Anti-Coercion Instrument

08 December 2021
by eub2 -- last modified 08 December 2021

The European Commission proposed on 8 December a new tool to counter the use of economic coercion by third countries.

What is the Anti-Coercion Instrument (ACI)?

The proposed instrument is a response to the rising problem of economic coercion and aims to protect the Union's and Member States' interests and sovereign choices. It will empower the Commission to apply trade, investment or other restrictions towards any non-EU country unduly interfering in the policy choices of the EU or its Member States.

Deterrence is its primary function, therefore the instrument would be most successful if there is no need to use it. The creation of the instrument in itself is expected to deter economic intimidation.

Nevertheless, if a third country resorts to coercion in specific cases, the ACI aims to end this coercion. To that end, it allows the EU to formally identify instances of economic coercion, and to respond to individual cases, first through efforts to find a common solution with the coercing country, but in the last resort through reaction.

At the same time, the instrument contributes to stronger international coordination to tackle economic coercion by helping to create, develop and clarify international frameworks to prevent and eliminate it.

What exactly does 'economic coercion' mean? In which circumstances can the EU act against those practices?

'Economic coercion' under the proposal refers to a situation where a third country is seeking to pressure the Union or a Member State into making a particular choice by applying, or threatening to apply, measures affecting trade or investment. Such practices unduly interfere with the legitimate policymaking space of the EU and its Member States and undermine the EU's open strategic autonomy.

Whether a third county action fulfils those conditions would be decided on a case-by-case basis.

A formal determination will prompt engagement with the coercing country to resolve the issue. The engagement may take the form of direct negotiations and may involve mediation, arbitration, adjudication or others suitable avenues.

As a last resort, when the economic coercion persists, the Union may consider taking countermeasures against the country in question in order to counteract such economic coercion.

The proposal also makes clear that, throughout the process, the EU should remain open to engage with the coercing country to find a solution.

Can you give an example of coercive practices?

There are many types of coercive practices.

For example, an EU trading partner may be seeking to shape future legislative initiatives of the EU or dissuade the EU from introducing a measure altogether by, for example, introducing (or threatening to introduce) extra, discriminatory import duties, intentional delays or refusing (or threatening to refuse) authorisations needed to do business. They might also impose discriminatory selective border or safety checks on goods from a given EU country, or organise state-sponsored boycotts against the goods or investors of that country.

Why is it being proposed now?

Recent rising geopolitical tensions, weakened international cooperation and increasingly weaponised trade and investment have triggered greater recourse to economic coercion. This threatens to undermine the interests of the EU and its Member States. We have seen that economic coercion can come from a variety of countries, and causes broad concern.

The European Parliament and several Member States have raised their concerns about the issue of coercion, and asked the Commission last year to develop a mechanism to deter and counter it (see Joint Declaration).

Doesn't the EU have already instruments to prevent such cases?

At the moment, the EU does not have an existing instrument that specifically deals with coercion.

The EU needs an appropriate instrument to deter and counteract economic coercion by third countries in order to safeguard its rights and interests and those of its Member States.

Without a dedicated instrument, the Union and Member States will fall back on standard diplomatic means, which may not always be sufficiently effective, as they may not exert the necessary deterrent effect.

More generally, it is necessary as a signal to international partners that the EU is not willing to accept economic coercion. It highlights the EU's resilience, and would contribute to the EU's open strategic autonomy.

Why is the ACI the right way to deal with economic coercion?

The EU needs to be able to respond to cases of economic coercion in a structured and uniform manner. A dedicated legislative framework ensures predictability and transparency; it underlines the EU's adherence to a rules-based approach, also internationally.

Predictability and transparency play a role for the deterrent function of the instrument as well.

Procedurally, a legislative framework under the common commercial policy offers possibilities for swift and efficient action where necessary.

A legislative framework also serves well the purposes of a platform for international cooperation on the issue of economic coercion.

