On 27th January 2022, in order to protect the single market, the EU filed a case before the WTO following China’s trade restrictions over Lithuanian goods.[1] China’s move came in August 2021 after Lithuania’s recognition of Taiwan’s diplomatic office as the ‘Taiwanese Representative office’ instead of ‘Taipei Representative Office’, according to the custom and China’s demand. Soon, filing a case before an international body may not be the only option for the EU to deal with such a case.

The Draft Regulation

On 8th December 2021, the European Commission proposed a regulation for an anti-coercion instrument (the Draft Regulation) enabling the Union to adopt economic coercive measures in response to third countries threatening or applying economic coercive measures aiming at interfering “in the legitimate sovereign choices of the Union or a Member State by seeking to prevent or obtain the cessation, modification or adoption of a particular act by the Union or a Member State”.[2] To date, the Union does not have at its disposition any legal framework for acting against economic coercion. The targeted measure must fulfil certain objective criteria in order to give the Commission clearance to propose countermeasures, but the existence of external pressures do not oblige the Union to react. Not only is the Union not obliged to respond to economic coercive measures, but should it choose to act, the Draft Regulation provides for a wide range of countermeasures which can be amended.[3] The proposal thus gives large room for manoeuvre and does not allow for predicting the Commission’s action in case it is faced with economic coercive measures.

Enhancing solidarity in the EU’s external relations

The Draft Regulation echoes Lithuania’s dispute with China over Taiwan which has now become an EU issue too. In an international political environment where tensions are increasingly antagonising the world’s major powers, scholars voiced the requirement that the EU fosters solidarity in external relations between Member States and between Member States and the Union.[4] It is already established that Member States owe a duty of solidarity towards the Union’s external action by refraining from interfering with the EU’s actions and by taking all appropriate measures to defend the Union’s interests.[5] But this reciprocity is uncertain.

The Draft Regulation provides a de facto solidarity of the EU with its Member States’ foreign relations actions. Indeed, if the Draft Regulation were already adopted, it is likely that the block would have used economic coercive measures against China in the dispute over Lithuanian goods, as suggested by the Commission.[6] Such reaction implies the support of the EU behind Member States’ relations on the international scene, even in a field of foreign relations that falls outside of the scope of EU’s competence, such as the establishment of bilateral diplomatic relations between a Member State and a third country or territory. Hence, the proposal represents a new stage in the pursuit of the objective of creating an ever closer Union, under Article 1 TEU, where the Union backs the diplomatic choices of its Member States. Nevertheless, the solidarity encompassed by the Draft Regulation does not impose any obligations upon the EU as it has the option not to act. On the other hand, it can be argued that if a Member State is subject to economic coercive measures by a third country and the EU does not make use of the Draft Regulation, the Commission may be held accountable for a failure to act under Article 265 TFEU on the account of not respecting the principle of solidarity guiding the EU’s external action, according to Article 21 TEU. But that is yet a moot point.

The EU’s second pillar awakening

On the podium of the largest economic areas in the world, the EU’s economic weight does not match its political strength on the international scene. Although the common commercial policy is an exclusive EU competence, the Common Foreign and Security Policy (CFSP) is not and it largely remains in the hands of the Member States. This divide in the allocation of competences in external relations significantly reduces the EU’s field of action. But through the Draft Regulation, the Union aims at becoming more resilient in an ever more hostile geopolitical context, where Russia, Belarus, Turkey and China have already demonstrated their animosities towards the Union and where the alliance with the United States is volatile and may well radically change every four years. Based on Article 207(2) TFEU, relating to the common commercial policy, the Draft Regulation takes advantage of the single market’s economic strength as a means of pressure to serve CFSP’s objectives, while leaving a wide margin of discretion to the Commission. This new card in the EU’s sleeves may well turn the tables and balance powers on the international concert.

[1] The request for consultation, the first step under the WTO dispute settlement procedure, can be accessed here: European Union, ‘Request for Consultations by the European Union’ (27 January 2022) <https://trade.ec.europa.eu/doclib/docs/2022/january/tradoc_160022.pdf> accessed 30 January 2022.

[2] Proposal for a Regulation of the European Parliament and of the Council on the protection of the Union and its Member States from economic coercion by third countries COM/2021/775 final, arts 1(1) and 2(1), accessible at <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021PC0775&qid=1643581845516> accessed 30 January 2022.

[3] Ibid., arts 7 and 8 and Annex 1.

[4] Jonathan Hackenbroich, Pawel Zerka and Filip Medunic, ‘Tough trade: The hidden costs of economic coercion’ (European Council on Foreign Relations, 1 February 2022) <https://ecfr.eu/publication/tough-trade-the-hidden-costs-of-economic-coercion/#2-the-proposed-anti-coercion-instrument> accessed 1 February 2022; Laura C. Ferreira-Pereira and A.J.R. Groom, ‘‘Mutual solidarity’ within the EU common foreign and security policy: What is the name of the game?’ (2010) 47 International Politics 596, p. 598.

[5] Epaminondas A. Marias, ‘Solidarity as an objective of the European Union and the European Community’ (1994) Legal Issues of Economic Integration 85, p. 94; Case 22/70 Commission v Council (ERTA) [1971] ECLI:EU:C:1971:32; Opinion 1/75 (Re Understanding on a Local Costs Standard) [1975] ECLI:EU:C:1975:145, the requirement of solidarity is not explicitly mentioned but in Opinion 1/76 (Draft Agreement establishing a European laying-up fund for inland waterway vessels) [1977] ECLI:EU:C:1977:63, para. 12 the Court of Justice of the European Union referred to this jurisprudence as emphasising on the duty of solidarity.

[6] ‘Press release: EU refers China to WTO following its trade restrictions on Lithuania’ (European Commission, 27 January 2022) <https://trade.ec.europa.eu/doclib/press/index.cfm?id=2355#:~:text=27%20January%202022-,EU%20refers%20China%20to%20WTO%20following%20its%20trade%20restrictions%20on,from%20the%20EU’s%20Single%20Market> accessed 30 January 2022.

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