By Gabriela Baczynska
BRUSSELS (Reuters) - The European Union wants Britain to stick to the bloc's rules on state aid, environment and workers' rights after Brexit to prevent it from gaining unfair access to the single market, diplomatic sources and officials told Reuters.
The EU sees this as key to ensuring a "level playing field" should the so-called Irish border backstop kick in after Brexit, tying all of the United Kingdom into a customs zone with the bloc.
"It is important that Britain would not undercut our own products on our own market in the all-UK Irish backstop," one source said of the EU demand that comes as the two sides are seeking a Brexit deal as soon as this month.
The border backstop, or an emergency fix to ensure the border between EU-member Ireland and Northern Ireland in the United Kingdom remains open, is the biggest hurdle in the divorce talks.
The EU has made concessions but there are still differences on the lifespan of such a solution, a review mechanism or the depth of regulatory alliance under the all-UK backstop, which has been sought by London.
The EU has presented the three areas as the bare minimum it deems necessary, complemented by no internal trade tariffs or quotas and the same external tariff.
The EU does not want to allow Britain to be able to pull out of the Irish backstop unilaterally but proposes that any such decision could be done by a joint committee.
"If you have a customs union-ish thingy, then that level playing field is a very important aspect. This is something we want to see there," a senior EU diplomat said. "Some member states have also mentioned fisheries."
For the EU, agreeing to an all-UK customs union is difficult as it risks prejudging the bloc's future relationship with Britain. And Brexit supporters say such a backstop solution could leave Britain in a perpetual customs union with the EU they want to leave.
The bloc is now waiting on whether British Prime Minister Theresa May can get her cabinet and parliament behind that.
If that is possible, EU and British Brexit negotiators would recommend that "decisive progress" has been achieved in Brexit talks and the EU would call a special summit of its 27 national leaders to endorse it.
Irish Prime Minister Leo Varadkar warned on Wednesday that chances for a deal this month were fading.
For Britain, it is important to lock in a deal before the turn of the year to give businesses the clarity they need to plan for the first quarter of 2019 when Britain is due to become the first country ever to leave the EU.
May has stepped up attempts to court European support for a Brexit deal as negotiations on securing a smooth British divorce from the world's biggest trading bloc enter their final stages.
(Reporting by Gabriela Baczynska; Editing by Raissa Kasolowsky and Janet Lawrence)