Trade War: EU Unveils New China Countermeasure Toolkit

The European Union has agreed on a new defense mechanism, allowing retaliation against countries employing economic blackmail or punitive trade measures, such as China’s blockade of Lithuanian imports due to the Baltic nation’s ties with Taiwan.

Member states can ask the European Commission to investigate any case of coercion and, if a country is found guilty, the Commission can work out a list of countermeasures. These could include increasing customs duties, canceling import or export licenses, and limiting services and public procurement. Unless a majority of the 27 member states oppose it, the countermeasures will be implemented after the legislation is passed in about six months.

 “Overnight, we made huge strides in shaping this new instrument to become an effective deterrent and a powerful tool against coercion,” Bernd Lange, Chair of the Committee on International Trade, said after the talks. “With a broad list of countermeasures, a framework for obtaining reparation for injury, clear timelines and Parliament’s close involvement throughout the process, we are close to finalizing a deal that will equip the European Union to defend itself when faced with economic blackmail.”

The anti-coercion tool is the latest unilateral action taken by Brussels after labeling China a systemic rival in 2019. Trade Commissioner Valdis Dombrovskis highlighted its importance for deterring economic bullying and safeguarding EU interests in an unstable world. The political agreement is still pending final approval in the upcoming weeks.

Growing disillusionment with the World Trade Organization’s dispute process, partly due to the US’s reluctance to participate fully, has led the EU to seek alternative solutions. The anti-coercion instrument aims to discourage nations from targeting the EU and its member states with economic coercion in the form of trade or investment measures.

In late 2021, China initiated an informal embargo on all imports from Lithuania and EU imports containing Lithuanian components after Vilnius allowed Taiwan to establish a representative office. The EU lodged a complaint with the WTO, and the case is ongoing.

Also Read: Lithuania’s Goods Barred From Entering Chinese Ports

The commission also reported several instances of economic coercion against EU members each year. In response, the EU introduced a mechanism to penalize companies receiving foreign subsidies that distort the internal market and another measure to promote openness in other countries’ public procurement markets. The EU has also proposed a ban on products manufactured using forced labor.

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