The European Commission proposed a powerful new trade tool on Wednesday (December 8), which will give it more leeway to impose sanctions on third countries.
In recent years, the EU has increasingly found itself facing threats from economic competitors, such as China threatening French wine sellers and German automakers, or Washington imposing tariffs on European steel and aluminum.
“Through this proposal, we have sent a clear message that the EU will firmly defend its interests,” said Valdis Donbrowskis, EU trade chief, in Brussels.
The new instrument stipulates a procedure. If the EU or its member states are subject to “coercive measures” by third countries such as China or the United States, the European Commission can take countermeasures.
“The main purpose of anti-coercion tools is to act as a deterrent,” Dombrovskis said. The reason is that if a third country sees that the EU will take countermeasures, they may not make any coercive attempts in the first place.
However, EU executives did not define mandatory measures that may require the EU to respond.
The list of possible countermeasures that Brussels may take under the proposed regulations is long and may include suspension of preferential tariffs and restrictions on the possibility of obtaining public procurement or investment. In addition, EU countermeasures can target individuals, companies and/or third countries.
According to an EU official, the trigger for the application of the instrument has nothing to do with the form of the measure, but with the intention to coerce the EU or member states.
Bernd Langer, chairman of the European Parliament’s Trade Committee, said that the proposal will help the European Union defend its interests.
“We now need to develop a comprehensive approach to what constitutes coercive behavior and how the EU should respond to these aggressive behaviors. From investment restrictions to intellectual property sanctions, we need a complete toolbox. The rules-based multilateral trade order remains ours. First priority, but we will not allow others to give orders to us,” he said.
A tense geopolitical climate
Dombrovskis gave an example of the coercive measures the Chinese government has taken against Lithuania in the past few days because of Vilnius’s diplomatic support for Taiwan.
Earlier this week, Lithuanian Foreign Minister Landsbergis wrote to East Brovskis and EU Chief Diplomat Joseph Borrell, asking the EU to intervene on behalf of the country, saying that it is time to finalize the anti-coercion mechanism. NS.
“It is hard not to see that these recent measures taken by the People’s Republic of China are a continuation of the politically motivated economic coercion that Lithuania has been facing since August 2021,” Landsbergs wrote.
“These activities of the Chinese authorities against an EU member state have a direct impact on the EU as a whole and our common trade policy,” he added.
Dombrovskis said that the Lithuanian case “clearly can be used as a reason for an assessment to determine whether there is economic coercion.”
Niclas Frederic Poitiers, a researcher at Bruegel think tank in Brussels, stated that the multilateral trading system “has failed to adapt to the current challenges of global trade”.
“In particular, the United States has adopted some trade policies that clearly violate WTO rules, while China is using its economic influence to put pressure on smaller economies such as Australia and most recently Lithuania.”
Poitiers said that even if the World Trade Organization is fully functional, it is not suitable for dealing with rapidly evolving trade disputes, and anti-coercion tools try to solve this problem.
However, according to trade lawyer Charlotte Sieber-Gasser, the dispute between China and Lithuania will take several years to end in the WTO environment.
The storm is brewing
However, one of the crux of the future surrounding the proposal is that the committee considers the tool to be in the field of trade policy rather than foreign policy, which allows the regulation to be passed by a qualified majority government, thereby circumventing the usual consensus requirements.
“This tool seems very suitable because it avoids the EU’s foreign policy coherence and is therefore more likely to play a more credible deterrent effect,” Poitiers said.
“Whether it can effectively act as a deterrent will depend on the EU’s willingness to respond forcefully to challenges from other major economies such as China or the United States,” he told EURACTIV.
Some member states, including Sweden, the Czech Republic, Northern Europe and Ireland, warned in a recent non-paper that the instrument should not lead to more protectionism.
Handed over to the french
An EU diplomat told EURACTIV that “the touchstone of the new tool will be when another incident like Lithuania occurs”, adding that member states still have too few details on how the mechanism should work to question its use. .
The proposal will now be discussed by the European Parliament and the governments of the member states of the European Council.
The French government, which will assume the rotating presidency of the European Council in the first half of 2022, welcomed the proposal.
“We are determined to advance this proposal during the French presidency of the Council. When the interests of the European Union are challenged by foreign powers, it is time for the European Union to have the means to defend its sovereignty,” said French Trade Minister Frank Rist.
[Edited by Zoran Radosavljevic]
