Economy as a Weapon (IV)

EU Commission presents today a new tool to counteract economic coercion. Initially planned to counter US extraterritorial sanctions, it will now to be used against China.

BRUSSELS/BERLIN |

BRUSSELS/BERLIN (Own report) - A new EU instrument to counteract sanctions would deprive member states of prerogatives - with wide-ranging foreign policy ramifications - transferring them to the EU Commission. This was revealed in the draft of the planned "anti-coercion instrument" that will be presented today by EU Commission Vice President Valdis Dombrovskis. The decision to create this "instrument" was largely motivated by intentions to counteract US coercive measures such as sanctions against Nord Stream 2. The groundwork has been laid since last year by the European Council on Foreign Relations (ECFR), a pan-European think tank headquartered in Berlin, also with the involvement of Germany's foreign ministry and the EU Commission's Director General of Trade, Sabine Weyand. According to current planning, she would be in charge of imposing eventual EU sanctions. Under discussion are the first EU punitive measures soon to be imposed on China.

"Reckless Policy"

Particularly sanctions and the threats of sanctions from the United States had motivated the EU to create an "anti-coercion instrument." Extra-territorial US sanctions had, for example, ruined EU member countries' trade with Iran. The attempt to salvage it with the ad hoc "Instrument in Support of Trade Exchanges” (INSTEX) had failed.[1] Discussions in Washington on expanding extraterritorial sanctions against Russia and China, in the summer of last year, led to growing fears that EU enterprises could be forced to severely restrict their activities, also in this case.[2] Washington's threat to impose punitive tariffs to prevent France from introducing a digital tax caused serious indignation in Paris, while US threats to impose sanctions on Nord Stream 2 led to massive anger in Berlin. Such a "reckless policy" has not "become a thing of the past" with the change of personnel in the White House," the chair of the EU Parliament's Committee on International Trade, Bernd Lange (SPD), declared on Monday, "on the contrary," he observes with growing frequency economic coercive measures aimed at "influencing political decisions."[3]

Groundwork

The groundwork for the EU's "anti-coercion instrument" has primarily been laid by the European Council on Foreign Relations (ECFR), a pan-European think tank headquartered in Berlin. It had not only published extensive research on the question of countering and deterring sanctions, punitive tariffs and other economic coercive measures, but it had also initiated a task force last year, focused on the development of concrete instruments.[4] According to reports, the initial meeting of the task force was chaired by Miguel Berger, State Secretary at the German Foreign Ministry. It also involved parliamentarians, ministry officials and business representatives from various EU countries, such as Germany, France, Spain, the Netherlands, Sweden and the Czech Republic. The EU Commission's Director General for Trade, Sabine Weyand, a German functionary considered very influential in Brussels, was at least temporarily involved. The EFCR had proposed the creation of an "EU Resilience Office" to thoroughly analyze potential coercion by third countries, develop options for action and present them to Brussels for decision.[5]

The Directorate General for Trade

On September 16, 2020, the plan to create an "instrument" to "counter the use of economic coercion by third countries," was explicitly embraced by EU Commission President Ursula von der Leyen and her Vice President Maroš Šefčovič. Today, Wednesday, Vice President of the Commission in charge of trade, Valdis Dombrovskis, is due to present the draft for such an instrument. According to reports, it provides for allowing the EU to impose counter-sanctions, whenever a third country "interferes in the legitimate sovereign choices of the Union or a Member State" by applying or threatening to apply "measures affecting trade or investment" in seeking to exercise influence.[6] The measures could be taken against individuals, organizations or states. According to reports, these include import restrictions, punitive tariffs, and even locking countries out of EU financial markets.[7] It is decisive that the decisions not be in the hands of the heads of states and governments, but rather rest with the EU Commission, under authority of the Directorate General for Trade, headed by Weyand. Given the wide-ranging impact EU punitive measures could have, observers say that the Commission's Directorate General for Trade "could effectively become the EU's foreign ministry."[8]

Objections

Whereas it appears that Germany and France support the draft, objections are being raised by several other EU states, including Italy, the Czech Republic, Estonia, Finland, and Sweden. In their position statement, the Czech Republic and Sweden noted that the prospective instrument will have extensive foreign policy impacts, therefore, it is crucial that Member States are "fully engaged in decision-making."[9] Other objections question whether all its measures are in full compliance with public international law. Japan's government, which had been asked for feedback by the EU, warns of p possible negative impacts on the World Trade Organization's regulations.[10] The Czech Republic and Sweden are also worried that the EU's countermeasures could bring more harm than good for enterprises in the EU; therefore, it is absolutely necessary to ensure that they are in the interest of the Union and its member states. The governments of both countries are visibly concerned that the projected EU instrument could sour relations with the United States. The Czech-Swedish position paper says the EU should now "seize the opportunity" and "strengthen its partnership with the USA."[11]

Against China

Currently in discussion are the first EU punitive measures to be imposed on China, because of the escalation of the conflict between China and Lithuania. The conflict was triggered by the opening of a "Taiwanese Representative Office" in Lithuania's capital Vilnius along with other targeted pinpricks against the People's Republic, which are part of a US campaign aimed at politically upgrading Taiwan and thereby escalating the conflict with Beijing. (german-foreign-policy.com reported.[12]) According to its coalition agreement, the incoming German government will also participate in the US' campaign, which breaks with a relevant, and still valid, UN resolution recognizing the People's Republic of China, as the sole legitimate representative of China.[13] Beijing has now sharply reacted to Lithuania's provocations - which at times are seen as US test balloons - and completely halted trade with Lithuania.[14] With its new instrument for counteracting coercive measures, the EU would be in a position, to punish these new sanctions, according to comments in Brussels.

 

[1] See also Vor dem Scheitern.

[2] See also From the Torture Chambers of the Economic War.

[3] Bernd Lange: Wehrhaft sein! handelsblatt.com 06.12.2021.

[4] See also Wirtschaft als Waffe (II).

[5] Jonathan Hackenbroich, Pawel Zerka: Measured Response: How to Design a European Instrument Against Economic Coercion. European Council on Foreign Relations Policy Brief. June 2021. See also Wirtschaft als Waffe (III).

[6] Jakob Hanke Vela: Brussels Playbook: Scoop: Europe forges sanctions hammer. politico.eu 06.12.2021.

[7] Andy Bounds: EU plan to tackle 'coercion' against member states faces resistance. ft.com 07.12.2021.

[8] Jakob Hanke Vela: Brussels Playbook: Scoop: Europe forges sanctions hammer. politico.eu 06.12.2021.

[9] Joint preliminary comments of the Czech Republic and Sweden on the Commission’s proposal for an Anti-Coercion-Instrument.

[10] Jakob Hanke Vela: Brussels Playbook: Scoop: Europe forges sanctions hammer. politico.eu 06.12.2021.

[11] Joint preliminary comments of the Czech Republic and Sweden on the Commission’s proposal for an Anti-Coercion-Instrument.

[12] See also Washingtons Prellbock.

[13] See also Dare More Cold War.

[14] Sofie Donges: China blockiert Handel mit Litauen. tagesschau.de 06.12.2021.