COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the document 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
Date: 2021-12-08
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: EU Member State, EU restrictive measure, economic sanctions, international sanctions, international trade, investment, legal person, natural person, third country, trade restriction

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 8.12.2021  SWD(2021) 371 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT  Accompanying the document 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} - {SEC(2021) 418 final} - {SWD(2021) 372 final}  
 
 
Table of contents 

1. 

2. 

3. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ............................................................... 5 

ILLUSTRATIVE EXAMPLE............................................................................................................... 6 

PROBLEM DEFINITION .................................................................................................................... 7 

3.1.  What is the problem? ......................................................................................... 7 
3.2.  What are the problem drivers? ........................................................................ 17 
3.3.  How will the problem evolve? ........................................................................ 18 

4.  WHY SHOULD THE EU ACT? ........................................................................................................ 19 

4.1.  Legal basis ....................................................................................................... 19 
4.2.  Article 207(2) TFEU is expected to be a sufficient legal basis for the 
purposes  of  a  policy  intervention  in  the  situations  of  economic 
coercion, as described below. Subsidiarity: Necessity of EU action .............. 19 
4.3.  Subsidiarity: Added value of EU action .......................................................... 20 

5.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ............................................................................... 20 

5.1.  General objectives ........................................................................................... 20 
5.2.  Specific objectives ........................................................................................... 20 

6.  WHAT ARE THE AVAILABLE POLICY OPTIONS? .................................................................... 22 

6.1.  Options discarded at an early stage – Option 1: No policy change (also 
the baseline  from  which other options  are assessed) and  Option  3:  A 
“Resilience Office” .......................................................................................... 22 
No policy change (also the baseline from which other options are assessed) – 

6.1.1. 
discarded at an early stage .................................................................................................... 22 

6.1.2. 

Option 3: A “Resilience Office” – discarded at an early stage .............................. 26 

6.2.  Options  retained  for  further  analysis  –  Option  2:  A  legal  instrument 

and design parameters ..................................................................................... 27 

7. 

IMPACT OF THE POLICY OPTIONS .............................................................................................. 38 

7.1.  General remarks ............................................................................................... 38 
7.2.  Economic impact ............................................................................................. 40 
7.2.1. 
States 

Non-EU countries that use or contemplate coercion towards the EU or Member 
40 

7.2.2. 

International relations ........................................................................................... 42 

7.2.3. 

UN Sustainable development goals ...................................................................... 43 

7.2.4. 

EU economic operators and consumers ............................................................... 43 

7.2.5. 

SMEs ...................................................................................................................... 48 

7.2.6. 

Trade and investment flows .................................................................................. 49 

7.2.7. 

Public authorities (EU, national, regional or local administrations) ..................... 49 

7.2.8. 

EU citizens and society as a whole ........................................................................ 50 

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7.3.  Social impact ................................................................................................... 50 
7.4.  Environmental impact ..................................................................................... 50 
7.5.  Fundamental rights .......................................................................................... 51 

8.  HOW DO THE OPTIONS COMPARE? ............................................................................................ 51 

8.1.  Configuration of policy packages .................................................................... 51 
8.2.  Policy packages ............................................................................................... 52 
8.3.  Comparison ...................................................................................................... 54 
Effectiveness or the extent to which the policy packages would achieve the 
8.3.1. 
objectives (deter, de-escalate, discontinue, counteract)...................................................... 54 

8.3.2. 

Efficiency ............................................................................................................... 56 

Coherence with other EU policy objectives, including the Charter for fundamental 
8.3.3. 
rights, and with other policy initiatives and instruments ..................................................... 57 

9. 

PREFERRED OPTION ...................................................................................................................... 58 

10.  HOW WILL THE ACTUAL IMPACTS BE MONITORED AND EVALUATED? ......................... 61 

ANNEX 1: PROCEDURAL INFORMATION ............................................................................................ 62 

1. 

LEAD DG, DECIDE PLANNING/CWP REFERENCES .................................................................. 62 

2.  ORGANISATION AND TIMING ...................................................................................................... 62 

3. 

4. 

CONSULTATION OF THE RSB....................................................................................................... 62 

EVIDENCE, SOURCES AND QUALITY ......................................................................................... 63 

ANNEX 2: STAKEHOLDER CONSULTATION – SYNOPSIS REPORT ................................................ 67 

ANNEX 3: WHO IS AFFECTED AND HOW? .......................................................................................... 72 

1. 

2. 

PRACTICAL IMPLICATIONS OF THE INITIATIVE..................................................................... 72 

SUMMARY OF COSTS AND BENEFITS ....................................................................................... 72 

ANNEX 4: ANALYTICAL METHODS ..................................................................................................... 74 

ANNEX 5: OVERVIEW OF CERTAIN EXISTING INSTRUMENTS AND THEIR RELATION 

TO COERCION .................................................................................................................................. 76 

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Glossary 

Term or acronym 

Meaning or definition 

Blocking Statute 

EBRD 

ECFR 

EESC 

EEAS 

EIB 

Council Regulation (EC) No 2271/96 of 22 November 
1996 protecting against the effects of the extra-territorial 
application of legislation adopted by a third country, and 
actions based thereon or resulting therefrom, OJ L 309, 
29.11.1996, p. 1–6; as last amended, OJ L 199I , 7.8.2018, 
p. 1–6; consolidated text. 

European Bank for Reconstruction and Development 

European Council for Foreign Relations 

European Economic and Social Committee 

European External Action Service 

European Investment Bank 

EU Trade Enforcement 
Regulation 

Regulation (EU) No 654/2014 of the European Parliament 
and of the Council of 15 May 2014 concerning the exercise 
of the Union's rights for the application and enforcement of 
international trade rules, OJ L 189, 27.6.2014, p. 50–58; as 
amended, OJ L 49, 12.2.2021, p. 1–5; consolidated text. 

EU or Union 

European Union 

HS 

Harmonized System 

DG TRADE 

Directorate General for Trade 

GDP 

INTA 

ISG 

MFF 

Gross Domestic Product 

Committee on International Trade of the European 
Parliament 

Interservice (steering) group 

The Multiannual Financial Framework of the European 
Union 

Member States 

The Member States of the European Union 

NGOs 

SMEs 

TEU 

TFEU 

REACH Regulation 

Non-government organisations 

Small- and medium-size enterprises 

Treaty of the European Union 

Treaty on the Functioning of the European Union 

Regulation (EC) No 1907/2006 of the European Parliament 
and of the Council on the Registration, Evaluation, 
Authorisation and Restriction of Chemicals, OJ L 396 
30.12.2006, p. 1, as amended; consolidated text. 

3 

 
CTEO 

UN 

US 

WTO 

WTO Agreement 

GATT 1994 

GATS 

TRIPS Agreement 

The Chief Trade Enforcement Officer at the Directorate-
General for Trade 

The United Nations 

The Unites States of America 

World Trade Organization 

Marrakech Agreement Establishing the World Trade 
Organization 

WTO General Agreement on Tariffs and Trade 1994 

WTO General Agreement on Trade in Services 

WTO Agreement on Trade-Related Intellectual Property 
Rights 

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1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT 

The  initiative  for  the  creation  of  an  anti-coercion  instrument  originates  in  the  legislative 
process during 2020 to amend the EU Trade Enforcement Regulation, where the European 
Parliament and a number of Member States raised concerns about the issue of coercion. 

This led to a political agreement on a Joint Declaration of the Commission, the Council and 
the  European  Parliament,1  to  create  a  new  legislative  instrument  to  deter  and  counteract 
coercion.  The  Joint  Declaration  contains  the  Commission’s  commitment  to  make  a 
legislative proposal by the end of 2021 at the latest. In particular, the Commission stated its 
intention  to  examine  further  a  possible  instrument,  which  could  be  adopted  in  order  to 
dissuade  or  offset  coercive  actions  by  third  countries  and  which  would  allow  the 
expeditious adoption of countermeasures triggered by such actions, in a manner consistent 
with international law. The Commission shared the view that the practices to seek to coerce 
the EU and/or its Member States to take or withdraw particular policy measures were of a 
concern. The European Parliament and the Council committed to consider the proposal in a 
timely manner. 

These concerns surfaced in the light of the possible imposition of trade-restrictive measures 
by the US pursuant to Section 301 of the US Trade Act of 1974 following an investigation 
into the digital services tax adopted by France, a taxation policy which the US viewed and 
continues to view unfavourably. Such tariffs could have affected French exports to the US 
of  cosmetics  and  handbags  of  an  estimated  trade  value  of  approximately  $1.3  billion  in 
2019.2  The  US  did  not  proceed  with  measures  at  the  time  but  this  possible  action  has 
contributed  to  increased  uncertainty  for  economic  operators  and  pressure  on  policy 
makers.3 Other examples of coercion, for example involving EU economic operators active 
in  China,  are  also  relevant.  Consequently,  the  issue  of  economic  coercion  is  of  broad 
concern, as the analysis undertaken in the context of this impact assessment confirms. 

The Commission President henceforth announced the initiative in her Letter of Intent to the 
President  of  the  Parliament  and  President  in  office  of  the  Council  of  16  September  2020 
under  the  heading  “An  economy  that  works  for  people”.  The  Commission  Work 
Programme 2021 identifies the initiative as a key one for the referenced period.  

The issue of economic coercion features in the EU’s future trade policy. The Trade Policy 
Review Communication of February 20214 aims at shaping a new consensus for an open, 
sustainable and assertive trade policy in  a  challenging economic  and  geopolitical  context. 
The  Communication  mentions  the  need  to  navigate  rising  global  tensions  with  trade 
increasingly weaponised in a geo-economic context. The Communication specifically refers 
to a future Commission proposal for an anti-coercion instrument. 

1   OJ C 49 of 12.2.2021, p.1. 
2   Office  of  the  United  States  Trade  representative,  Notice  of  Action  in  the  Section  301  Investigation  of 

France’s Digital Services Tax.  

3   Subsequently,  the  investigation  continued  and,  on  2  June  2021,  the  new  US  Administration  announced 
tariffs but decided to suspend them for 180 days and, subsequently, for an indefinite period of time. This is 
discussed in more detail in section 3.1. 

4   Communication  from  the  Commission  of  February  2021  on  the  Trade  Policy  Review  -  An  Open, 

Sustainable and Assertive Trade Policy, COM(2021) 66 final. 

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As set out in the Communication, the current geopolitical environment is characterised by 
uncertainty, rising tensions between major players and a resort to unilateral measures. The 
Covid-19 pandemic accelerated these trends while highlighting the interconnected nature of 
the EU’s economy with third country economies and the need for global cooperation.  