Does the ACI target a particular country?

No, the ACI would not be targeting any particular country. It is treating the problem of coercion, wherever it may come from.

It is designed as a horizontal instrument, applicable to any country using economic coercion against the EU or its Member States.

Which Union response measures are available under the proposed instrument?

The range of potential measures is designed to be broad, in order to allow the selection and design of an effective and efficient response to an individual case of economic coercion that comes up at as small a cost as possible to EU operators. The aim of these measures remains the cessation of the coercion.

The proposed ACI lists classical measures related to the fields of goods and services, but also of intellectual property rights and foreign direct investment. Additionally, various restrictions on access to the EU market, such as public procurement, capital, authorisation of products under chemical and sanitary rules, as well as access to EU-funded research programmes.

The Communication that accompanies the proposal also recalls other possibilities within the Commission's existing powers, particularly concerning funding, which can also be deployed, if necessary. Such possibilities include, for instance, not engaging in new Union financial commitments for programmes or funds or opposing new financing operations, in accordance with the rules and procedures under the relevant Union financing instruments.

Crucially, the EU's response measures are an optional step available only as a last resort and subject to a number of conditions – but they can be deployed swiftly, if the need arises. They must be proportionate to the harm they counter, and must be targeted and temporary.

Is the ACI compatible with international law?

The EU policy intervention, in any form, must and will be compatible with both the EU legal order and international law. Countermeasures would be deployed when necessary and in response to a breach of international law by the coercing country. This instrument can only be engaged when the third country adopts a measure of economic coercion and so creates the situation

Does the ACI foresee cooperation with other partners?

Yes, it does. In cases where the ACI would be used, the EU would be able to raise the issue in any relevant international fora, and coordinate with other countries and like-minded partners and allies.

The EU is open to discuss with all partners that recognise economic coercion more broadly as an issue.

Decision-making under the proposed instrument

The Commission proposes the use of traditional implementing and delegated powers available within the common commercial policy area. These offer sufficient flexibility and speed of action.

In particular, the Union response measures would be determined and adopted via an implementing act and the Member States assist the Commission in an examination procedure.

The Commission proposes that further changes to the menu of potential response measures and rules of origin be done via delegated acts, with the respective involvement of the European Parliament and the Council.

Stakeholder involvement is crucial for the selection and design of the Union response measures, notably where such measures may have an impact on specific groups. Relevant stakeholders (such as affected or potentially affected businesses) would have sufficient opportunities to come forward and make their views known and provide information in the concrete application of the instrument.

Next steps

Following the Commission's proposal with the accompanying impact assessment, the ACI will now follow the ordinary legislative process in the European Parliament and Council of the European Parliament for adoption. In the joint Declaration, the European Parliament and the Council have committed to consider the proposal in a timely manner.

Stakeholders and citizens may still provide feedback on the proposal during the following eight weeks. The Commission will report on to the Council and Parliament on the feedback received.

Stakeholder feedback so far

Earlier this year, the European Commission launched a 12-week public consultation to seek input from businesses, organisations and individuals in shaping the new legal instrument. Stakeholder feedback on the potential instrument has been very positive overall.

There is a common recognition by stakeholders that economic coercion is increasingly posing a problem for the EU and its Member States, which should not be left unaddressed.

Stakeholders support the creation of a legislative instrument to address the issue of economic coercion. They attach particular value to the function of deterrence, prioritising efforts to encourage third countries to stop the economic coercion through non-interventionist measures (such as diplomacy). They predominantly regard the use of countermeasures as a last resort whose collateral damage must be weighed before action.

There is broad support for the rest of the elements as well; the triggers for the use of the instrument should be sufficiently broad to cover informal economic coercion, and, in order to ensure an effective response, the EU should be able to choose from a range of options in individual cases.

Stakeholders also greatly value the possibility for international cooperation against economic coercion.

Commission proposal for an Anti-Coercion Instrument

Source: European Commission