Analysis: The EU Proposal for an Anti-Coercion Instrument

The purpose of this memo is to get a better understanding of the EU proposal on anti-coercion. The National Board of Trade points out some of the most immediate challenges and gives recommendations on how to minimise the proposal’s negative effects for international trade and trade policy.

The EU proposal on anti-coercion is meant to give the EU a possibility to act against economic coercion from countries outside the EU.

According to the European Commission, economic coercion refers to a situation where a country outside the EU is seeking to pressure the EU or an EU member state into making a particular policy choice by applying, or threatening to apply, measures affecting trade or investment against the EU or a member state. Noteworthy is that the coercion as such could be linked to any policy area, although the tool to respond is in the field of trade policy.

The purpose of this memo, commissioned by the Swedish Ministry for Foreign Affairs, is to get a better understanding of the proposed legislation. The National Board of Trade points out some of the most immediate problems and challenges and gives recommendations on how to minimize the proposal’s negative effects for international trade and trade policy. We have, however, not analysed the proposal from a public international law perspective, nor the hierarchy of legal sources between WTO and public international law.

Compatibility with WTO rules

Although the National Board of Trade recognises that coercion as such is indeed problematic, the proposed instrument raises a number of concerns from a trade policy perspective. The proposal empowers the EU to suspend international obligations without going through the WTO´s dispute settlement process, which normally requires authorization. In this way, there is a risk that it could be inconsistent with the rules of the WTO´s Dispute Settlement Understanding. We note however, that when assessing WTO-compatibility, all the institutional and administrative elements in the proposal, and the discretion of the Commission could be relevant. In addition, the proposal risks resulting in response measures that are incompatible with the material rules or market access commitments in WTO, free trade agreements or investment treaties. This has to be analysed on a case-by-case basis and also in relation to relevant exceptions in the agreements. 

Without a very clear case of economic coercion, the EU could be accused of the same, which affects its credibility as an actor in the multilateral arena. Furthermore, if other countries use similar instruments and arguments for suspending international obligations, this risks affecting the legitimacy and efficiency of a system that has contributed to economic integration for a long time.