The present initiative is complementary to other, more structural initiatives to enhance the 
resilience of the EU economy  against  external  pressures.  The update of the EU  Industrial 
Strategy  of  May  2021  aims  at  strengthening  the  single  market’s  resilience.5  This  strategy 
now plays a key role in the recovery supported by robust competition and trade policies.6  

Furthermore,  in  January  2021,  the  Commission  announced  in  its  communication  "The 
European  economic  and  financial  system:  fostering  openness,  strength  and  resilience"  a 
strategy  to  promote the  EU’s resilience in  economic and financial matters.7 This  includes 
inter alia considering additional policy options to further deter and counteract the unlawful 
extra-territorial  application  of  third-country  sanctions  to  EU  operators,  notably  by 
amending  the  EU  Blocking  Statute.  The  amendment  to  the  Blocking  Statute  would  (i) 
include  additional  deterrence  mechanisms  and  (ii)  streamline  its  application,  including  by 
reducing  compliance  costs  for  EU  persons  and  businesses.  A  legislative  proposal  is 
foreseen  for  the  second  quarter  2022.8  That  initiative  is  distinct  but  also  related  to  the 
present initiative. There could be a potential partial overlap between problems identified by 
the  two  initiatives,  if  there  were  a  situation  where  unlawful  extra-territorial  third-country 
sanctions are applied with coercive effect on the EU or the Member States.  

2. 

ILLUSTRATIVE EXAMPLE  

To  facilitate  the  reading  of  this  document,  the  following  is  a  fictitious  example  which 
illustrates  the  problem  and  the  preferred  option  –  as  will  be  elaborated  throughout  the 
remainder of this report: 

Hypothetical example  of economic coercion targeting the EU and of possible EU 
reaction under an anti-coercion instrument: 

The Commission makes a proposal to the European Parliament and Council to adopt a 
new regulation to protect the environment in some important respect. This new policy 
is  fully  compliant  with  international  law.  Country  X,  however,  dislikes  it  because  it 
harms  some  of  its  commercial  interests.  It  therefore  imposes  an  import  ban  on  all 
widgets from the EU. The explicit motivation of Country X is to force the EU not to 
adopt or to abandon the new policy. The EU widget industry is a significant source of 
employment  and  GDP  in  the  EU  and  Country  X  an  important  export  market.  The 
import  ban  therefore  makes  it  difficult  for  the  EU  legislator  to  adopt  or  maintain  the 
new policy despite there being a clear political majority in its favour.  

The EU intends to defend its right and ability to adopt and maintain the new policy. It 

5   Communication  from  the  Commission  "Updating  the  2020  New  Industrial  Strategy:  Building  a  stronger 

Single Market for Europe’s recovery” of May 2021, COM(2021) 350 final. 

6   In  this  context,  the  Commission  has  identified  a  list  of  137  possible  strategic  dependencies  (out  of  5200 
products). For 34 of these products, risk are higher because it is not possible to produce internally and there 
are few suppliers at global level 

7   COM/2021/32 final. 
8   The inception impact assessment and the public consultation were published subsequently to submission of 

this report to the Regulatory Scrutiny Board, in August and September 2021, respectively. 

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notifies  X  that  it  objects  to  this  interference.  It  first  offers  (without  success)  talks  on 
resolving  the  matter  amicably,  then  sets  a  deadline  for  the  removal  of  the  coercive 
import  ban,  combined  with  the  warning  that  the  EU  will  otherwise  resort  to  the 
adoption  of  countermeasures  (given  there  is  a  violation  of  international  law).  After 
expiry, the EU implements prohibitive import duties on certain products originating in 
Country  X,  selected  after  stakeholder  consultation  and  to  minimise  detrimental 
economic  effects  in  the  EU,  at  a  nearly  equivalent  value  as  the  widget  trade  loss, 
demanding that Country X stop its actions. Country X after few weeks enters into talks 
with the EU. Both sides first agree to suspend both measures for six months while the 
talks are ongoing; then agree on the definitive lifting of both measures.  

3. 

 PROBLEM DEFINITION 

3.1.  What is the problem? 

The above-referenced Joint Declaration of the Commission, the Council and the European 
Parliament  on  this  initiative  expressly  referred  to  “practices  of  certain  third  countries  to 
seek  to  coerce  the  Union  and/or  its  Member  States  to  take  or  withdraw  particular  policy 
measures”. The initiative therefore aims to address this problem and those concerns.  

Definition 

The initiative is concerned with economic coercion defined as follows:  

pressure which foreign countries exercise towards the EU and/or its Member States 
through most often a trade or investment restriction with the objective of attaining a 
specific  outcome  falling  within  the  legitimate  policymaking  space  of  the  EU  or  a 
Member State.  

It  is  defined  as  economic  because  of  the  use  of  economic  means  for  the  coercion.9  The 
definition  is  a  reformulation  of  the  provisional  definition,  which  stakeholders  commented 
on in the public consultation. Substantively, the meaning is unchanged.10 

Coercion, so defined, can be observed in current international relations in various forms on 
a broad  spectrum  of intensity, formality  and nature, as  also  confirmed in  the consultation 
process.  At  one  end  of  this  spectrum  regarding  formality,  the  foreign  government’s 
involvement may be very informal, unofficial or implicit, not always easily discernible, but 
unquestionably  existing because it is the impulse giving rise to  the  coercive measure that 
aims to put pressure on a foreign actors and hence their home governments.11 At the other 

9   Coercion through the use of force or the threat of its use is not part of this dimension. 
10  That  provisional  definition  was:  “Coercive  practices  by  non-EU  countries  are  measures  which  seek  to 
coerce  public  authorities  in  the  EU  to  take,  not  take,  or  withdraw,  particular  policy  measures.  These 
practices  may include the use or threat of coercion, often in the  form of trade or investment restrictions. 
The coercion may or may not be based on existing legislation, and can affect any field in which the EU or 
its  Member  State  are  active.”  Participating  stakeholders  across  the  groups  largely  agreed  with  the 
definition.  Those  who  partly  agreed  argued  that  in  most  cases  the  definition  should  extend  to  coercion 
against private actors and in general should be broader than narrower for the instrument to work. 

11  Cf.  Darren  Lim  and  Victor  Ferguson,  'Informal  economic  sanctions:  the  political  economy  of  Chinese 
coercion during the THAAD dispute', Review of International Political Economy, advanced publication. 

7 

 
 
                                                           
end of this spectrum, the government may be acting openly, officially and through formal 
measures, such as legislation. 

Coercive measures by third countries targeting the EU or Member States can be considered 
a breach of customary international law, which prohibits certain forms of interference in the 
affairs of another subject of international law when there is no basis in international law for 
doing  so.12  Whether  specific  coercive  measures  constitute  a  breach  would  depend  on  the 
concrete circumstance in individual cases and will be a matter of case-specific analysis. 

In such an event, the EU and the Member States have the right to respond to the measures 
in question with the means which international law allows. These means include the right 
under  customary  international  law,  as  codified  in  Articles  49  et  seq.  of  the  International 
Law  Commission’s  Articles  on  State  Responsibility,13  to  take  countermeasures  if  the 
coercive act breaches international law. If this is not the case, the EU (or its Member States) 
is  always  entitled  to  resort  to  a  retorsion,14  i.e.  an  act  per  se  not  inconsistent  with 
international  law.  In  all  instances,  the  EU  (or  its  Member  States)  can  resort  to  standard 
diplomatic  means,  i.e.  make  representations  to  the  foreign  government  in  question. 
However,  the  principle  of  conferred  powers  means  that  the  EU  and  its  institutions  can 
deploy the means existing under international law only when empowered to do so. 

Presently,  there  is  no  legal  framework  in  any  of  the  existing  instruments  to  permit  EU 
action  against  a  third  country  to  respond  specifically  to  coercive  measures  of  third 
countries.  Existing  instruments  do  not  address  situations  of  coercion  as  identified  and 
defined above and thus are neither suitable, nor capable as a response to coercion. It follows 
that the EU is unable to respond to coercion in a timely and effective manner, should a need 
arise, even less so to provide any deterrence effect or legal predictability. The EU has so far 
not  adopted  any  instruments  against  coercion.  Section  6.1.2  (the  baseline)  presents  the 
analysis of any other possibilities for a response.  

Individual elements 

Deconstructing coercion as defined above leads to the following key elements:  

Coercive  intention  –  the  third  country’s  objective  of  attaining  a  specific  outcome  lying 
within the legitimate policymaking space of the EU or Member State; it may affect any area 
of competence of the EU or a Member States; 

Target – pressure on private actors as a conduit to public authorities of the EU or Member 
States (also as subjects of international law); 

Author of the coercive measure – this can be any government agent or other agent whose 
conduct  is  attributable  to  the  country  in  question.  It  includes  state-owned  and  state-
controlled enterprises.  

Type of coercive measure – these may be explicit, disguised or silent.   

12  Mohamed  S.  Helal,  On  Coercion  in  International  Law,  52  N.Y.U.  J.  Int'l  L.  &  Pol.  (2019);  Maziar 

Jamnejad & Michael Wood, The Principle of Non-Intervention, 22 Leiden J. Int'l L. 345 (2009).   

13  Articles  on  Responsibility  of  States  for  Internationally  Wrongful  Acts  adopted  by  the  International  Law 

Commission at its fifty-third session, in 2001, and submitted to the General Assembly. 

14  “Retorsion” is the accepted term in international law scholarship to designate a state’s response to another 
state’s  action  when  the  response  is  not  in  departure  from  international  obligations  which  the  responding 
state has.   

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Manifestation  –  predominantly  trade  or  investment  restrictions,  including  also  restrictions 
on financial flows.15 

Explicit coercion would be the use of formal measures for coercion. A well-known example 
is parts of Section 301 of the US Trade Act of 1974, on the basis of which the US takes or 
threatens  to  take  trade-restrictive  actions  because  a  third  country  maintains  a  measure 
which  the  US  regards  as  unreasonable  and  unfairly  harming  commercial  interests  of  US 
companies without it being in breach of international obligations.  

Disguised  coercion  is  the  abuse  of  an  instrument  which  per  se  could  have  a  legitimate 
purpose. An observed example is the abusive resort by China to trade defence instruments 
or  the  selective  stepping  up  of  border  checks  against  goods  from  a  particular  country  or 
region.16 Another example is excessive or discriminatory sanitary and phytosanitary (SPS) 
measures  that  are  introduced  with  a  coercive  intention,  rather  than  being  introduced  on 
health protection grounds.17 The internationally illegal coercion in these cases is unrelated 
to the question of the possible WTO-illegality of the trade-restrictive measures chosen.18   

Silent coercion and boycotts do not come in the form of legislative or regulatory actions but 
result from informal restrictions applied by private actors under the unofficial direction of 
the foreign government (e.g. a boycott of goods or services from certain origins, fomented 
for example via government-controlled media or through informal instructions) in order to 
influence  a  foreign  government’s  policy.  This  was  for  instance  the  case  in  Turkey  which 
saw  the  boycott  of  French  products,19  or  China  in  respect  of  a  number  of  European,20 
American,21 Korean22 and Japanese23 companies. 

