The EU Commission has been working on the explosive draft law for a long time, but it has chosen a spicy time for the presentation: Presented on Wednesday Commission Vice-President Valdis Dombrovskis, responsible for trade, presented an “instrument against economic coercive measures” in Brussels. This should allow the authority to quickly threaten counter-reactions if a member state or the EU as a whole falls victim to unjustified sanctions. If the threat does not help, the commission may take action.
Lithuania is just such a victim. Because a week ago China deleted the Baltic republic from its customs system, which amounts to a complete trade embargo. Beijing is upset because Lithuania is letting the Taiwanese government open a representation under the name Taiwan in Vilnius. Beijing does not recognize Taiwan, which is why these embassies are usually called representations of Taipei. The new instrument would empower the Commission to threaten China’s companies with punitive tariffs, a ban on tenders or investment bans if Beijing does not quickly lift the sanctions.
Commission Vice Dombrovskis stressed that these powers of his authority should “above all act as a deterrent”. The problem, of course, is that the adversary, in this case China, may not be intimidated so that the Commission would have to carry out the threat in the end. And then Beijing could react to the Brussels answer with its own punitive tariffs: The trade dispute would escalate. Some member states are therefore critical of the legislative proposal. They want to make sure that the instrument does not lead to more protectionism or trade wars – and they dislike the Commission’s new power.
The governments of Sweden and the Czech Republic warn in a position paper that the authority should fully involve member states in decisions. In addition, there should not be the slightest doubt that the rules are in line with the rules of the World Trade Organization. The fact that the Czech Republic and Sweden, of all places, express themselves in this way promises trouble: The Commission’s proposal is now being discussed and amended in the two legislative chambers, the EU Parliament and the Council of Ministers. And in the Council, the body of the member states, the Czechs will do business from July; in January 2023 the Swedes will take over this rotating council presidency. This means that the Czech Republic, and perhaps Sweden, will play an important role in the passage of the law.
“Trade is used more and more as a weapon”
The EU has already imposed embargoes – against companies from Belarus, for example. But unanimity among the member states is necessary for such foreign policy decisions. The new instrument makes it much easier for the Commission to threaten and introduce sanctions, because EU governments can only stop such plans if they organize a majority against them. This speeds up the process and counteracts the risk that governments pro-Russia or China will block such steps with their veto.
However, the authority receives this considerable power – too much power in the opinion of some governments – only for a narrowly defined area: to defend against sanctions by other states who want to change the policies of the EU and its members with their threats. Dombrovskis complains that “in times of heightened geopolitical tensions”, “trade is increasingly being used as a weapon and the EU and its member states are becoming the target of economic intimidation”. In addition to China, the wrongdoers also include Russia, which threatened the Czech Republic with economic disadvantages in the spring after Prague had expelled Russian diplomats. And the former US President Donald Trump wanted to prevent the introduction of special taxes on digital companies in Europe with punitive tariffs.
“We are vulnerable.”
The act is one of a series of initiatives to make the EU appear tougher or – as Brussels likes to call it – “less naive”. In May the commission presented a lawthat would make doing business in Europe more difficult for subsidized state-owned companies from China. Another legal act allows Chinese companies from Exclude tendersas long as China seals off its domestic market from Europeans.
The EU Parliament approves the anti-sanctions law: “We have so far had a gap in our range of instruments,” says SPD MP Bernd Lange, chairman of the trade committee. “We are vulnerable, and there are states that want to take advantage of this vulnerability.”