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Triggering Article 16 will be the "only option" if talks between the UK and EU fail to resolve Northern Ireland Protocol problems, Lord Frost has said.
The UK's Brexit minister gave an update after almost four weeks of intensive talks to address the standoff.
But he said the UK was "not giving up" yet and he wished to remain positive.
The protocol is a post-Brexit trading arrangement specific to Northern Ireland, but the UK wants changes to the deal it agreed with the EU in 2019.
The deal struck two years ago was aimed at preventing a hard border on the island of Ireland but critics argue it is disrupting trade and undermining Northern Ireland's position within the UK.
Article 16 of the Northern Ireland Protocol is a safeguard measure which allows either the UK or the EU to take unilateral action if they believe the arrangement is causing serious problems.
The UK has been warning since July that it believes the conditions have already been met to trigger Article 16 but is still trying to avoid that outcome through further talks.
There is growing speculation that the move could be just weeks away.
'Stay calm'
Speaking in the House of Lords on Wednesday, Lord Frost said: "If the talks do in the end fail, we will of course publish in full our assessment of the EU's proposals in full and set out why they fall short of a durable settlement, but we will not do so until we have exhausted all the negotiating possibilities."
The minister argued that triggering Article 16 would be "wholly consistent" with the UK's legal obligations even though the EU disputes that position.
Last week, European Commission Vice-President Maros Sefcovic warned there would be "serious consequences" if the UK triggered Article 16.
However, Lord Frost urged the EU to "stay calm" and "turn away from confrontation" over the protocol.
He said the EU was threatening "massive and disproportionate retaliation" if the UK triggers Article 16.
"My Lords, I gently suggest that our European friends should stay calm and keep things in proportion," he told the House of Lords.
'Protecting their own interests'
He said no country in the world had a greater interest in stability and security in Northern Ireland than the UK and was therefore "hardly likely to proceed in a way that puts all that at risk".
"If the EU were to choose to react in a disproportionate way, and decide to aggravate the problems in Northern Ireland rather than reduce them, that is of course a matter for them.
"But at that point we would be entitled to come to our own judgement about how much value we could attach to their commitment to supporting the peace process and the people of Northern Ireland as against protecting their own interests."
Lord Frost will meet his EU counterpart Maros Sefcovic on Friday for a fourth round of discussions.
He made his statement as Mr Sefcovic briefed EU ambassadors in Brussels on the current state of the talks.
Edwin Poots, from the Democratic Unionist Party (DUP), said there is a "significant chance" Article 16 of the Northern Ireland Protocol will be triggered soon.
On Tuesday, DUP leader Sir Jeffrey Donaldson said he believed it was "unlikely" the UK and EU would reach agreement and that Article 16 could be triggered in a matter of weeks.
The move would result in some parts of the Northern Ireland Protocol being suspended.
The protocol keeps Northern Ireland in the EU's single market for goods and allows free-flowing trade with the EU.
But it also creates a trade border between Northern Ireland and Great Britain.
'Dangerous'
In the United States, several senior members of the House Foreign Affairs Committee published a joint statement criticising the UK's position on the protocol standoff as "dangerous".
"The Good Friday Agreement and broader peace process took patience and time to build, with good faith contributions from the communities in Northern Ireland, the United States, the United Kingdom, Ireland, and others," the statement said.
"In threatening to invoke Article 16 of the Northern Ireland Protocol, the United Kingdom threatens to not only destabilize trade relations, but also that hard earned peace. We call on the UK to abandon this dangerous path, and to commit to implementing the Northern Ireland Protocol in full."