EU devises new measures against ‘economic coercion’

China last week put a ban on imports from Lithuania, an EU member state. It had nothing to do with a trade conflict: Beijing simply wants to persuade Vilnius to change its friendly policies toward Taiwan.

Lithuania has allowed Taiwan to open a kind of embassy but China sees Taiwan as a renegade province awaiting reunification with the mainland.

Now, the EU’s commissioner for economy and trade, Valdis Dombrovskis, intends to use new instruments in the EU’s sanctions toolbox to prevent such examples of “economic coercion” aimed at bringing about political compliance.

On Wednesday, after 10 months of preparatory work, Dombrovskis presented a plan for stopping individual member states or the EU as a whole from being bossed around from outside. He said the “anti-coercion instruments” would include import bans, the withdrawal of approval for certain product groups in the EU, the freezing of EU subsidies and the denial of research funding.

The new tools are predominantly meant to have a deterrent effect, Dombrovskis said. He noted that that negotiations with respective countries would be held before any actions were taken.

“This has a great deal of potential,” says Markus Ferber, financial expert of Germany’s Christian Social Union (CSU) in the European Parliament. “But you have to be willing to really use the instruments.”

Ready ‘to push back’

Ahead of the presentation, EU officials had spoken of a “stick” the Commission could soon swing in its geopolitical tussles with China and other states.

Dombrovskis, for his part, was less drastic, speaking only of a “powerful tool.”

“The European Union will stand firm in defending itself. The European Union will not hesitate to push back when we are under threat,” he said.

The European Commission wants to be able to deploy the countermeasures against “coercion” rapidly. Unlike with the political sanctions currently used, they will not require unanimous approval, rather a qualified majority will suffice.

But Ferber from the European Parliament is doubtful some member states will approve the measures. Even before the proposals were made public, states such as Sweden and the Czech Republic had spoken out against the new tools, citing concerns about escalating trade wars and increasing protectionism.

Dombrovskis promised that the measures against “coercion” would, of course, be applied according to international law — that is, in accordance with World Trade Organization (WTO) rules. What is more, he said, the Commission had consulted over months with business associations and lobby groups to gauge the consequences they could have on the bloc’s own economic activities.

Not just about China

The chair of the trade committee in the European Parliament, Bernd Lange from Germany’s Social Democrats (SPD), welcomed the Commission’s proposal. He said it was just what was needed in a “rough geopolitical landscape.”

Dombrovskis declined to name specific countries to be targeted by the new “anti-coercion instruments.” He also declined to cite concrete case examples. He did, however, say that this was not just about China.

In Brussels, there is speculation that the Commission could also have its eye on the United Kingdom, which wants to force the EU into new negotiations on the Brexit agreement by violating customs regulations and deepening a row with France over fishing rights.

These tools could perhaps also have been deployed to counter the erratic trade policies of former US President Donald Trump. But the new Biden administration has almost entirely ended or suspended Trump’s trade wars.

The European Parliament and EU member states have yet to approve the new tools — a process that could take many months if past experience is anything to go by.

Dombrovskis says he hopes there will be quick agreement. But in its current conflict with China, Lithuania will likely have to do without the “stick” for some time to come.

This article was translated from German