Should EU activate anti coercion instrument?

Out of the blue, Emmanuel Macron calls for activation of the anti-coercion instrument against the super power, America. Macron is widely known for his bluster and not carrying through it. But the condition today is too volatile to boot. Should EU activate this measure?

The Anti-Coercion Instrument (ACI) has a street name: Trade Bazooka. This measure was adopted in November 2023, and entered into force the next month. Its main aim is to protect EU’s 27 members from economic hand twisting by third nations and adopt defensive counter measures as corollary.

Theoretically there are several manoeuvres. Announcing penalties to the opponent is a key item. Others include trade related restrictions rising towards complete boycott of the opponent in diplomatic relations too. Yet another measure is to seek reparations for the loss caused by an action of the opponent that can be reduced into actual figures.

Practically, EU can restrict US access to European market targeting US tech companies, financial institutions from transaction to and fro member nations.  As additional measure EU can restrict procurements of all sorts from America by firms operating within EU.

Originally targeted against China ACI remained in the rule book without ever being touched. Now Macron has opened the can of worms, by calling for its first ever use against the hegemon. What are pros and cons?

A significant plus point is that once being enforced ACI can act as a unifier of the member countries who have varying opinions against opponent. Speed is another pro because once adopted ACI comes into force immediately. The third good thing is ACI measures can be proportionate to the degree of damage opponent is inflicting on EU.

There are cons too. Chief amongst these is that EU could be reported to World Trade Organization (WTO) as regards the violation of trade rules & practices. Secondly EU cannot envisage the type of counter measures the targeted country would undertake. The bottom line is who has the control of the escalation ladder bringing trade and supply chain disruptions. At the end target might get better of the situation and pull down the carpet beneath the foot of the EU.   

Since ACI borders on trade, foreign and security policy of the 27 members, EU as a responsible organization must invoke ACI only as the last resort. Even then it should not lead to a trade war between US & EU.

More than anything else, the distinction between friend and enemy should be recognised.Originally, ACI was contemplated as defensive option against China which is all purposes an economic enemy. But Macron wants ACI to be used against USA.

Germany has the responsibility to advise EU that strategy must be made taking into count whether the counter party is an enemy, friend or frenemy. The crux of the matter is strategy amid geoeconomics is the vital theme that should influence all decisions be it political, economic or even military. On this count Germany withdrawing her soldiers from Greenland is a case in point.

 

Cheers!

 

Muthu Ashraff Rajulu

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser