On 3 October 2023 the European Parliament approved a new trade instrument to enable the EU to respond, in line with international law and as a last resort, should the EU or member states face economic blackmail from a foreign country seeking to influence a specific policy or stance. The final text of the legislation was reached by the Parliament and Council in June 2023.
The new mechanism was already justified. First, in December 2021, the Commission proposed the mechanism, driven by a demand from the European Parliament. The main reasons behind the Initiative were the economic pressure exerted by the US during the Trump administration, along with numerous confrontations between the EU and China. This new instrument complements a series of trade defence tools adopted in recent years. In May, G7 leaders announced the launch of a coordination platform against economic coercion, echoing the EU’s initiative.
The new trade instrument is meant as a deterrent, the primary objective will be to engage in dialogue to persuade the authorities of the non-EU country to cease their coercion, but it will allow the EU to fight economic coercion and respond with its own countermeasures. The potential responses available to the EU are summarised in a comprehensive list. The specified instruments are applicable if the EU or Member States face economic blackmail from a foreign country. The regulation specifies when qualifies something as economic coercion. Economic coercion occurs when a non-EU country attempts to pressure the EU or a Member State into making a specific choice by applying or threatening to apply trade or investment measures.
Under the new rules, the Commission will have four months to investigate potential coercion. Based on its findings, the Council will have eight to ten weeks to decide -by a qualified majority- whether coercion exists. If coercion is found and Member States agree, the Commission will have six months to outline the appropriate response, keeping the Parliament and the Council informed at all stages. Under the new rules, the EU could seek “reparation” from the coercive non-EU country. The Commission may also apply measures to enforce these reparations.