Understanding the EU’s Anti-Coercion Instrument: Function and Impact

Rowan Ashford

ago 2 hours

Pressure is mounting on European leaders to activate the EU’s Anti-Coercion Instrument (ACI) amid escalating tensions with the United States. This situation was intensified when former President Donald Trump threatened tariffs if Denmark did not agree to sell Greenland.

Understanding the EU’s Anti-Coercion Instrument

The Anti-Coercion Instrument, adopted in 2023, aims to address economic coercion by powerful nations like the US and China. It is designed to protect EU member states from trade threats or aggressive demands from external countries.

Definition of Economic Coercion

According to the ACI, economic coercion involves a third country applying measures to influence trade or investment, aiming to alter a specific decision by the EU or a member state. Under this definition, Trump’s threat of tariffs on Denmark is considered an act of coercion.

Tariff Threats and Responses

Trump’s tariffs, set to range from 10% to 25% starting February 1, are tied to Denmark’s position on Greenland, with a deadline for agreement by June. Europe previously faced similar threats from the US, leading to discussions about potential retaliatory actions and trade implications.

The ACI as a Trade Tool

The ACI allows the EU to restrict access to its single market.
It can limit trade licenses and access to public contracts.
It also includes measures that could impact American services operating in Europe.

Though the ACI serves mostly as a deterrent, its activation process is meticulous. Once a situation of coercion is identified, the European Commission has four months to evaluate the circumstances. Following this, member states vote on whether to activate the ACI.

Potential Consequences of Activation

If activated, negotiations would commence with the coercing country. Should these talks fail, the EU could employ a variety of countermeasures, including:

Excluding foreign companies from EU tenders.
Limiting access to public procurement.
Suspending certain intellectual property protections.

Any response must remain proportional and should not exceed the initial level of injury experienced by the EU.

Political Implications for the EU

Member states have been hesitant about using the ACI due to its potential unpredictable consequences. Countries like Germany and Italy have expressed concerns over rapid deployment due to fears of damaging transatlantic relations. They emphasize the importance of maintaining dialogue with the US, especially regarding NATO and the ongoing situation in Ukraine.

Looking Ahead

European leaders are at a crossroads. They could choose to activate the ACI against Trump’s tariffs, reinforcing their commitment to Denmark’s sovereignty. If they pursue this route, it could lead to a new trade war and heightened economic tensions.

With Copenhagen firmly rejecting any negotiations regarding Greenland’s sovereignty, the stakes are high. If tariffs are enacted, it will likely have repercussions affecting both US consumers and businesses ahead of the midterm elections. European officials are preparing for all possible outcomes as this situation unfolds.