireland, EU officials said. The ECJ issue isn’t raised by stakeholders and citizens in Northern Ireland, said one EU diplomat.

“It’s very clear that you cannot have access to the single market without the supervision of the ECJ,” Sefcovic said. “But I think that we should really put aside this business of the red lines, the business of deadlines, real or artificial, and we should really focus on what we hear from the stakeholders and the people in Northern Ireland.”

The EU’s proposals were welcomed by EU member states, including Ireland, whose foreign minister, Simon Coveney, saying they “comprehensively address the practical, genuine issues that matter most” to Northern Ireland.

The Northern Ireland Business Brexit Working Group, which represents local businesses, cautiously welcomed the new proposals, but said any changes need to bring stability and certainty.

ECJ, Single Market

What happens next will depend on how realistic London proves to be, and any solution needs to provide stability, certainty and predictability to Northern Ireland, the EU official said.

Frost said Tuesday the U.K. is prepared to trigger Article 16—a clause in the protocol that allows for unilateral safeguard measures if “serious economic, societal or environmental difficulties” result from its implementation. The EU has warned it’s prepared to respond with legal and retaliatory trade measures.

If Britain invokes Article 16, the EU has the right to take immediate and proportionate re-balancing measures, depending on the U.K.’s actions. A trade war is possible, with options for the EU including seeking to impose tariffs on sensitive industries, or dialing up the intensity of customs checks on goods crossing the English Channel.

In another post-Brexit dispute, French government spokesman Gabriel Attal told reporters it could announce bilateral retaliation measures against the U.K. at the end of next week, if London still doesn’t comply with its commitments on granting fishing rights. A French minister earlier this month indicated France could threaten Britain’s electricity supplies.