Why ‘anti-coercion’ tool is the EU’s trade weapon of last resort
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The “anti-coercion instrument” is the EU’s strongest weapon to retaliate against economic or trade duress from a third country.
PHOTO: REUTERS
BRUSSELS - The European Union has a powerful tool to wield in trade disputes that it hopes it will never need to use.
As US President Donald Trump ramps up pressure on the bloc with a threat to impose a blanket import tariff of 30 per cent on European goods floating the possibility of invoking
The ACI allows the EU to use an array of measures stretching well beyond the boundaries of trade in goods in response to coercive actions by a trading partner.
In that sense, the bloc would be seeking to fight fire with fire
What is the anti-coercion instrument?
It is the EU’s strongest weapon to retaliate against economic or trade duress from a third country. If it decides that it is being coerced, the bloc may hit back with a range of punishments targeting the offending country’s access to one of the world’s biggest and most lucrative markets in goods and services.
In the case of the US, that could mean new taxes on US tech giants, curbs on US investments in Europe or a ban on American firms bidding for public contracts.
The EU sees the ACI’s true purpose not as retaliation so much as deterrence, as its provisions are so potentially damaging to a trade partner that the mere threat of applying it means countries will think twice before using trade as a diplomatic weapon.
What is the origin of the ACI?
The EU’s executive, the European Commission, proposed adopting the ACI in response to a series of wake-up calls, including Mr Trump’s trade actions against the bloc during his first administration and China’s 2021 trade blockade targeting EU member Lithuania over the European nation’s ties with Taiwan, which showed the EU’s vulnerability to coercive tactics wielded through trade and investment.
Under a new trade policy laid out that year, the EU has sought to become more assertive in upholding what it called a rules-based global order and its own interests and values.
The bloc’s “Open Strategic Autonomy” doctrine gives it scope to act independently in strategically important areas while prioritising multilateral cooperation where possible.
When can the ACI be used?
EU member states decide collectively whether to use the ACI. First it needs to be established that there is coercion by a third country.
Response measures can then be adopted via a qualified majority vote, which means gathering the support of 55 per cent of member states that together represent 65 per cent of the total population.
This gives the EU’s heavyweights, France and Germany, a significant say over the outcome.
What is coercion in trade?
Trade coercion is the practice of applying trade instruments such as tariffs, anti-dumping measures, quotas and other tools that inflict harm on a trade partner for reasons that are not justified under the generally accepted rules of international trade, and which do not directly address any recognised imbalance or injustice in the trading relationship.
The goal instead is to impose economic costs on the target in an arbitrary way as part of a broader diplomatic dispute.
Why is the ACI being talked about now?
France, which has the EU’s second-largest economy, has secured growing support for its call to deploy the ACI against the US if no trade deal is reached by Aug 1 and Mr Trump moves to impose a 30 per cent tariff on European goods.
As he has already warned any retaliation targeting US interests would be met with even tougher countermeasures from his administration, an activation of the ACI would likely escalate the transatlantic trade clash, pitting Washington against its largest trading partner.
The ACI’s proponents may be counting on recent events as justification for invoking it: When the US came to blows with China in May and it looked as if bilateral trade would be brought to a grinding halt, the two sides eventually pulled back from the brink.
How quickly could the ACI be activated?
The process could take weeks or even months, depending on how quickly wavering member states can be persuaded to put aside their concerns.
The Commission would first investigate the alleged coercion. If it decides the circumstances justify use of the ACI, then it would propose doing so to the European Council, composed of the representatives of the 27 EU member states.
The Council would then have 10 weeks to adopt or reject the proposal.
What else does the EU have up its sleeve?
Beyond the ACI, the EU is preparing additional countermeasures if negotiations fail. Chief among them are so-called rebalancing tariffs.
The latest draft list covers as much as €72 billion (S$107.9 billion) in US exports – including Boeing aircraft, automobiles, and bourbon – should the bloc decide to hit back at Mr Trump’s tariff policies. BLOOMBERG
