* EU says onus to propose solutions falls on Britain
* Sharp disagreement on one of most complex points of Brexit
* Chief negotiator says EU won't suspend single market rules (Adds Irish reaction, details on commission paper)
BRUSSELS, Sept 7 (Reuters) - The European Union's chief Brexit negotiator said on Thursday that Britain's plans for a special border arrangement with Ireland after it leaves the EU were unacceptable.
The blunt comments from Michel Barnier highlighted the gulf between the two sides on one of the trickiest issues thrown up by Brexit - how it will affect the currently seamless movement of people and goods between the Republic of Ireland, which is an EU member, and British-ruled Northern Ireland.
Britain said last month that there should be no border posts or immigration checks along the 500 km (300 mile) frontier after Brexit. Some 30,000 people make the crossing each day, and businesses from farming to brewing depend on easy movement of goods between north and south.
While Brussels and Dublin also say they want to keep an open border, they say Britain has failed to explain how it would square this with its stated intention to leave the EU's customs union.
"The UK wants the EU to suspend the application of its laws, its customs union and its single market at what will be a new external border for the EU, and the UK wants to use Ireland as a kind of test case for the future EU-UK customs relations. This will not happen," Barnier told a news conference in Brussels.
The EU is also concerned that Britain could use the border between the two Irelands as a way to circumvent tariffs that could be imposed in a post-Brexit EU-UK trade deal.
Barnier's remarks coincided with the publication of a set of principles from the European Commission, the EU's executive, on how the Irish issue should be dealt with. It explicitly stated that the "onus to propose solutions" on Ireland fell on Britain.
The paper also made it clear that a hard border between Ireland and Northern Ireland should be avoided to protect peace on the island. It said that "any physical border infrastructure" should be ruled out, but that required "flexible and imaginative solutions".
LACK OF PROGRESS
Nearly three months into Brexit talks, EU and Britain negotiators have made little progress on the Irish border and the other issues - expatriate citizens' rights and the bill that London should pay its EU partners to settle existing financial commitments - that Brussels wants broadly solved before talks on a future trading relationship can start.
Barnier said what he had seen in the British negotiating paper on Ireland and Northern Ireland worried him. A solution had to be "unique" and would require flexibility from both sides, he said.
The Irish government called on Britain to make "substantive commitments" and provide "workable solutions". Prime Minister Leo Varadkar reiterated that for all sides to achieve their aim of avoiding a hard border, Britain needed to stay in the customs union or in a similar arrangement for at least a post-Brexit transition phase.
Britain seized on the EU comments about the need for an open border as evidence that British and EU objectives were "closely aligned".
"In particular the commitment to avoid any physical infrastructure at the border is a very important step forward," a government spokesman said, adding that the position papers from both sides "clearly provide a good basis on which to continue to make swift progress." (Additional reporting by Alastair Macdonald, Lily Cusack, Padraic Halpin and Kylie MacLellan; Editing by Mark Trevelyan)