Extra-territorial sanctions are formal measures imposed to foreclose commercial activities 
of foreign operators in another third country. Extra-territorial sanctions are directed at EU 
(and other) operators with the intention to avoid that these operators might undermine the 
foreign policy of a third country by continuing to engage in business activities there and by 
even  replacing  economic  operators  of  that  third  country  in  an  environment  sanctioned  by 
that third country (“backfilling”). They have the purpose of maximising the effectiveness of 
the sanctions imposed by the third country.  An example is the US sanctions on economic 
operators active in/with Cuba and Iran.24 However, they also frequently have the effect of 
coercing the EU or the Member State in the sense that they create pressure for the EU or the 

15  There also can be other restrictions, for example, restrictions imposed on individuals, notably EU decision-
makers. This initiative however focuses on trade and investment restrictions, therefore such other measures 
will not be referred to in the remainder of the document.  

16  Al Jazeera,  China ‘blocks’ Mongolian border after Dalai Lama  visit, 10 December 2016; Reuters,  China 
slaps new fees on Mongolian exporters amid Dalai Lama row, 1 December 2016; see also below footnotes 
52-54 and accompanying text. 

17  E.g. Kesha West, Banana crisis blamed on Philippines-China dispute, ABC News, 29 June 2012.  
18  Accordingly, any anti-coercion action would not rely on any potential WTO-incompatibility of the action.  
19  BBC, Turkey's Erdogan urges French goods boycott amid Islam row, 26 October 2020.  
20  Stuart  Lau,  China’s  new  bogeyman:  Europe,  Beijing  turns  to  invective  and  boycotts  to  dissuade  Europe 

from closer coordination with Washington, Politico, 29 March 2021.  

21  Consumer boycotts against US and Japanese (cf. footnote 23) companies clearly existed; less evident was 

the role of the state in fomenting these.   

22  Darren Lim and Victor Ferguson, footnote 11 above.  
23  Yoko  Kubota,  Japan  carmakers  face  $250  million  in  lost  China  output,  new  risk,  Reuters,  12  September 
2012;  Chester  Dawson  And  Yoshio  Takahashi,  Japanese  Car  Sales  Plunge  Amid  China  Rage,  The  Wall 
Street Journal, 9 October 2012. 

24  Study: extraterritorial Sanctions on trade and investment and European responses, requested by the INTA 

committee of the European Parliament, November 2020.  

9 

 
                                                           
Member  State  to  align  its  policy  vis-à-vis  the  sanctioned  third  country  with  the  country 
imposing  the  sanctions.  Where  such  extra-territorial  sanctions  simultaneously  coerce  the 
home government of the economic operators they fall under the definition of this initiative.  

If  extra-territorial  sanctions  do  not  also  coerce  the  home  government  of  the  economic 
operators  in  question,  they  do  not  fit  within  the  definition  of  coercion  with  which  this 
initiative  has  been  launched.  However,  irrespective  of  this,  businesses  and  other 
stakeholders voiced strong concerns about coercion of this type. As noted, extra-territorial 
sanctions  are  covered  under  the  EU’s  Blocking  Statute,  which  is  in  the  process  of  being 
amended so as to deter such practices and better protect EU operators. 

What falls outside the definition? 

Extra-territorial  sanctions  will  fall outside the definition where they do not  have  coercive 
effects  towards  the  EU  or  Member  States.  The  definition  also  does  not  cover  coercion 
against  private  actors  where  the  conduct  which  the  third  country  government  desires  to 
obtain from private actors is purely related to these operators’ activities in that third country 
and  unrelated  to  the  public  policy  of  the  EU  or  a  Member  State.  Examples  would  be 
attempts to pressure a foreign company into surrendering its assets, to transfer technology 
or  to  support  certain  domestic  or  international  policies  of  that  government,  abusive  anti-
trust or anti-corruption investigations, the arbitrary withholding of licences, or the targeting 
of specific companies for the positions they or their employees are taking or not taking on 
any matter of legitimate public interest (e.g. on Hong Kong25 or Taiwan26).  

A number of business associations suggested that the provisional definition for coercion in 
the public consultation be broadened in these respects. A recurring argument has been that 
foreign governments can at times achieve their goal directly by pressuring private operators 
only, rather than going through and pressuring the economic operators’ home government. 
Other arguments have been that the coercion against private operators nevertheless amounts 
to coercion  against a government, or that one should not, and sometimes cannot,  separate 
and distinguish the two types of coercion precisely. 

Private actors can in such cases feel coerced in much a similar way as far as their position 
and interests are concerned. Legally, however, there is a decisive difference compared with 
situations  of  coercion  falling  under  the  definition  above.  In  the  case  of  coercion  against 
private actors related to these operators’ activities in the third country in question, this does 
not amount to prohibited interference in the affairs of another state, on the one hand, but is 
government  conduct  that  is  arbitrary,  discriminatory,  at  odds  with  the  rule  of  law  and, 
internationally, infringing on human rights, the law of aliens or relevant treaties, e.g. those 
protecting  foreign  investors.27  In  the  case  of  extra-territorial  sanctions  that  do  not  also 
coerce  EU  public  authorities,  the  difference  is  precisely  the  latter  absence  of  a  threat  to 
those authorities’ decision-making autonomy, even if both cases amount to a transgression 
of  the  limits  imposed  by  international  law  on  the  exercise  of  territorial  sovereignty.  This 

25  Sumeet Chatterjee & Engen Tham, How Beijing humbled Britain’s mighty HSBC, Reuters, 28 June 2021; 
Ben Cohen & James T. Areddy,  One Year After China Banned the  NBA, Basketball Returns to Chinese 
TV, The Wall Street Journal, 9 October 2020.  

26  Ed  Bryan,  Taiwan:  How  airlines  are  being  dragged  into  China’s  bitter  dispute  over  the  island’s 

sovereignty, The Conversation, 6 August 2018.  

27  Where these inconsistencies exist, there may on that basis be means of redress available to the private actor 
in question or to the EU or Member State.  These means of redress include local remedies and diplomatic 
protection and may include investment protection and may or may not be effective in a given instance.   

10 

 
                                                           
might  not  be easy to  distinguish  in  all cases, and this would require a  determination  on a 
case-by-case by basis.  

Who is affected and what is the impact of the coercion? 

Coercion affects the addressees of the coercion, i.e. the public authorities of the EU and/or 
Member  States,  by  exerting  pressure  on  them  to  change  policy.  That  can  undermine  the 
EU’s  open  strategic  autonomy  and  the  freedom  of  action  for  the  EU  and/or  its  Member 
States  to  regulate  within  their  own  jurisdictions.  The  great  majority  of  the  participating 
stakeholders recognised these effects. 

At the same time, there is an economic and social impact. The non-EU country channels its 
pressure through EU private actors. Those businesses engaged in trade or investment in the 
non-EU country in  question are affected directly.  In line with  what  stakeholders report in 
the  consultation,  depending  on  the  concrete  coercive  measure,  most  often  there  could  be 
direct  economic  costs  such  as  loss  of  jobs  and  business  (opportunities)  or  investment 
(opportunities)  in  the  non-EU  country  in  question.  That  may  lead  to  long-term  effects  as 
regards  businesses  growth  and  development.  Ultimately,  economic  costs  may  distort 
competition  and  have  a  spill  over  effect  on  the  markets.  Some  stakeholders  reported  that 
coercion  through  trade-restrictive  measures  contributes  to  the  rise  of  illicit  trade. 
Additionally,  stakeholders  reported  that  even  temporary  coercive  acts  influence  the 
purchasing behaviour of local  consumers substantially. Stakeholders also report that mere 
threats  of  coercion  give  rise  to  serious  concerns  and  uncertainties  among  exporters, 
destabilising their business strategy even before coercive practices actually occur, and that 
threats are sufficient to  disrupt and jeopardise commercial contractual relations. They add 
that  uncertainty  associated  with  the  coercion  has  a  negative  impact  on  innovation  and 
economic  development  as  a  whole.  Moreover,  instances  of  coercion  and  their  impact 
remain  unreported  for  fear  of  retaliation  or  further  coercive  measures.  Similarly,  many 
companies  and  even  sectors  reported  experience  of  coercive  conduct  by  third  country 
governments but would not speak openly about specific experiences. 

Coercion  may  affect  any  area  or  sector  as  it  has  been  observed.  Stakeholders  stated  that 
there are a variety of areas and sectors that the non-EU country may decide to use for its 
coercion.  They  reported  a  large  number  of  such  examples  with  potentially  significant 
negative impact, among which energy, (new) technology, ICT area, raw materials, financial 
sector  and  (critical)  infrastructure,  R&D,  transport,  equipment,  seeds,  ceramics,  tiles, 
furniture,  IT/digital  industries,  textile,  footwear,  agricultural  production,  manufacturing, 
aerospace and defence, chemical, health, retail, product registration, public tenders, public 
procurement,  technical  regulations  and  cooperation  with  authorities  in  third  countries, 
services in general, and so on (see results of the public consultation and replies to question 
9, in particular, here).  

Furthermore,  stakeholders  observed  that  a  non-EU  country  may  have  the  means  to  apply 
coercive measures instantly or in a very short timeframe, depending on the legal base and 
domestic system  of governance. The speed the coercion  may take reinforces the potential 
negative consequences for the EU public authorities and economic operators concerned as 
the time for a possible advance reaction is reduced or inexistent.  

Finally, some coercive measures of the non-EU countries could affect consumers within the 
EU indirectly if they would produce effects on the EU market. 

Size and cost of coercion – illustrative examples 

11 

 
To  illustrate  the  size  and  cost  of  coercion,  the  report  relies  on  a  few  selected  examples. 
Those examples were also put forward by stakeholders and are in the public domain.28 They 
are by no means exhaustive nor statistically representative. 

