After Donald Trump’s statements in January about a possible annexation of Greenland, the European Union has threatened to use its anti-coercion tool. What exactly does it consist of? Why has it not been used? What other tools does Brussels have for commercial defense? And what is the status of the implementation of the Turnberry agreements to end the trade escalation between the United States and the European Union? Elvire Fabry, who heads the “Trade and Economic Security” program at the Jacques Delors Institute, discusses the various solutions available to the European Union.
In January, following Trump’s statements on a possible Greenland annexation, there was talk of using the EU’s anti-coercion tool. What is it?
In case of a trade dispute, countries could use the World Trade Organization to request arbitration that imposes supranational measures on states (with compensatory measures). The US has never fully accepted this and has since 2019 blocked the functioning of the Appellate Body of the dispute settlement mechanism by delaying the appointment of new judges.
This led the European Commission to equip the European Union with new unilateral tools of trade defense, without resorting to arbitration. Among these new instruments was the anti-coercion tool, motivated by US extraterritorial measures and calibrated to respond to the risk of Chinese extraterritoriality.
Elvire Fabry states that the anti-coercion tool adopted in 2023 has not been used yet as it is primarily a deterrent. The aim is to announce retaliatory measures strong enough to dissuade a third country from exercising coercion.
The European Commission first assesses the coercion risk, and the EU Council votes to activate it with a qualified majority, meaning the support of at least 55% of member states representing at least 65% of the total EU population. The Commission then determines the measures to be taken, which are voted on by the Council. In essence, an inverted qualified majority would be needed to go against a Commission decision. A unanimous vote would have been futile as one state could block the process.
This new foreign policy instrument goes beyond purely commercial matters. Its deterrent potential is strong as measures can include restrictions on access to goods markets through tariffs, services, direct foreign investment, or access to public markets, suspension of intellectual property licenses, etc. It is crucial to select alternatives for goods and services when utilizing this tool.
The recent tensions, especially regarding the US threat to take control of Greenland, are mobilizing Europeans. It is clear that the risks of coercion are increasing, and the EU will likely need to use this tool. However, the conditions must be created, including reducing dependencies quickly, even in digital services.
In July, the EU negotiated the Turnberry agreements with the US. What commitments were made on both sides? Can we still rely on this agreement as a basis for dialogue, or is it outdated?
From the US side, tariffs were stabilized at 15%, down from Trump’s initial proposal of 27%. This represents a significant increase compared to the previous average level around 2-3%. While some sectors like automotive can absorb this, others like wines and spirits face heavier impacts.
The EU should reduce its industrial tariffs to zero. The agreements on liquefied gas and US armaments imports were mainly for political display. The EU Commission alone cannot guarantee these purchase volumes, but the announcements aimed to signal cooperation with Washington.
There were no automatic countermeasure mechanisms in the agreement. However, a set of measures prepared by the EU Commission allowing for tariffs on US imports up to €93 billion has been kept aside “on the shelf” until June to be quickly enacted in case of new tariff threats.
The agreement requires a vote from the European Parliament as it modifies tariffs. The INTA, the International Trade Committee of the European Parliament, has taken up the issue to prevent these concessions from becoming permanent. A sunset clause was included, tying the agreement’s validity to the end of Donald Trump’s term. Safeguard clauses were also integrated to suspend the agreement if US imports destabilize European markets. A compromise within the INTA committee seems to pave the way for a possible vote soon.
The EU has other defense instruments like anti-dumping measures, safeguard clauses, and controls on foreign subsidies. The EU Commission is now more actively using them, especially against China due to the arrival of low-priced products in the European market.
How can companies prepare for future events, and which European sectors are most exposed to new American measures or Chinese pressure?
This requires a derisking strategy, reducing excessive dependencies on certain markets or suppliers, along with stockpiling critical inputs.
Sectors highly dependent on American or Chinese markets (pharmaceuticals, wines and spirits, dairy products, etc.) or in direct competition with both blocs (chemicals, machine-tools, etc.) are most exposed. Diversifying outlets and securing supplies is crucial for these industries to withstand new protectionist measures. Time is of the essence to achieve this.
Interview conducted by Sophie Creusillet and Kétana Men.
