The EU’s Anti-Coercion Instrument — A new step in EU-China escalation?

22 November 2023

With the signing of its Anti-Coercion Instrument (ACI) on 22 November, the European Union has taken yet another step in strengthening its trade defence arsenal. The new trade-security instrument will allow the bloc to retaliate against countries that try to pressure the EU or its member states to do their bidding. Concretely, an impressive set of countermeasures such as the adoption of trade restrictions, import tariffs, limitations to access in public procurement procedures, or sanctions against natural and legal persons acting on behalf of the third party’s government could become possible. While the policy process for an ACI ironically accelerated after the weaponisation of trade under US President Trump, the instrument is now commonly interpreted as a tool against China’s economic bullying. Although the European Commission clearly defines its new instrument as country agnostic, China is still the 'elephant in the room' to many. The widely used example of avoiding situations such as when the People’s Republic of China (PRC) put pressure on Lithuania after it opened a Taiwanese Representative Office in 2021, proves a case in point. Yet, how does China look at the ACI, and what are the broader implications for EU-China relations in the context of increasing geoeconomic competition?

Diverging perspectives

The arrival of the ACI symbolises an unprecedented shift in the EU’s trade policy, which has long been driven by the liberal mantras of free trade and market-opening reforms. The ACI, on the other hand, symbolises the encroachment of trade policy, and foreign and security policy in a context of increasing geoeconomic competition in international relations. To justify this shift in the EU’s trade policy, Brussels tends to frame its new policy actions in defensive terms. Indeed, the ACI is often framed as a defensive tool with countermeasures only being adopted as a measure of last resort. According to the EU, the ACI should, therefore, be seen as a measure of economic deterrence, most effective if it never has to be used. The PRC, however, tends to frown upon these EU statements. Instead of a defensive tool, Beijing perceives the ACI as an offensive weapon that might unlawfully be used to target China. China’s tabloid newspaper Global Times, for example, has referred to the ACI as a "bullet launcher on the grounds of vaguely defined 'coercive' practices by non-EU economies". Additionally, while criticising the ACI and its possible countermeasures against 'so-called coercion', the PRC has also backed up its criticisms by noting that in cases of “illegal unilateral sanctions on China, the EU will undoubtedly face strong countermeasures”. China’s criticisms of the ACI are further fuelled by legal experts’ questions regarding the compatibility of the instrument with WTO law.

Towards escalation?

Should we then see the ACI as a possible trigger for a future escalation in EU-China relations? Not necessarily. Most importantly, to have the potential to escalate the situation, the EU’s new trade defence instrument will need to prove its effectiveness. While the instrument allows the Commission to determine whether a third country’s actions have amounted to economic coercion, member states will still need to agree with a qualified majority before countermeasures can be implemented. However, China is known to skilfully prevent the EU from developing a unified position. Although economic security thinking is increasingly becoming salient in European capitals, to prove the ACI’s potential, member states will need to overcome their disunity over whether or not to engage China assertively. Given the diverging economic interests at play, this might still be a difficult hurdle to overcome.

The adoption of the Anti-Coercion Instrument entails an important step for the EU’s adjustment to an increasingly geoeconomic context in international trade policy.

In case the ACI does prove to amount to a more assertive EU stance, this also does not necessarily imply a dramatic event for the current state of EU-China relations. The ACI does not come like a bolt from the blue. EU-China relations have, already for a long time, passed their 'honeymoon phase'. Therefore, we should assess the EU-China bilateral relationship from a more pragmatic point of view. All economic heavyweights nowadays, including China, are increasingly adapting to a context in which economic security is becoming more important. To a large extent, China is a leading player behind this trend. The EU, on the other hand, is quite late to the game, given its long-time inclination towards liberal trade and multilateral trade arbitration in the WTO. We should see the fact that the EU is now adopting more assertive trade instruments such as the ACI as the EU following a global trend of increased geoeconomic thinking about international trade policy. While the ACI might be criticised in Beijing, it thus only reflects a context that has been shaping EU-China relations for some time. If the ACI proves to be an effective trade-security instrument, it may still lead to specific trade escalation with Beijing, but in a broader context, it does not entail a big rift from the current state of affairs in the EU’s bilateral relations with the PRC.

China needs the EU

Furthermore, while the EU is taking on a more assertive approach with the adoption of the ACI, in the present geoeconomic context, China might be less inclined to engage in a disproportionate confrontation with the EU. Taking into account the fact that China is increasingly facing a combative US international economic policy, it is not in the PRC’s economic interest to further escalate its relations with Europe. Compared to the US’ more hawkish stance on China, the EU’s increased assertiveness still seems to be more manageable in the eyes of Beijing. Consequently, despite irritants in its relationship with the EU, China increasingly sees Europe as a lucrative market and a relevant player in global affairs. Chinese businesses have invested heavily in European industries including energy and car manufacturing, and the latest appointments of foreign policy specialists to China’s Central Committee have all been Europe-oriented. Furthermore, by increasing its engagement with Europe, Beijing aims to avoid the formation of a strong anti-China transatlantic bloc. Therefore, China has been ramping up a charm offensive to reset its relationship with Brussels. Beijing's efforts to revive the stalled Comprehensive Agreement on Investment (CAI) should be interpreted within this context. So far, Europe’s reactions to China’s charm offensive have been ambiguous. While German Chancellor Scholz is, for example, in favour of reactivating the CAI, French President Macron does not see it as a viable option. On an institutional level, no consensus is visible either. European Commission President von der Leyen leans more to the sceptical side, having just coined the new ‘de-risking’ concept to define the EU’s approach to China, while European Council President Michel is in favour of improving EU-China relations. From an EU perspective, this disunity is not commendable for its geopolitical position on the international stage, yet from a Chinese point of view, Europe’s hesitation is at least a better alternative than the US’ anti-China bipartisan consensus.

The adoption of the Anti-Coercion Instrument entails an important step for the EU’s adjustment to an increasingly geoeconomic context in international trade policy. While the new trade-security tool still needs to prove its effectiveness, if the ACI’s countermeasures remain proportional, China will likely avoid reacting in an escalatory way, given its need to avoid a simultaneous confrontation with both Washington and Brussels.

DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.

Author biography

Sjorre Couvreur is a PhD researcher at the Ghent Institute for International and European Studies, Ghent University. His research focuses on the geoeconomic turn in EU trade policy and economic security. He is an alumnus of the College of Europe and Ghent University. Image credit: © European Union, 2023.