 

 

 

In 2020, following an earlier investigation into Australia’s trade practices and at the 
time  of  Australia’s  advocacy  for  an  independent  investigation  into  the  origins  and 
early handling of the Covid-19 outbreak, China reacted in various ways.29 It levied 
an 80% anti-dumping and countervailing duty on Australian barley. The Australian 
national association of grain producers estimated that the tariffs stopped an annual 
trade worth AUD 1.2 billion (around €750 million)30 and could cause total costs to 
the industry of AUD 2.5 billion (€1.6 billion) over the initial five-year period of the 
tariffs.  Around  the  same  time,  China  applied  anti-dumping  and  countervailing 
measures  on  wine  from  Australia31  (2019  value  of  trade  of  over  €700  million). 
Australian coal was said to disrespect environmental standards, while seafood, beef, 
copper,  cotton,  sugar  and  timber  also  faced  entry  barriers.32  Collectively,  these 
targeted  exports  to  China  were  worth  roughly  €15.5  billion  in  2019,  or  1.3%  of 
Australian GDP.33 Trade in services is also targeted. Chinese tourism and students 
were big sources of income for Australia before the pandemic and were singled out 
as targets.34  

In  late  December  2019,  Indonesia  “silently”  blocked  imports  of  spirits,  wine  and 
dairy products from the EU in response to the EU’s regulatory treatment of palm oil 
as  fuel  for  transportation.  With  respect  to  alcohol,  Indonesian  authorities  either 
refused  to  grant  import  licences,  or  granted  partial  licences  for  non-EU  products 
only. The situation started to improve in  quarter 4 of 2020, however, only 40% of 
requested import amounts for 2020 were granted. As a result,  EU exports of beer, 
wine,  vermouth  and  sprits  fell  by  over  60%  (€5.9  million)  in  2019  and  were  still 
30% less than the pre-ban value in 2020.35 

In  2015,  Russian  authorities  threatened  to  impose  a  ban  on  flowers  from  The 
Netherlands, which at that time was exporting up to 5% of its flower sales to Russia. 
Russia  alleged  that  Dutch  flowers  contained  organisms  that  the  EU  had  failed  to 
recognise as dangerous. This happened at the same time as the Netherlands pointed 
at  Moscow-backed  separatists  for  shooting  down  Malaysia  Airlines  flight  MH17 
with a Russian-made missile and co-sponsored a resolution to set up a UN-backed 
tribunal  to  prosecute  the  culprits.  The  value  of  affected  Dutch  exports  was  €162 
million  (HS  0603;  in  2014)  and  they  fell  by  one  quarter  in  2015  alone,  to  fully 
recover only in 2019. 

28  The examples reported by stakeholders are found in the factual report of the public consultation (here). 
29  Victor  Ferguson  and  Darren  Lim,  'Economic  Power  and  Vulnerability  in  Sino-Australian  Relations',  in 
Linda Jaivin, Jane Golley, and Sharon Strange (eds), China Story Yearbook 2020: Crisis (Canberra: ANU 
Press, 2021). 

30  https://grdc.com.au/resources-and-publications/grdc-update-papers/tab-content/grdc-update-

papers/2021/02/in-the-wake-of-the-china-barley-tariffs  

31  https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/DS/602-1.pdf&Open=True  
32  https://www.reuters.com/article/us-australia-trade-china-commodities-tim-idUSKBN28L0D8  
33  Estimated by Lowy Institute.  
34  Levi Parsons, Chinese ambassador warns Australia's education and tourism industries could be next on the 
chopping block after ban hammered wineries, Daily Mail Australia, 30 April 2021; Benedict Brook, China 
tourism warning against Australia 'just the tip of the iceberg’, news.com.au, 8 June 2020.  

35  Comext and the business association. 

12 

 
 
 
                                                           
  US tariffs under Section 301 of the US Trade Act of 1974: on 2 June 2021, the US 
concluded investigations initiated by the preceding US administration under Section 
301 into the digital services taxes of Austria, Spain and Italy (and investigations of 
India, Turkey and the UK),36 in addition to the previous investigation of France.37 It 
opted to enact additional ad valorem import duties of 25% on $3.18 billion worth of 
goods imported from these four EU Member States38 because the US considers that 
each of those countries’ taxes regarding digital services providers is “unreasonable 
or discriminatory and burdens or restricts U.S. commerce”.39 At the same time, the 
application  of the  tariffs on products  from  Austria, Spain  and  Italy  was  postponed 
for 180 days, until 29 November 2021,40 and those on products from France for an 
indefinite  period,41  with  the  objective  to  provide  the  time  necessary  to  find  a 
the  Organisation  for  Economic  Co-operation  and 
multilateral  solution  at 
Development. Legally, however, the suspension may be ended at any moment, thus 
exerting  leverage  in  the  tax  discussions  at  the  Organisation  for  Economic  Co-
operation  and  Development,  or  intending  to  influence  the  three  Member  States’ 
current tax policies or the EU’s or other Member States’ plans for the development 
of digital services levies.42 

  As  vaccines  against  the  COVID-19  pandemic  emerged,  two  vaccine-producing 
countries,  Russia  and  China,  were  described  as  engaging  in  “vaccine  diplomacy”, 
meaning  that  they  accompanied  vaccine  supplies  with  soft  power  messages  to 
support  their  standing  or  positions.43  In  June  2021,  China  reportedly  succeeded  in 
demanding  that  Ukraine  withdraw  from  a  statement  at  the  UN  Human  Rights 
Council  in  Geneva  calling  for  immediate  access  for  independent  observers  to 
Xinjiang, by blocking a large shipment of COVID vaccines until Ukraine do so.44 

Why is this a general problem? 

Coercive  measures  restrict  policy  space  in  the  targeted  countries  or  impose  costs  on  the 
legitimate use of that policy space. They may affect any area of competence of the EU or a 
Member States and any sector of the economy, as observed and as reported by stakeholders. 

36  See USTR, Section 301 – Digital Services Taxes.  
37  See USTR, Section 301-France's Digital Services Tax.  
38  Seafood, handbags, belts, footwear and some glassware from Spain; caviar, perfumes, suits, sweaters, ties, 
jackets,  footwear  and  lenses  from  Italy;  ceramics,  glassware,  copper  alloys,  fridges,  optical  parts  and 
projection  screens  from  Austria;  handbags,  make-up  and  cosmetics  from  France,  see  USTR,  Notices  of 
Action  in  the  Section  301  Investigation  of  Spain’s,  Italy’s  and  Austria’s  Digital  Services  Taxes,  7  June 
2021 and France’s Digital Services Tax, 16 July 2020; USTR terminated its investigations into  inter alia 
the Czech Republic and the EU itself, because neither actually had digital services taxes. 

39  USTR, ibidem.  
40  This will be subject to developments before the publication of this report. 
41  USTR, Notice of Modification of Section 301 Action: Investigation of France’s Digital Services Tax, 12 

January 2021.  

42  Stakeholders  reported  that  only  the  threat  of  the  US  tariffs  has  caused  supply  chain  disruptions  and 
cancellation of orders. For instance,  the proposal specifies an increase of  tariffs on 15 types of  footwear 
coming from Spain and the industry has already been affected. The Spanish footwear association estimates 
that 3000 jobs could be lost immediately. 

43  Michael Leigh, ‘Vaccine diplomacy: soft power lessons  from China and Russia?’ Bruegel Blog, 27 April 

2021.  

44  Yevhen Solonyna and Reid Standish, China Used Vaccines, Trade To Get Ukraine To Drop Support For 
Xinjiang  Scrutiny, Radio Free Europe Radio Liberty, 28 July 2021; Jamey Keaten,  Diplomats say China 
puts squeeze on Ukraine, AP News, 25 June 2021.  

13 

 
 
 
                                                           
They  do  not  allow  governments  to  exercise  governmental  authority  in  the  interest  of  the 
governed  people  and  independently  from  the  demands  of  the  coercing  government  and 
without incurring the cost imposed by the coercion. This also has to be seen in the context 
of the weaponisation of trade, where large economies are taking coercive measures, which 
have  the  effect  of  forcing  other  countries  to  act  in  one  way  or  another  trapping  EU 
companies between the two camps.45 

There  is  large-scale  scholarly  work  that  identifies  the  use  and  threat  of  coercion  in  the 
current  era  of  global  transformation  and  an  increasingly  globalized  and  interdependent 
world.46 It has been noted that some actors such as China and Russia are using economic 
coercion as a foreign policy tool more frequently than they used to,47 whilst other countries 
have continued to resort to economic coercion.48 

The ECFR policy brief “Measured response: How to design a European instrument against 
economic coercion” of June 202149 argues that Europe is at ever greater risk of economic 
coercion coming from several sources, that there is increased coercion of private actors, and 
points to the use of extra-territoriality and of informal coercion. In illustrating the risk and 
the  problem,  it  refers  to  several  incidents  and  types  of  coercion,  such  as  China’s  use  of 
economic punishment to EU businesses and other actors in March 2021 following EU (and 
US)  sanctions  on  Chinese  officials  for  human  rights  violations;  Russia’s  use  of  public 
health  concerns  to  ban  Polish  imports  of  fruits  and  vegetables  in  2014,  following  EU 
sanctions  over  the  war  in  Ukraine;  Turkey’s  boycott  on  French  origin  goods  following 
France’s announcement of policies to combat extremism; US sanctions on the Nord Stream 
2 gas pipeline; US’ use of Section 301 trade restrictions in relation to certain EU Member 
States’ digital taxation policies; and others.50 The paper puts forward that the problem lies 
in  the  use  of  economic  tools  for  geopolitical  power  and  geopolitics  for  economic  gain.  It 
argues that there is  a gap in  the EU’s defence that must be filled. It  makes  the case for a 
new legal instrument as a priority. 

45  Henry  Farrell,  Abraham  L.  Newman,  Weaponized  Interdependence:  How  Global  Economic  Networks 
Shape  State  Coercion,  44  International  Security  42–79  (2019),  Daniel  W  Drezner,  Henry  Farrell,  and 
Abraham L. Newman (eds) The Uses and Abuses of Weaponized Interdependence, Brookings Institution 
Press  (2021),  Anthea  Roberts,  Triple  R  (Risk,  Reward,  Resilience)  Framework  (publication  pending) 
(2021),  Benjamin  Herscovitch,  Assessing  Policy  Responses  to  Economic  Coercion:  Balancing  Risk  and 
Reward and Navigating Complexity (publication pending) (2021). 

46  See  i.a.  Ketian  Vivian  Zhang,  ‘Chinese  non-military  coercion—Tactics  and  rationale’,  22  January  2019;  
Julian Gewirtz, ‘The Chinese Reassessment of Interdependence’, 1 June 2020, China Leadership Monitor, 
(64); Elizabeth Rosenberg, Peter E. Harrell, and Ashley Feng, ‘A New Arsenal for Competition, Coercive 
Economic Measures in the U.S.-China Relationship’, April 2020.  

47  Bryan R. Early and Menevis Cilizoglu, ‘Economic Sanctions in Flux: Enduring Challenges, New Policies, 

and Defining the Future Research Agenda’, 21 International Studies Perspectives 438–477 (2020).  
48  Dawid, Walentek, ‘Economic Peace Revisited, Coercion in a Liberal Order’, APSA Preprints 2020.  
49  The  policy  brief  of  June  2021  is  based  on  the  work  of  ECFR’s  Task  Force  for  Strengthening  Europe 
against  Economic  coercion  that  brings  together  high-level  representatives  from  six  Member  State 
governments  the  Czech  Republic,  France,  Germany,  the  Netherlands,  Spain,  and  Sweden)  and  private 
sectors (although the report does not necessarily represent their views). ECFR has been very active on the 
issue  of  economic  coercion.  An  earlier  report  entitled  “Defending  Europe’s  economic  sovereignty:  New 
ways to resist economic coercion” of October 2020 presented eleven policy options  for the EU to tackle 
economic coercion; a type of an anti-coercion instrument is among these, but also a reform of the Blocking 
Statute, creation of European export bank, building digital currency, creation of EU resilience office  and 
EU resilience fund, etc. An earlier policy brief “Redefining Europe’s economic sovereignty” also discusses 
an agenda to strengthen the economic sovereignty. 

