The EU’s Anti-Coercion Instrument: bazooka or popgun?

Alasdair R. Young explains what the EU’s Anti-Coercion Instrument is and how it can be used. He argues that the high-decision threshold, as well as the EU’s reliance on the US for its security, mean it would be difficult to use as a tool against the US.

In response to President Donald Trump’s threat to impose tariffs on European countries opposing the acquisition of Greenland by the US, EU leaders began discussing deploying the EU’s Anti-Coercion Instrument (ACI). This is often referred to rather quaintly as the EU’s ‘bazooka’.  But an agreement on Greenland was reached and the threat of tariffs was dropped before serious discussions about using the bazooka began.

Adopted in 2023, the ACI is intended to equip the EU to respond to exactly such circumstances. It applies when another country imposes or threatens measures affecting trade or investment to coerce a member state or the EU to do something it otherwise wouldn’t do. The ACI was developed in response to concrete examples of economic coercion: it was proposed in response to the first Trump administration’s threat to impose tariffs on European countries that collected digital services taxes. Those taxes were postponed and the tariffs were not imposed. Subsequently, in 2021, China restricted exports from Lithuania and containing Lithuanian inputs to express its displeasure at the establishment of a Taiwanese (rather than Taipei) Representative Office in Vilnius.

The European Economic Security Strategy, adopted just before the ACI, noted “member states and businesses have also had to shoulder the cost of economic coercion, including bans of European exports and boycotts of European brands, designed to force them to comply and conform with the political priorities of another country.”

The ACI enables the EU to impose a wide range of measures that would inflict economic costs on the coercing state. The ACI was necessary because trade policy falls within the exclusive authority of the EU, member states cannot adopt trade measures on their own, and the EU had no legal instrument for taking an action in such circumstances. The EU can restrict imports and exports of goods and services. It can exclude products subject to EU regulations, including chemicals and plant and animal products. It can also impose restrictions on banking, insurance and other financial services. It can curb foreign direct investment. It can also restrict intellectual property rights protections, meaning, for instance, that the patents of a foreign firm could be violated with impunity. The measures adopted, however, should be proportionate and not exceed the injury inflicted upon the EU. The EU’s hope is that the existence of the ACI will deter countries from trying to coerce the EU or its member states.

Should deterrence fail, the ACI establishes a multistep process through which the EU decides whether and how to respond to economic coercion.  Once the ACI is engaged, the Commission investigates to determine whether there is economic coercion. If it concludes there is, the member states, acting by qualified majority in the Council, have eight weeks to endorse this conclusion. If they do, then the Commission is required to try to negotiate an end to the coercion and perhaps compensation for the harm done. Should those negotiations not reach an outcome satisfactory to the Commission, it can propose specific countermeasures, which, again, must be approved by a qualified majority of the member states. This lengthy process was established at the insistence of the member states, which want wanted to ensure that they retain ultimate control over whether the EU uses trade policy for a foreign policy end.

The EU does not want to impose retaliatory measures using the ACI. This is evident in its emphasis first on deterrence and then on efforts to resolve the issue through negotiations. And it’s not hard to understand why: adopting retaliatory measures would impose economic costs on the EU. According to one analysis, matching the US’s threatened tariffs over Greenland would have done more harm to the European economy that the US tariffs themselves. When the EU agreed to impose tariffs in response to the US’s ‘reciprocal’ ‘Liberation Day’ tariffs that it had adopted in April, it sought to identify imports from the US that would be least disruptive to the European economy.  It also delayed their implementation in the hope of negotiating a resolution. A solution was eventually found, albeit one on terms very favourable to the US.

The EU confronts an additional consideration when deciding whether to stand up to the US – its reliance on it for security, particularly in the context of the war in Ukraine. These security considerations also shaped the EU’s decision to reach an agreement with the US over its reciprocal tariffs rather than retaliate. As the US administration does not share the EU’s concern about the negative effects of tariffs on its economy and does not rely on its European allies for security to anything like the same extent, the US enjoys “escalatory dominance.” In a tit-for-tat exchange, the US can inflict more harm than the EU, and both sides know it. These considerations, combined with the ACI’s high-decision threshold, means that it will be difficult for the EU to agree to respond to coercion from the US, particularly if only some member states are adversely affected.

By Alasdair R. Young, Associate Dean for Faculty Development, Professor and Neal Family Chair, Sam Nunn School of International Affairs, Georgia Institute of Technology.