MEPs adopt new trade tool to defend EU from economic blackmail

This article is brought to you in association with the European Parliament.

The new trade instrument is primarily meant as a deterrent, but it will allow the EU to fight economic coercion and respond with its own countermeasures.

With 578 votes to 24 and 19 abstentions. Parliament approved on Tuesday a new trade instrument to enable the EU to respond, in line with international law and as a last resort, should the EU or member states face economic blackmail from a foreign country seeking to influence a specific policy or stance.

The Anti-Coercion Instrument (ACI) seeks to protect EU and member state sovereignty in a geopolitical context where trade and investment are increasingly weaponised by foreign powers.

What is coercion?

According to the regulation, economic coercion occurs when a non-EU country attempts to pressure the EU or a member state into making a specific choice by applying, or threatening to apply, trade or investment measures. Although this kind of coercion undermines the EU’s strategic autonomy, it is not covered by the World Trade Organisation (WTO) agreement. The WTO dispute settlement mechanism is unavailable for cases of economic coercion specifically, unless they also involve aspects that violate WTO rules.

Under the new rules, the Commission will have four months to investigate potential coercion. Based on its findings, the Council will have eight to ten weeks to decide -by a qualified majority- whether coercion exists. Although the primary objective will be to engage in dialogue to persuade the authorities of the non-EU country to cease their coercion, if those efforts fail, the EU will have a wide range of countermeasures at its disposal. If coercion is found, and member states agree, the Commission will have six months to outline the appropriate response, keeping the Parliament and the Council informed at all stages.

Potential countermeasures

MEPs enhanced the deterrent aspect of the instrument by including a comprehensive list of potential responses available to the EU, including restrictions in trade of goods and services, intellectual property rights and foreign direct investment. Imposing constraints on access to the EU public procurement market, capital market, and authorisation of products under chemical and sanitary rules will also be possible.

Repairing the injury

Under the new rules, the EU could seek “reparation” from the coercive non-EU country. The Commission may also apply measures to enforce these reparations.

Quote

Bernd LANGE (S&D, DE), rapporteur and Chair of the Committee on International Trade, said: “This instrument enables rapid reaction against coercive measures, against pressure from other countries. We have introduced clear timelines and clear definitions to say what a coercive measure is and how to react to it. We now have a broad range of countermeasures at our disposal and have filled our toolbox with defensive instruments. While this anti-coercion tool should act as a deterrent, we will also be able to take action if necessary to defend the European Union’s sovereignty.”

Next steps

Once formally adopted by the Council – expected in October -, the regulation will take effect 20 days after publication in the Official Journal.

Background

The Commission proposed the mechanism in December 2021, driven by a demand from the European Parliament and in response to economic pressure exerted by the US during the Trump administration, along with numerous confrontations between the EU and China. This new instrument complements a series of trade defence tools adopted in recent years. In May, G7 leaders announced the launch of a coordination platform against economic coercion, echoing the EU’s initiative.