cross-posted from: https://scribe.disroot.org/post/5258553

Archived version

For the second time this year, French President Emmanuel Macron is calling on the European Union to consider using its most powerful economic weapon — the anti-coercion instrument — in a dispute with a major trading partner.

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The ACI allows the bloc to deploy an array of measures in response to coercive trade measures, and activating it would represent a significant escalation. For this reason, it has never done so.

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**What is the anti-coercion instrument (ACI)? **

It’s the EU’s strongest tool to retaliate against economic or trade duress by a third country. If the bloc decides that it’s being coerced, the ACI would give it cover to hit back with a range of punishments targeting the offending country’s access to one of the world’s biggest and most lucrative markets in goods and services.

With China, such measures may include tariffs on the country’s exports, targeted curbs on its investments in the EU or new taxes on Chinese tech companies. They could also involve limiting access to certain parts of the EU market or restricting Chinese firms from bidding for public contracts in the region.

The EU sees the ACI’s true purpose not as retaliation so much as deterrence, as its provisions are so potentially damaging to a trade partner that the mere threat of applying it means countries will think twice before using trade as a diplomatic weapon.

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The … European Commission proposed the ACI in 2021 in response to a series of wake-up calls that showed the bloc’s vulnerability to coercive tactics wielded through trade and investment. These included Trump’s trade actions during his first administration, and a Chinese trade blockade targeting EU member Lithuania over the European nation’s ties with Taiwan.

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What is coercion in trade? Trade coercion is the practice of applying trade instruments such as tariffs, anti-dumping measures, quotas and other tools that inflict harm on a trade partner for reasons that aren’t justified under the generally accepted rules of international trade, and which don’t directly address any recognized imbalance or injustice in the trading relationship. The goal instead is to impose economic costs on the target in an arbitrary way as part of a broader diplomatic dispute.

When can the ACI be used?

EU member states decide collectively whether to use the ACI. First it needs to be established that there is coercion by a third country. Response measures can then be adopted via a qualified majority vote, which means gathering the support of 55% of member states that together represent 65% of the total population. This gives the EU’s heavyweights, France and Germany, a significant say over the outcome.

Why is the ACI being talked about now?

China has announced plans to significantly tighten controls on its exports of rare earths and other critical minerals, meaning that overseas sales of items containing even traces of those materials would be impossible without an export license.

Macron told European leaders at a summit on Oct. 23 that the Chinese rules amount to economic coercion and that they should consider using the ACI in response, according to people familiar with the matter. German Chancellor Friedrich Merz confirmed that the anti-coercion tool was discussed at the summit but said no decision had been reached on using it. He said it was up to the European Commission, which handles trade matters for the EU, to decide whether to deploy the ACI.

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