50  An overview of the examples is contained in the policy brief. 

14 

 
                                                           
Furthermore,  the  public  consultation  showed  that  economic  coercion  is  a  widespread 
concern for the EU, across the Member States. All stakeholder groups clearly acknowledge 
the issue and advocate for an appropriate solution.51 In support of their position, they refer 
to a number of coercive practices, that affect a variety of sectors and areas (see the results 
of  the  public  consultation  here,  in  particular  replies  to  questions  1-14,  and  a  summary 
factual report here). 

Other countries’ standpoint as regards the problem 

As  demonstrated  by  the  stakeholder  consultation  and  as  can  be  observed  in  the  public 
domain, economic coercion is not a problem faced exclusively by the EU. It is of a wider 
concern.  The  sources  and  subjects  of  coercion  are  multiple.  In  general,  other  countries’ 
standpoint  as  regards  the  issue  of  coercion  varies.  It  may  also  depend  on  whether  the 
particular jurisdiction contains an available instrument for a specific anti-coercion action or 
it  does  not  need  a  specific  legislation  in  order  to  act  against  coercion  (see  results  of  the 
public  consultation,  in  particular  replies  to  question  4  on  evidence  of  legislation  or 
unwritten measures that can be used for coercion, here). Some countries which have been 
subjected to coercion chose to accept the coercion and sought to minimise the commercial 
losses suffered. Others may have disguised their responses and kept them outside a rules-
based  framework.  In  any  event,  contrary  to  other  jurisdictions,  which  may  take  anti-
coercion  measures  rapidly  and  without  the  need  for  a  framework  legislation  put  in  place 
first, the principle of conferred powers requires the establishment of a legal basis in the EU 
legal order for the EU to act in specific cases such as coercion. 

Concrete examples of other countries’ actions are presented below. 

  Australia  has  so  far  chosen  to  raise  concerns  about  coercive  practices  in  WTO 
bodies52 and to bring WTO disputes against coercive measures when these allegedly 
infringe  WTO  rules  (barley,  wine).53    Such  WTO  disputes  can  only  deal  with  the 
WTO-inconsistency  of  the  measures  in  question,  not  the  separate  infringement  of 
general international law that lies in the coercive act and intention. The latter does 
not  fall  in  the  remit  of  the  WTO  dispute  settlement  system.  Australia  does  not 
possess a dedicated anti-coercion instrument. 

  Canada  has  similarly  launched  a  WTO  dispute  against  China  in  a  case  involving 
import  restrictions  on  canola.54  Canada  does  not  possess  a  dedicated  anti-coercion 
instrument. 

  The  US  has  started  to  be  active  on  the  issue  of  economic  coercion  including  by 
seeking  alliances.  Secretary  of  State  Blinken  mentioned  this  in  certain  speeches.55 
The US does not possess a dedicated anti-coercion instrument. 

51  There  are  some  differences  within  the  groups,  where  a  small  share  seems  to  suggest  that  existing 
instrument could at least partly deal  with the  problem and another small share calls for caution  with any 
solution. 

52  Most recently in the WTO Council for Trade in Goods meeting on 8-9 July 2021, see footnote 59 below.  
53  China — Anti-Dumping and Countervailing Duty Measures on Wine from Australia, WT/DS602; China — 

Anti-dumping and countervailing duty measures on barley from Australia, WT/DS598. 
54  China — Measures Concerning the Importation of Canola Seed from Canada, WT/DS589.  
55  See e.g. Antony J. Blinken,  Reaffirming and Reimagining America’s  Alliances, 24 March 2021: “We’ve 
seen  how  Beijing  and  Moscow  are  increasingly  using  access  to  critical  resources,  markets,  and 
technologies to pressure our allies and drive wedges between us. Of course, each state’s decision is its own, 
but we must not separate economic coercion from other forms of pressure. When one of us is coerced, we 

15 

 
 
 
                                                           
 
  China: In June 2021, China adopted a law on countering foreign sanctions. It largely 
codifies already existing practices but it is expected to give the Chinese government 
clearer  authority  to  penalise  compliance  with  foreign  government's  sanctions  on 
Chinese  entities  and  individuals.  Accordingly,  the  law  provides  legal  support  and 
guarantees for Chinese companies against the measures imposed in third countries’ 
jurisdictions.  Additionally,  however,  it  provides  for  possible  countermeasures 
applicable  to  a  broad  pool  of  targets:  any  individual  and  organization  directly  or 
indirectly involved in the formulation,  adoption and implementation of the foreign 
sanctions.  This  could  include  the  foreign  legislators,  government  officials,  law 
enforcement  officers,  or  even  banks,  or  companies  that  formulate  or  implement 
foreign  sanctions.  It  goes  even  further,  by  covering  the  spouses  and  immediate 
family  members  for  individuals,  and  the  management  or  related  companies  of 
sanctioned entities or individuals. The possible countermeasures are of a very broad 
range that includes the denial/revocation of visa, the denial of entry, deportation, the 
freezing  of  assets,  and  the  prohibition  or  restriction  on  transactions  with  listed 
persons, among others.  

The law complements the existing legislation on related subjects, such as the Export 
Control Law,56 the Rules on Counteracting Unjustified Extra-Territorial Application 
of  Foreign  Legislation  and  Other  Measures57  (modelled  after  the  EU  Blocking 
Statute) and the Unreliable Entity List Regulations.58 This is not a tool, however, to 
respond to coercion. 

International forums 

In  May  2021,  the  G7  Foreign  and  Development  Ministers’  Meeting  Statement  concluded 
that the G7 members would work collectively to foster global economic resilience against 
arbitrary,  coercive  economic  policies  and  practices.  In  June  2021,  the  EU-US  Summit 
concluded with a Statement towards a renewed  Transatlantic partnership on, among other 
things,  plans  to  increase  cooperation  and  information  and  expertise  exchange  to  enhance 
resilience against, and counter all forms of, coercion including economic pressure. 

In July 2021, at a regular meeting of the WTO Council for Trade in Goods, the EU made a 
statement  as  regards  a  point  raised  by  Australia  concerning  Chinese  trade  measures.59 
Noting  and  respecting  Australia’s  preference  to  treat  the  long  list  of  Chinese  measures 
raised  on  their  individual  technical  merits,  including  raising  them  in  technical  WTO 
Committees  and  WTO  dispute  settlement,  the  EU  expressed  concerns  as  regards  the 
coercive dimension to the matter raised by Australia. The EU noted that, as it appeared, the 
underlying true reason for the alleged Chinese resort to those measures, that may be formal 
or informal, is an intention to put pressure on or sanction Australia for policy choices. The 
EU  further  noted  that  such  coercion  raises  questions  of  international  legality  beyond  and 
apart from the WTO-consistency. 

should respond as allies and work together to reduce our vulnerability by ensuring our economies are more 
integrated with each other than they are with our principal competitors.” 

56  http://www.npc.gov.cn/npc/c30834/202010/cf4e0455f6424a38b5aecf8001712c43.shtml 
57  http://tfs.mofcom.gov.cn/article/bc/202101/20210103029710.shtml 
58  http://tfs.mofcom.gov.cn/article/bc/202009/20200903002593.shtml 
59  China – Implementation of Trade Disruptive and Restrictive Measures – Request from Australia, see item 
22 of the Proposed Agenda for the Meeting of the Council for Trade in Goods of 8 and 9 July 2021, WTO 
document G/C/W/795, 2 July 2021. Minutes of the meeting are not yet available, but will be, in due course, 
as WTO document G/C/M/140, and will be derestricted 45 days after their circulation.  

16 

 
 
                                                                                                                                                                                 
3.2.  What are the problem drivers? 

The  use  of  economic  coercion  for  geopolitical  ends  has  increased  recently,  blurring 
economic and geopolitical lines. Most recently, power conflicts are re-emerging in a more 
tense geopolitical environment.  

Foreign  countries’  desire  to  impose  their  own  economic  or  political  preferences  to  their 
benefit (different preferences as to economic policies) 

In certain  instances,  this is  an expression of foreign countries’ desire to  impose on others 
their own economic or political preferences. The motives can be commercial, in the sense 
of  furthering  or  protecting  economic  gains  for  the  country’s  economic  operators.  The 
motives can also be political and related to divergences of views on issues of international 
relations.  In  that  sense,  the  coercion  can  relate  to  matters  of  both  internal  policy  and 
external relations. The objective of influencing partner countries is not illegitimate in itself, 
and, certainly, there are legitimate means by which to see to do so. However, the (mis)use 
of trade or investment restrictions with the objective of attaining a specific outcome lying 
within  the  legitimate  policymaking  space  of  the  EU  or  Member  State  goes  beyond  and 
should be differentiated from the ordinary use of soft powers to influence partner countries. 

Geopolitical instability with increased tensions over economic governance 

A  separate  global  trend  is  recent  geopolitical  instability  with  increased  tensions  between 
various  countries,  of  varying  intensity,  and  where  some  of  these  tensions  give  rise  to 
measures of economic coercion.  As a  result, restrictions on trade  or investment are being 
used  by  various  players  with  the  aim  of  pressurising  other  countries  to  modify  their 
policies,  even  though  international  law  permits  those  policies  and  gives  no  right  to  other 
countries to demand those policies change.   

Interconnectedness  of  the  world  economy  and  enhanced  ability  to  disrupt  economic 
activities in other countries through restrictions on trade, investment or financial flows 

What  has  also  changed  over  the  last  few  decades  is  the  closer  integration  of  the  world 
economy in the form, inter alia, of more complex value chains in the manufacturing sector, 
overseas  investment  and  intensively  interconnected  financial  systems.  These  aspects  have 
contributed to an enhanced ability of certain governments to disrupt economic activities by 
imposing  restrictions  on 
the  examples,  have 
demonstrated,  there  is  a  recent  trend  of  more  frequent  recourse  to  informal  or  unofficial 
restrictions.  Third,  the  interconnection  of  the  world  economy  has  given  rise  to  enhanced 
recourse, and ability to have recourse, to extra-territorial restrictions, because of at least two 
reasons:  the  presence  of  internationally  active  economic  operators  in  the  market  of  the 
coercing  country,  giving  the  latter  the  ability  to  enforce  at  home  concerns  relating  to 
activities  abroad;  and  the  ability  to  control  certain  elements  of  the  international  banking 
system and thereby to prevent or sanction banking activities abroad.61  

investment.60  Second,  as 

trade  or 

Insufficient deterrence on the part of the EU 

60  Cf.  Daniel  W.  Drezner,  Introduction  in:  Daniel  W.  Drezner  et  al., The  Uses  and  Abuses  of  Weaponized 
Interdependence (2021); Henry Farrell & Abraham Newman, Weaponized Interdependence, International 
(2019), 
Security, 
https://direct.mit.edu/isec/article/44/1/42/12237/Weaponized-Interdependence-How-Global-Economic.  

