THE IMPACT OF ANTI-COERCION ON INTERNATIONAL TRADE

In times of rising geopolitical tensions, trade is increasingly used as a kind of weapon, with the European Union and member states becoming targets of economic intimidation. The competition for access to sorts of goods, the increased number of interested parties, and many other factors contribute to the intensification of the economic duress to achieve the intended goals. As history shows, if such practices are not nipped in the bud, they could significantly threaten the economic and geopolitical interests of the Union, consequently undermining the EU's new approach to trade based on open strategic autonomy. It’s imperative that we strengthen the resilience and autonomy of the EU to counteract the external influence of economic coercion and, in turn, protect our economy by using our right to impose remedies. The initiative to start work and create an instrument to defend member states in response to potential economic coercion by third countries was announced by European Commission President Ursula von der Leyen in September 2020, which allowed it to be implemented as part of the Commission's work program for the year 2021 and thus prepare for the current circumstances.

The main objective of implementing the new instrument is to discourage countries from restricting or threatening to restrict trade, investment, taxation, or environmental restrictions related to climate change. Economic coercion is a violation of international law, which, incidentally, is not defined in international treaties or legal mechanisms. For this reason, the EU has never used any retaliatory measures against economic coercion before, precisely because of the lack of legal instruments. The new approach to EU trade policy is more assertive and focuses on defending the interests of the member states.

The decisions that had been taken at the EU level clearly show that Europe is united and will respond to a threat if necessary. At the same time, the EU must bear in mind existing obligations under international law. The bloc has clarified that the proposed mechanism is not intended to replace the use of the World Trade Organization (WTO) dispute settlement procedure as the primary instrument for combating unfair foreign trade practices by third countries. The proposed regulation aims to complement existing trade policy instruments and provide them with additional legal support to counter coercive measures, especially those used by powerful international players such as China and Russia and also by the United States. Countermeasures would only be taken into account when all other methods have failed and as a result of a sound assessment identifying the use of economics and industry after prioritizing soft tools such as strategic communication or mediation.

Deterring from applying sanctioned means of negotiation would be a fundamental function of the ACI (anti-coercion instrument). The creation of the instrument in itself is expected to stop economic intimidation and the instrument would therefore be most effective without the need to use it.

It is understandable that in times of economic changes and geopolitical challenges, the EU wants to strengthen its ability to defend its interests and values, which is met with an official response from potentially affected countries.

China's response is unequivocal. "The EU should look at China’s development objectively and rationally, further expand market access, promote liberalization and the facilitation of trade and investment, reduce trade barriers, and in particular refrain from erecting new barriers," said Zhao Lijian, Chinese politician and deputy director of the Chinese Ministry of Foreign Affairs Information Department, adding that "the EU should also stop politicizing economic and trade issues and create an open, transparent and non-discriminatory business environment for companies around the world.” Zhao also stressed that China firmly rejects all forms of coercion and intimidation in the world. "We strongly support the multilateral trading system, with the WTO at its center, and have made a significant contribution to global economic development."

It is not easy to achieve consistency and unanimity across all members of the EU. The imposition of sanctions requires the unanimous agreement of member states following the EU treaties. Some countries veto EU decisions, putting their internal needs first. To avoid intra-community tensions, the decision to apply the instrument against coercive measures will largely rest with the Commission, a qualified majority against the measure proposed by the Commission. There is no doubt that this reversal of the majority of the Council's contribution, instead of the previous need for unanimous approval of sanctions, is ultimately one of the basic premises of the ICC instrument, which is intended to be the first step in a dialogue aimed at de-escalation and removal of specific coercive measures.

The proposed regulation revolves around a several-stage procedure and imposition of remedies as a last resort. The Commission is open to cooperating with the third country on behalf of the EU. The actions that would be taken when a potential economic constraint is identified would focus primarily on:

• engaging with the third country to find a solution through direct negotiation, mediation, conciliation, or arbitration,

• consultation and cooperation of the committees with any other country affected by the same practice,

• if no solution can be found, the committee will consider remedial measures and set a deadline for their implementation.

Potential restrictions will target countries that use explicit coercive trade defense instruments against the EU, focusing on:

• new or increased customs duties and restrictions on the export and import of goods,

• restrictions or exclusion to access to Union-funded research programs, restrictions on investments and new foreign direct investments, additional charges on imported or exported goods,

• restrictions on the exportation of goods falling under the Union export control regime,

• new or increased restrictions on trade in services,

• restrictions on the protection of intellectual property rights or their commercial exploitation,

• restrictions on registrations and authorizations under the legislation of the Union.

With this new instrument, the EU hopes to systematize certain practices and harmonize the common approach of all EU members to the growing problem of economic coercion.

Family Business Initiative Association (IFR) is a Warsaw-based alliance that groups entrepreneurs who own family businesses, as well as experts and scientists who support this community. Agnieszka Grabowska-Dubiel is an IFR expert and a proxy at the law firm Grabowski & Partners (GWLAW).