EU agrees trade defense instrument against China

The EU has agreed on a new trade defense tool that allows it to retaliate against countries using punitive measures, such as China’s blocking of Lithuanian imports over the Baltic state’s relationship with Taiwan.

This anti-coercion tool is the latest in a series of recent unilateral measures taken by Brussels after China was declared a “systemic rival” in 2019.

“It is a vital tool to deter economic bullying and protect EU interests in an increasingly volatile world,” said Valdis Dombrovskis, trade commissioner. A political agreement between the European Parliament, Member States and the European Commission was reached on Monday evening and is yet to be finalized in the coming weeks.

Block has historically used World Trade Organization settle disputes, but is growing frustrated as the dispute resolution process in the Geneva body is hampered by the US’s refusal to participate fully.

“This instrument aims to deter third countries from economic coercion against the EU and its member states through measures affecting trade or investment,” the Council of EU Member States said in a statement.

Measures that could be taken include higher customs duties, revocation of import or export licenses, and restrictions on services and public procurement.

Once the legislation enters into force – expected in about six months – any member state can apply to the European Commission with a request to investigate a case of duress.

If it determines that a country is coercing a member state, and other governments agree, the commission can draw up a list of potential countermeasures to be taken unless a supermajority of 27 member states blocks them.

The commission must take into account the impact on the business.

At the end of 2021, China imposed an unofficial embargo on everything import from Lithuania and from the EU with Lithuanian components after Vilnius allowed Taiwan to open a representative office there. In the end, the EU complained to the WTO, and the case continues.

The commission said that every year there are several cases of economic coercion against EU members.

Among other measures against Chinese companies, the EU recently created a mechanism to penalize companies that receive foreign subsidies which “distort” the domestic market, and others aimed at forcing the opening of public procurement markets in other countries. He also proposed a ban on goods made using forced labor.