International 

Security 

42-79 

44 

61  Cf. Darren Lim and Victor Ferguson, footnote 11 above.  

17 

 
                                                           
The fact  that there is  so far on the side of the EU and its Member States  no credible and 
effective instrument or policy of deterrence and response to economic coercion contributes 
to the ability of other countries to deploy such means. They may be tempted to assume that 
there will be no reaction and hence that their action is relatively cost-free. For instance, the 
mere availability of legal means to apply restrictions on EU market access as a response to 
coercion could be a powerful deterrent but it is currently lacking. 

In the public consultation, stakeholders largely confirmed that the existing gap plays a role 
in  driving  third  countries’  recourse  to  economic  coercion.  Some  highlighted  the 
impossibility  to  deal  with  the  problem  through  standard  diplomatic  means.  Additionally, 
across stakeholder groups, there is  convergence that non-EU countries’ use of coercion  is 
often a means for attempting to avoid political, economic or other effects of actions by the 
EU and Member States, for preventing these from regulating, for imposing the commercial 
interests  of  their  national  companies  abroad,  as  well  as  for  limiting  or  influencing  the 
conduct of other countries’ economic operators elsewhere in the world. 

3.3.  How will the problem evolve? 

The  geo-economic  tensions  that  the  international  order  is  currently  experiencing  are 
unlikely to  dissipate in  the coming  years. On the contrary,  there is  no objective reason to 
assume  that  they  will  recede  in  the  near  future.  There  are  a  number  of  tensions  and 
standoffs in international relations, which are likely to continue to drive coercive policies. 

The ECFR policy brief “Measured response: How to design a European instrument against 
economic coercion” of June 202162 argues that Europe is at ever greater risk of economic 
coercion  coming  from  several  sources.  From  a  number  of  countries,  including  China, 
Russia and Turkey, the rhetoric in the direction of other countries often takes on coercive 
tones (see examples reported in section 3.1. and by stakeholders in the public consultation). 
It has been noted that some actors such as China and Russia are using economic coercion as 
a  foreign  policy  tool  more  frequently  than  they  used  to,63  whilst  other  countries  have 
continued  to  resort  to  economic  coercion.64  The  US  has  a  new  administration  that  has 
changed  the  tone  and  atmosphere  in  international  interactions  and  adopted  a  more 
cooperative  approach  towards  partners  in  multilateral  frameworks.  There  is  however  still 
legislation in place, such as Section 301 of the Trade Act (and the investigations into digital 
services  taxation  ongoing  at  the  time  of  the  public  consultation)  or  several  instances  of 
legislation applying sanctions affecting EU operators.  It is impossible to tell the approach 
of future US administrations to international cooperation. 

62  The  policy  brief  of  June  2021  is  based  on  the  work  of  ECFR’s  Task  Force  for  Strengthening  Europe 
against  Economic  coercion  that  brings  together  high-level  representatives  from  six  Member  State 
governments  the  Czech  Republic,  France,  Germany,  the  Netherlands,  Spain,  and  Sweden)  and  private 
sectors (although the report does not necessarily represent their views). ECFR has been very active on the 
issue  of  economic  coercion.  An  earlier  report  entitled  “Defending  Europe’s  economic  sovereignty:  New 
ways to resist  economic coercion” of October 2020 presented eleven policy options  for the  EU to tackle 
economic coercion; a type of an anti-coercion instrument is among these, but also a reform of the Blocking 
Statute, creation of European export bank, building digital currency, creation of EU resilience office  and 
EU resilience fund, etc. An earlier policy brief “Redefining Europe’s economic sovereignty” also discusses 
an agenda to strengthen the economic sovereignty. 

63  Bryan R. Early and Menevis Cilizoglu, ‘Economic Sanctions in Flux: Enduring Challenges, New Policies, 

and Defining the Future Research Agenda’, 21 International Studies Perspectives 438–477 (2020).  
64  Dawid, Walentek, ‘Economic Peace Revisited, Coercion in a Liberal Order’, APSA Preprints 2020.  

18 

 
                                                           
 There  is  also  a  clear  tendency  to  revert  to  disguised  or  silent  economic  coercion,65 
especially  by  countries  whose  domestic  governance  structures  enable  the  respective 
leadership to transmit instructions to the private sector and state-owned enterprises, without 
recourse  to  formal  legal  acts.  In  some  instances,  they  rely  on  the  possibility  of  plausible 
deniability of their involvement. This trend poses additional challenges because of the more 
difficult  attribution  of  the  action  to  the  government.  It,  simultaneously,  highlights  the 
necessity  of  holding  such  governments  to  account  to  safeguard  the  normative  force  of 
international law. 

Stakeholders observe that instances of coercion have been multiplying in recent  years and 
the  EU  and  Member  States  have  been  regular  targets  of  coercion.  Stakeholders  further 
report  cases  representing  an  imminent  or  medium-  to  long-term  threat,  highlighting  the 
expectation  that  coercion  would  not  subside  on  its  own.66  Business  associations,  in 
particular, but also other stakeholders, give a pessimistic prognosis that the rise of coercive 
measures  will  continue.  Even  the  minority  stakeholders,  which  do  not  appear  convinced 
about  a  direct  need  for  an  EU  policy  intervention  and  consequently  called  for  further 
analysis, yet recognise the existence of the problem, also in the foreseeable future, and that 
the EU may or should respond and preferably deter potential coercion from third countries. 

Accordingly,  it  is  considered  unlikely  that  coercion  would  disappear  on  its  own  or  even 
would  recede  to  the  more  manageable  level  that  tended  to  prevail  in  the  past.  On  the 
contrary, it is expected that it continues unless addressed appropriately. 

4.  WHY SHOULD THE EU ACT? 

4.1.  Legal basis 

A possible legal basis for the EU intervention is Article 207(2) TFEU. 

Article  207(2)  TFEU  provides  for  the  adoption  of  measures  defining  the  framework  for 
implementing  the  common  commercial  policy.  Article  207(1)  TFEU  defines  the  scope  of 
the common commercial policy, which refers to, inter alia, trade in goods and services, and 
the commercial aspects of intellectual property, foreign direct investment, export policy and 
measures to protect trade. The initiative is concerned with foreign countries’ measures that 
take the form of trade or investment restrictions towards the EU  economic operators. The 
initiative  is  also  concerned  with  providing  a  response  to  foreign  countries’  measures 
primarily in the area of the common commercial policy. 

4.2.  Article  207(2)  TFEU  is  expected  to  be  a  sufficient  legal  basis  for  the 
purposes of a policy intervention in the situations of economic coercion, as 
described below. Subsidiarity: Necessity of EU action 

Article 5(3) TEU provides that the principle of subsidiarity  applies in  areas which do not 
fall within the exclusive competence of the EU. Article 3(1)(e) TFEU provides that the EU 
has  exclusive  competence  in  the  area  of  common  commercial  policy.  The  possible  legal 
basis, Article 207(2) TFEU, falls into the category of exclusive competences. Therefore, the 

65  See, for instance, Darren Lim and Victor Ferguson, footnote 11 above. The ECFR policy brief “Measured 
response: How to design a European instrument against economic coercion” of June 2021  highlights the 
rise of informal coercion, in particular. 

66  See the results of stakeholders’ replies to questions 6 and 8 in the public consultation here, and a summary 

factual report here.  

19 

 
                                                           
question  of  subsidiarity  does  not  arise  insofar  as  the  third  countries’  coercive  measures 
and/or the EU response falls under the common commercial policy. 

In any event, only an action at EU level would ensure a uniform EU solution to a problem 
of concern to the EU as a whole. Member States remain, of course, responsible and able to 
act in defence of their rights under international law; this includes their right to counteract 
international coercion, as long as they do so without taking measures for which the EU is 
exclusively  competent.  However,  it  is  not  possible  for  the  Member  States  to  put  in  place 
national legislation in order to cover coercion that is targeted against the EU and not against 
that  Member  State.  Also,  national  legislation  would  not  be  capable  of  providing  an 
effective  solution  in  the situation  of  concern  to  the  EU  as  a  whole  or  across  the  Member 
States. EU action remains the sole option under which the EU can implement its obligation 
to define and conduct the common commercial policy.  

4.3. 

Subsidiarity: Added value of EU action 

The added value of an action at EU level lies in the achievement of benefits that cannot be 
achieved  sufficiently,  if  at  all,  at  Member  State  level.  These  benefits  relate  to  deterrence 
and  counteraction  against  coercion  by  third  countries  to  defend  and  protect  the  EU’s  and 
Member  States’  autonomy  in  policy-making  and  against  trade  and  investment  restrictions 
used for coercion.   

5.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

5.1.  General objectives 

In  a  context  of  geopolitical  instability,  the  EU  aims  to  safeguard  its  open  strategic 
autonomy, that is its ability to make its own choices by remaining open and connected to 
the world whilst protecting itself from economic coercion. 

The general objectives of the initiative are the following: 

-  Contribute to preserving the legitimate policymaking space of the EU and Member 

States; 

-  Protect the international rights and interests of the EU and its Member States; 
-  Protect the economic interests of EU economic operators by preventing or limiting 

economic losses as a result of foreign countries’ coercive actions. 

5.2. 

Specific objectives 

The analysis of the drivers of the economic coercion shows that it is primarily the choice of 
non-EU countries to seek to impose their own policy preferences and their enhanced ability 
to  disrupt  economic  activities  mediated  by  the  interconnectedness  of  the  world  economy, 
tied  with  geopolitical  instability,  which  drives  coercion.  At  the  same  time,  there  is 
insufficient  deterrence  exerted  by  the  EU  or  Member  States  towards  those  non-EU 
countries. There are broader efforts by the EU in managing the geopolitical instability and 
increasing the EU’s resilience.67 The present initiative focuses specifically on the issue of 
economic coercion and the EU’s possible response.  

67  As  noted  earlier:  Commission  Communications  on  Trade  Policy  Review,  the  European  economic  and 
financial system: fostering openness, strength and resilience, the Industrial Strategy update, and also more 
generally the Commission’s upcoming 2021 Strategic Foresight Report. 

20 

 
                                                           
It has the following four specific objectives: 

1)  Deter coercion 

The prime objective is to deter coercion  so that it does not take place in the first place. The 
deterrence effect will arise from the mere existence of an EU framework to tackle coercion 
specifically, provided that it is effective, credible and can be deployed quickly.68 Averting 
coercion,  and thus averting harm and the need for counteraction, is the best-case scenario 
for this initiative. Nearly all stakeholders recognise and support this key objective. 

2)  Provide for de-escalation 

Where coercion nevertheless takes place, the objective is to de-escalate the situation such 
that the coercion is withdrawn without the need for counteracting it directly. This implies 
that  the  initiative  may  involve  the  use  of  a  first  range  of  responses  rather  than  leading 
directly to countermeasures. A majority of the stakeholders strongly supports this objective. 

3)  Induce the discontinuation of specific coercive measures 

This implies using a range of responses that are capable of inducing the discontinuation of 
coercive measures. 

