What are the countermeasures the Commission could develop
It is the first scene of a geopolitical drama: the European Union “puts a trade weapon on the table”, under pressure from an increasingly powerful China, “The question is: Will it ever fire?” asks Politico in its analysis.
Time will tell, but as of this week that the European Commission, governments and Parliament agreed to a series of countermeasures in retaliation for financial thugs, the possibility of the “trade defense” mechanism now seems realistic.
Brussels is alarmed by China's blockade of Lithuania (due to the Baltic country's tightening of ties with Taiwan) and wants to toughen its stance on Beijing as the economic and trade relationship is now out of balance, as is commented on. It is a message that Commission President Ursula von der Leyen will convey next week when she visits China with French President Emmanuel Macron.
From December 2021 and without informing the E.U. or the Lithuanian authorities, China began to severely restrict or de facto block imports from and exports to Lithuania, as well as imports and exports related to Lithuania. The Commission has repeatedly raised the matter with the Chinese authorities.
Referring to this week's political agreement to create a body against coercive measures, von der Leyen said: “We now need unity at EU level. for a bolder and faster application of these instruments when required and a more assertive attitude in terms of their enforcement”.
The young rules will empower the Commission to investigate whether coercion is taking place and to recommend countermeasures – giving the executive extended powers to make foreign policy, an area where EU countries have traditionally had control.
“This organ is not a toothless tiger, it is a toothy tiger. It's not a water pistol, it's a weapon,” commented MEP Bernd Lange, the head of the file.
The countermeasures the Commission could develop include enhanced customs duties, intellectual property restrictions or export controls, within a time-limited procedure, lasting no longer than one year.
The details are yet to be determined, but a final deal is expected before the summer break in Brussels. The anti-enforcement toolbox is likely to come into force in the second half of 2023.
The anti-enforcement tool was “born” as an idea after the imposition of steel tariffs against the EU by former US President Donald Trump in 2018. That decision by Washington had prompted Brussels to strengthen trade defense.
As European leaders debated the appropriate response, France and other member states pushed for more than just authorizing the EU to impose retaliatory tariffs, paving the way for the anti-coercive body.
< p>This initially led to an upgrade of the EU's so-called enforcement regulation, making it possible to retaliate with tariffs when a World Trade Organization (WTO) member is uncooperative.
But, ultimately, it was China that provided the political impetus for the deal. When Beijing demonstrated its massive trade displacement by halting imports of Lithuanian goods in retaliation for relations with Taiwan, Brussels was powerless to defend itself.
Fears of a power grab and the provision for a qualified majority
The Commission's original proposal in 2021 raised fears of a “power grab”, which would bypass the current requirement for unanimity on foreign policy matters in the Council.
“This body is a kind of monster born out of trying to reconcile two opposing decision-making processes: one for foreign policy and security and one for trade,” Philippe De Baere, the law firm's managing director, told Politico. Van Bael & Bellis. “If we had a really effective common foreign policy, we wouldn't need the instrument,” he added.
Member States have finally regained some control over deciding when to 'pull the trigger'. However, they can block the Commission's action only with a qualified majority.
“The problem is that everyone has their own opinion on how it could be used and when it should be used,” said a diplomat. of the EU, who spoke anonymously due to the sensitivity of the ongoing negotiations. “This is a foreign policy decision.”
The Netherlands test
The Dutch government recently bowed to US pressure to impose export controls on high-tech equipment used to make microchips. ASML, a Dutch company, leads the world market and its most advanced lithography tools are the missing piece of the “puzzle” for China's chip industry.
After the announcement, China's ambassador to the Netherlands warned that this move would have consequences. China's reaction in turn prompted questions from MPs to the Dutch government about whether the country would seek support from other EU member states should China turn to sanctions. “Europe has an instrument against coercion. Are we going to use it?” Dutch MP Mustafa Amhaouch asked Prime Minister Mark Rutte. Rutte declined to comment.
Experts in legal matters estimate that this attitude towards China can “backfire”. China could claim trade coercion, given that both the E.U. and the Netherlands have pledged not to impose export restrictions on other WTO members.
The various powers “are no longer thinking in time with the World Trade Organization, they are thinking in time with geopolitical developments. And in geopolitical time, each of these powers protects its own interests by adopting measures it deems appropriate,” said Geraldo Vidigal, a former WTO lawyer and lecturer in international trade law at the University of Amsterdam.
The the bottom line is that the anti-coercion instrument should be reliable enough. Its greatest strength is its deterrent effect. And now there is no clear scenario for its activation, EU diplomats said.
“The instrument is intended for deterrence and de-escalation in cases of specific coercive action,” said Miriam García Ferrer, spokeswoman for the European Commission. . “It's only going to be developed as a last resort, it's not something we're going to implement right away.”