The EU wants to stop third countries muddling in EU policy decisions. Businesses must take note, they may be impacted by restrictions & higher costs.
Why this measure?
The EU states that rising geopolitical tensions, weakened international cooperation and increasingly weaponised trade and investment have triggered the use of coercive practices that aim to force the EU to change tone: “We have seen that economic coercion can come from a variety of countries, and causes broad concern”.
The European Parliament and several Member States have raised their concerns about the issue of coercion and asked the Commission last year to develop a mechanism to deter and counter it
Coercion means making you do something against your will by threat
Generally speaking, Coercion is persuasive a party to act involuntarily by use of threats, including force. It involves a set of various types of forceful actions that violate the free will of an individual to induce a desired response, for example, a bully demanding lunch money from a student or the pupil getting beaten.
What does coercion mean in law?
In law, coercion is codified as a duress crime. Such actions are used as leverage, to force the victim to act in a way contrary to their interests. Coercion may involve the actual infliction of physical pain/injury or psychological harm to enhance the credibility of a threat. The threat of further harm may lead to the cooperation or obedience of the person being coerced.
And economic coercion?
‘Economic coercion' is where a third country (like the UK or China or Russia) puts pressure on the EU (or its members) to force it to make a particular choice by applying, or threatening to apply, measures affecting trade or investment.
Such practices unduly interfere with the legitimate policymaking space and undermine the EU's open strategic autonomy.
Examples:
Can you give an example of coercive practices?
There are many types of coercive practices that aim to force the EU to change its tone:
introducing (or threatening to introduce) extra, discriminatory import duties,
intentional delays or refusing (or threatening to refuse) authorisations needed to do business.
impose discriminatory selective border or safety checks on goods from a given EU country,
organise state-sponsored boycotts against the goods or investors
Who decides where when this applies?
Whether a third county action fulfils those conditions would be decided on a case-by-case basis.
What will happen?
A formal determination will prompt engagement with the coercing country to resolve the issue. The engagement may take the form of direct negotiations and may involve mediation, arbitration, adjudication or other suitable avenues.
Countermeasures
As a last resort, when the economic coercion persists, the Union may consider taking countermeasures against the country in question to counteract such economic coercion. The range of potential measures is designed to be broad.
The proposed ACI lists classical measures related to the fields of goods and services, but also of intellectual property rights and foreign direct investment.
Additionally, various restrictions on access to the EU market, such as public procurement, capital, authorisation of products under chemical and sanitary rules, as well as access to EU-funded research programmes.
Engagement First
Articles 4 and 5 of the proposal states that where coercion is identified, the EU must determine what third-country measure is appropriate. the third country concerned is informed of any measures considered and will be contacted to explore options with a view to obtaining the cessation of the economic coercion. Such options could include. e.g.
direct negotiations;
mediation, conciliation or good offices to assist the Union and the third country concerned in these efforts;
submitting the matter to international adjudication.
The EU can also raise the matter in the relevant international forum.
The way this is foreseen is illustrated here:
Rules of origin
The ACI would empower the EU Commission to adopt delegated acts to amend the rules of origin related to services and investment provided in the legislation. These have been listed in Annex 2 of the ACI and deal with services and investment, not trade in goods.
Actions against individuals and companies
The EU can designate individuals and enact economic sanctions where the EU finds that
that such person is connected or linked to the government of the third country concerned; or,
that such person is connected or linked to the government of the third country concerned and has additionally caused or been involved in or connected with the economic coercion.
Next steps
Following the Commission's proposal with the accompanying impact assessment, the ACI will now follow the ordinary legislative process in the European Parliament and Council of the European Parliament for adoption. In the joint Declaration, the European Parliament and the Council have committed to consider the proposal in a timely manner. Stakeholders and citizens may still provide feedback on the proposal during the following eight weeks. The Commission will report on to the Council and Parliament on the feedback received.
Downloads
While you are here, you may be interested in
EU Export Control Clinic 821 On-Demand Training
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