4)  Counteract specific coercive measures (and/or their effects) 

As a last resort, where all other avenues are exhausted, the EU may decide to counteract the 
harm which the coercing country is causing. 

The table below illustrates the intervention logic, notably the relation between the problem, 
its drivers, the objectives and the envisaged intervention and outcome. 

Table 1 Intervention logic 

Problem 

General objectives 

The pressure which 
foreign countries 
exercise towards the EU 
and/or its Member 
States through most 
often a trade or 
investment restriction 
with the objective of 
attaining a specific 
outcome falling within 
the legitimate 
policymaking space of 
the EU or a Member 
State. 

Contribute to preserving 
the legitimate 
policymaking space of 
the EU and Member 
States; 

Protect the international 
rights and interests of 
the EU and Member 
States; 

Envisaged intervention 

Protect the economic 
interests of EU 
economic operators; 

Creation of a framework 
to tackle coercion 
specifically; 

Drivers 

Specific objectives 

Foreign countries’ 
desire to impose their 
own policy preferences 

Deter coercion in a 
wider sense; 

Range of responses 
without 
countermeasures to 
choose from in 
individual cases; 

68  Thomas C. Schelling, Arms and Influence, Yale University Press (1966). 

Envisaged outcome or 
intended change 

Foreign countries do not 
resort to coercion in the 
first place; 

The foreign country 
ends its coercive 
measures quickly 
without EU 
countermeasures; 

The foreign country 
ends its coercive 
measures quickly as a 
result of the  EU 
countermeasures; 

21 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Range of 
countermeasures to 
choose from in 
individual cases; 

Consequently, the 
interests of the EU and 
of the Member States 
are protected from 
coercion 

De-escalate specific 
coercive measures 

Induce discontinuation 
of specific coercive 
measures; 

Counteract specific 
coercive measures 
(and/or their effects). 

to their benefit; 

Enhanced ability to 
disrupt economic 
activities in other 
countries through 
restrictions on trade, 
investment or financial 
flows; 

Interconnectedness of 
the world economy; 

Geopolitical instability 
with increased tensions 
over economic 
governance; 

Insufficient deterrence 
on the part of the EU. 

6.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

In light of the objectives, the report considers the following types of policy options: 

  Option 1: no policy change (baseline); 
  Option 2: a new legal instrument based on several design parameters; and 
  Option 3: a “resilience” office. 

Options 1 and 3 have been considered but  are discarded at an early stage, for the reasons 
explained below. The report retains for further consideration and thus focuses on option 2 
as a suitable option and the various parameters for the design of a legal instrument. 

6.1.  Options discarded at an early stage – Option 1: No policy change (also the 
baseline  from  which  other  options  are  assessed)  and  Option  3:  A 
“Resilience Office” 

6.1.1.  No  policy  change  (also  the  baseline  from  which  other  options  are 

assessed) – discarded at an early stage 

The  no-policy  option  presents  the  currently  available  framework  and  relation  to 
international law, and discusses whether possibilities for response to the problem exist. The 
option is discarded because it is found inadequate to address the problem. As a baseline, it 
reveals  a  gap  in  the  current  legislative  framework  and  accordingly  in  the  EU’s  ability  to 
protect its interests and those of Member States from coercion. The following framework as 
belonging to the baseline is identified:    

  International law 

As pointed out  in  section 3.1, when facing  coercion from  third countries, the EU and  the 
Member  States  have  the  right  to  respond  to  this  coercion  with  the  means  which 
international  law  allows.  These  means  include  the  right  under  customary  international 
law, as  codified in  Articles 49 et  seq. of the  International  Law Commission’s Articles on 

22 

 
 
 
 
 
 
 
 
State  Responsibility,69  to  take  countermeasures  if  the  coercive  act  breaches  international 
law. If this is not the case, the EU (or its Member States) is always entitled to resort to a 
retorsion,70 i.e. an act per se not inconsistent with international law. However, the principle 
of conferred powers means that the EU and its institutions can deploy the means existing 
under  international  law  only  when  empowered  to  do  so.  There  is  currently  no  such 
framework specific to an anti-coercion response. 

  Dispute settlement 

The possibility  to  file a  lawsuit  under international  law before  an international  tribunal 
does not exist by default because such avenue of adjudication must first be created through 
agreement between the EU and the third country concerned. The WTO dispute settlement 
system  and  the  bilateral  dispute  settlement  systems  of  trade  agreements  concluded  by 
the EU are available only for addressing breaches and, in the WTO’s case,  other cases of 
nullification or impairment of benefits under the respective agreement.71 Coercion in breach 
of  customary  international  law  does  not  feature  among  the  possible  claims  that  can  be 
submitted to these treaty-made dispute settlement systems.  

There can be instances in which the third country’s coercive measure is both coercive and 
represents a breach of substantial commitments under the WTO Agreement. For example, if 
a  third  country  arbitrarily  or  selectively  initiated  an  anti-dumping  investigation  against 
certain EU exports, for instance without there being any evidence of dumping, this would 
be  an  example  of  coercion  and  simultaneously  a  substantive  breach  of  the  WTO  Anti-
Dumping Agreement.  Likewise, the coercive action could  take the form  of excessive  and 
discriminatory border checks for sanitary or phytosanitary purposes, or, a selective import 
ban  or  higher-than-bound  import  duties  on  products  from  a  particular  Member  State.  All 
such  cases  can  be  challenged  successfully  in  the  WTO  dispute  settlement  system,  and 
certain countries (Canada, Australia) are bringing such cases at present.72  

However, such WTO cases, where only the WTO breach forms the basis (and claim) for the 
legal assessment, do not tackle the question of coercion and its illegality under customary 
international law. WTO dispute settlement, therefore, is no substitute to the creation of an 
anti-coercion instrument whose purpose is the EU’s defence not against the infringements 
of  its  rights  under  the  WTO  Agreement,  but  of  its  right,  distinct  under  international  law, 
that  third  countries  do  not  coercively  interfere  in  the  EU’s  internal  or  external  affairs. 
However,  as  already  noted,  the  principle  of  conferred  powers  means  that  the  EU  and  its 
institutions can deploy the means existing under international law only when empowered to 
do so, and currently there is no such framework. 

  Standard diplomatic means 

Standard  diplomatic  means  are  available  and  can  be  deployed  but  they  are  not 
sufficiently  effective  in  all  cases.  In  particular,  they  may  not,  and  have  not,  effectively 

69  Articles  on  Responsibility  of  States  for  Internationally  Wrongful  Acts  adopted  by  the  International  Law 

Commission at its fifty-third session, in 2001, and submitted to the General Assembly. 

70  “Retorsion” is the accepted term in international law scholarship to designate a state’s response to another 
state’s  action  when  the  response  is  not  in  departure  from  international  obligations  which  the  responding 
state has.   

71  Cf. Article XXIII:1 of the GATT 1994, the Articles of other WTO agreements on trade in goods referring 
to Article XXIII:1 and the corresponding Articles of the GATS and TRIPS Agreement, the latter presently 
subject to a moratorium on complaints other than violation complaints.  

72  See footnotes 52-54.  

23 

 
                                                           
deterred  a  third  country  from  taking  coercive  measures  or  encouraged  it  to  drop  such 
measures. 

  Article 207 TFEU 

The  European  Parliament  and  the  Council  can  act  on  the  basis  of  Article  207  TFEU  to 
adopt measures defining the framework for implementing the common commercial policy. 
Article 207 could allow for the adoption of measures on a case by case basis; however, this 
would  be  subject  to  the  ordinary  legislative  procedure  which  takes  considerable  time.  A 
case-by-case  approach  under  Article  207  TFEU  would  not  permit  to  address  economic 
coercion in individual instances in a swift manner, providing a deterrent effect. Framework 
legislation, which would provide for swift implementing or delegated acts, does not exist.  

  Article 215 TFEU 

The  Council  can  act  pursuant  to  Article  215  TFEU  to  take  restrictive  measures  against 
third countries and against natural and legal persons, based on a decision in the area of the 
common foreign and security policy under Article 29 TEU. Article 29 TEU, in turn, is the 
basis for upholding the values laid down in Article 21 TEU. However, Article 215 TFEU is 
not a dedicated instrument dealing specifically with the issue of economic coercion, setting 
out the EU’s overall approach to it and the conditions under which the EU can counteract 
coercion. It follows that Article 215 TFEU is not an appropriate legal basis to achieve the 
objectives of this initiative. 

  Other existing instruments 

The  Blocking  Statute  is  the  EU’s  principal  tool  to  counteract  the  extra-territorial 
application of laws, regulations, and other legislative instruments of non-EU countries that 
purport  to  regulate  activities  of  natural  and  legal  persons  under  the  jurisdiction  of  the 
Member States.73 It applies exclusively to the legal acts listed in its annex (currently only to 
measures of the US concerning Cuba and Iran although it can be adjusted by delegated act). 
Whenever  extra-territorial  sanctions  are  applied  with  the  intention  to  coerce  the  EU’s  or 
Member  States’  public  authorities,  there  is  an  overlap  with  problems  identified  by  the 
current  initiative.  Stakeholders  systematically  referred  to  this  overlap.  It  follows  that 
consistency  and  coherence  between  the  two  instruments  must  be  ensured.  However,  the 
Blocking Statute is not an option addressing this initiative’s objectives. It does not have a 
deterrent effect as regards coercion. 

The  baseline  scenario  could  consider  solely  the  Blocking  Statute  as  it  stands  today. 
Amendments  of  the  Blocking  Statute  are  under  preparation  (inception  impact  assessment 
published in August 2021, public consultation open until 4 November 2021) in parallel to 
the present initiative, so as to render it more efficient in deterring extra-territorial sanctions 
and  in  protecting  EU  operators  from  them.  A  possible  legislative  proposal  for  the 
amendment the Blocking Statute is expected for quarter 2 of 2022, thus falling outwith the 
timeframe for the present impact assessment. 

Some  stakeholders  (mainly  public  authorities)  referred  to  several  existing  instruments. 
Such  instruments  would  be  the  trade  defence  instruments  (anti-subsidy  measures  and 

73  As  a  matter  of  principle,  the  EU  considers  the  extra-territorial  application  of  sanctions  contrary  to 
international law. In line with this principle, EU’s own sanctions apply only where the EU has jurisdiction 
(i.e. impact actors when active in the EU), even though these sanctions inherently aim to affect policies or 
activities in non-EU countries. 

24 

 
                                                           
safeguards,  in  particular),  the  Foreign  Direct  Investment  screening  regulation,  the 
Enforcement  Regulation,  the  Foreign  Subsidy  Instrument,  the  International  Procurement 
Instrument (the latter two are currently in the legislative process and thus are not in force 
and  deployable  yet).  These  stakeholders  argued  that  in  the  presence  of  these  instruments, 
the  creation  of  a  new  legal  instrument  is  not  needed  or  justified.  However,  none  of  these 
instruments  are  either  designed  or  able  to  address  specifically  the  issue  of  economic 
coercion  because  they  pursue  different  objectives  and  apply  to  different  situations.  The 
legal  conditions  for  their  application  are  unconnected  to  coercion  by  third  countries,  as 
defined in this document. Consequently, their use with the specific objective of countering 
acts of coercion would be legally impossible as a matter of EU law, and such use could also 
be  questionable  under  international  law,  given  the  triggers  for  these  instruments  are  not 
aligned with the relevant conditions under international law for responding to coercion. As 
a result, these instruments are not suitable for or capable of addressing economic coercion 
and they do not fill the gap. It follows that they do not form part of the baseline. Annex 5 
contains  an  overview  of  these  instruments,  where  potential  overlap  is  claimed,  and 
illustrates that they are unconnected to the problem of coercion. 

  National legislation 

Specific  national  legislation  to  address  economic  coercion  towards  individual  Member 
States  could  not  be  identified.  Member  States  can,  like  many  third  countries,  adopt 
retorsions  or  reprisals  (countermeasures)  against  other  states,  based  on  international  law 
and  in  line  with  internal  constitutional  requirements,  which  may  or  may  not  require  the 
passage  of  formal  legislation.  In  three  ways,  however,  this  avenue  is  not  suitable  for 
tackling  effectively  the  problem  of  coercion  targeting  the  EU.  First,  where  coercion  is 
directed against the EU and the EU has, under international law, the right to respond, that 
right  cannot  automatically  be  exercised  by  individual  Member  States,  as  a  matter  of 
international law. Second, a uniform reaction of the EU would require action at EU level. 
Third, the exclusive competence of the EU in the area of notably the common commercial 
policy  but  also  in  other  areas  precludes  action  at  Member  State  level  if  the  response 
measures fall into this area. 

  International initiatives 

International initiatives in this area have been discussed (see section 3.1) and may offer 
scope  for  cooperation  in  the  future.  They  are  an  important  means  in  principle  and 
stakeholders  attached  great  value  to  those.74  However,  such  alliances  and  cooperation  are 
no substitute for the EU’s ability to take action. Moreover, it is relevant to the EU’s ability 
to take part in such cooperation to have an instrument available at EU level which permits 
the EU to respond.  It needs to be recalled that, whilst the possibility for cooperation may 
develop further, specific interests may not always align and it is therefore important that the 
EU  maintain  the  ability  to  act  where  cooperation  is  either  not  possible  or  remains  too 
general to address some of the specific problems to be addressed by this initiative.75 

The above demonstrates that the existing EU framework does not provide for  instruments 
to  deter  and  counter  coercion  in  a  prompt,  coordinated  and  credible  manner.  As  things 

74  Stakeholders across the groups raise the question of international cooperation. They regard it not  so much 
as a substitute to an EU policy intervention but as a complementary avenue and one that must be preserved 
and supported, and not neglected or harmed (in particular via an EU policy intervention). They suggest that 
he EU should make efforts to cooperate with partners that face the same problems. 

75  Stakeholders similarly acknowledge that reaching global solutions might be difficult in the current political 

environment. 

25 

 
                                                           
stand,  the  current  array  of  available  instruments  does  not  produce  a  strong  and  credible 
deterrence  effect.  Thus,  there  is  no  possibility  for  taking  prompt,  coordinated  trade, 
investment  or  other  policy  measures  or  to  address  the  evolving  forms  of  coercion,  where 
the  need  arises.  There  is  no  system  to  provide  for  de-escalation,  nor  to  induce 
discontinuation,  where  coercion  takes  place.  The  baseline  scenario  is  consequently 
inadequate  to  address  the  problem  in  a  comprehensive  and  satisfactory  manner.  The 
baseline  reveals  a  gap  in  the  current  legislative  framework  and  accordingly  in  the  EU’s 
ability to protect its interests and those of Member States against coercion. 

This conclusion reflects the majority view in the public consultation. The baseline scenario 
is  an  unsuitable  option  for  most  stakeholders  across  the  groups,  in  particular  in  the  long-
term. They argue that it would allow the coercion to continue and damage EU businesses, 
including  SMEs,  the  EU’s  autonomy  in  decision-making  and  the  EU’s  credibility  on  the 
international scene. 

6.1.2.  Option 3: A “Resilience Office” – discarded at an early stage 

Option 3 proposes the creation of a dedicated entity either within the Commission or within 
the EU institutions (commonly referred to as a “resilience office”) with specific functions in 
relation to the deterrence and counteraction of coercion, which would be complementary to 
option 2. Thus, it is not a self-standing solution to the issue of coercion, nor an alternative 
to  the  anti-coercion  instrument.  The  option  has  been  considered  due  to  the  considerable 
support among some stakeholders. However, it is not retained, at this stage and is discarded 
as not feasible in terms of being created in this specific instrument, for the reasons set out 
below. 

Some  business  associations,  some  Member  States,  and  ECFR,  put  forward  the  idea  of  a 
“resilience office” (also referred to as “watch tower”, “coordination unit/cell”) either within 
the  Commission  or  within  the  EU  institutions  (some  suggestions  were  about  a  liaison 
resilience committee linked to the Council as the institution to trigger the use of instrument, 
and  so  institutionally  outside  the  Commission).  The  idea  originates  in  the  ECFR  policy 
brief “Defending Europe’s economic sovereignty: New ways to resist economic coercion” 
of October 2020.76 That policy brief, and references to it in the policy brief of June 2021 on 
the  future  anti-coercion  instrument,  suggest  creating  a  dedicated  entity,  which  should 
essentially oversee relevant policies and provide better support to EU businesses. Suggested 
specific  functions  include:  monitoring,  information  collection  and  documenting,  cost 
assessment  and  analysis  of  economic  coercion,  investigations,  identifying  deterrence  and 
countermeasures  and  assessing  their  potential  impact  (across  available  instruments), 
providing  a  corresponding  “coercion  margin”,  contact  with  third  countries,  keeping 
international partners informed about developments, liaison with Member States and access 
point  for  businesses,  and  various  assistance  and  support  to  EU  businesses.  There  are 
suggestions about functions also as regards EU sanctions and other foreign economic tools. 
A Special Representative for Economic Coercion (similar to the Chief Trade Enforcement 
Officer (CTEO)) could head the office, comprising experts with various backgrounds, and 
using state-of-the-art analysis tools. The idea resonated with businesses and Member States 
and came through the public consultation contributions, although no question addressed it. 

The idea has merits in pooling and coordinating relevant knowledge, expertise, action and 
assistance on the subject. A dedicated office may well enhance the deterrence function of 

76  That policy brief presented eleven policy options for the EU to tackle economic coercion; a type of an anti-

coercion instrument and EU Resilience office are amongst them. 

26 

 
                                                           
the  instrument.  However,  this  legislative  instrument  would  be  the  appropriate  vehicle  to 
create  a  resilience  office,  which,  if  it  were  to  be  created,  is  rather  a  question  of  internal 
organisation  for  the  Commission  or  between  the  EU  institutions.  At  this  stage,  it  can  be 
noted  that  if  an  anti-coercion  instrument  is  created,  it  will  fall  under  the  operational 
responsibility  of  the  Commission’s  CTEO.  Existing  structures  are  already  capable  of 
ensuring  effective  coordination  of  policies  within  the  Commission  and  between  the 
Commission and the EEAS, with the appropriate involvement of the other EU institutions 
and Member States in line with their respective responsibilities.  

6.2.  Options retained for further  analysis – Option 2: A legal instrument  and 

design parameters 

Option 2 considers developing a new legal instrument to address the problem of economic 
coercion  and  fill  in  the  identified  gap.  This  would  be  a  framework  regulation  of  the 
European  Parliament  and  the  Council  allowing  EU  action  in  situations  of  economic 
coercion under certain conditions.  

The  majority  view  of  stakeholders  is  supportive  of  a  new  instrument.  During  the  public 
consultation,  in  response  to  the  specific  question  on  whether  an  EU  policy  instrument  is 
needed  to  tackle  coercion,  no  respondent  expressed  disagreement;  respondents  agreed  or 
strongly  agreed,  or  were  neutral.  Those  who  were  not  immediately  convinced  about  the 
need for a new legal instrument, welcome the approach to have an impact assessment that 
can examine if a new instrument is justified. Obviously, when it comes to the design of the 
instrument,  stakeholders  have  various  views  and  some  concerns  (as  discussed  below). 
Moreover, stakeholders defined the need for an instrument as pressing (the majority, among 
which mostly business associations but also other groups) or as medium- to long-term, or a 
possible  need.  The  urgent/pressing  need  was  justified  inter  alia  by  preserving  the  EU’s 
credibility  on  the  international  stage  and  providing  a  long-term  vision,  the  growing 
tendency  towards  the  weaponisation  of  trade  and  investment  measures,  geopolitical 
tensions and tendencies towards protectionism. 

In  light  of  the  four  specific  objectives  for  this  initiative,  presented  earlier,  the  following 
components  are  considered  to  be  the  main  design  parameters  for  drawing  up  the 
instrument: (A) Triggers for action; (B) Threshold for action; (C) Possible action; (D) 
Selection  conditions  for  countermeasures;  (E)  Decision-making;  (F)  Activating  the 
instrument; (G) Stakeholders involvement. 

This section presents the design parameters and suitable options for them, starting with an 
overview in Table 2. Section 8 presents the most suitable configurations of parameters and 
options and examines how they compare, while section 9 identifies the preferred option. 

Table 2 Overview of design parameters and options under consideration 

Design parameter 

Options under consideration 

(A)  Triggers for action 

(A1) 

(A2) 

Explicit, disguised, silent coercion 
and boycotts 

(A1) without extra-territorial sanctions 

(B)  Threshold for action 

(B1) 

(B2) 

Quantitative threshold 

Qualitative threshold 

27 

 
 
(C)  Possible action 

(C1) 

(C2) 

(C3) 

(C1) and Additional 
countermeasures 

(C2) and Financial 
compensation 

First resort actions and 
Countermeasures 
restricting trade in 
goods or services, 
commercial aspects of 
intellectual property 
rights, access to EU 
public procurement 
market, as well as 
foreign direct 
investment 

(D)  Selection conditions 

Effectiveness, minimal damage, minimal administrative burden, general EU 
interest 

(E)  Decision-making 

Treaties’ framework: Delegated/Implementing acts 

(F)  Activating the 
instrument 

(F1) 

(F2) 

Complaint mechanism 

Ex officio 

(G) Stakeholders 
involvement  

(G1) 

(G2) 

Comprehensive approach 

Case-by-case approach 

Design parameter (A) Triggers for action 

The triggers for action are the specific situations of coercion where it would be appropriate 
for  the  EU  to  be  able  to  respond  to  under  the  instrument.  Determining  which  situations 
would  trigger  a  response  precisely  means  addressing  the  existing  gap  in  the  legislative 
framework. As clarified above, there is currently no legal instrument which enables the EU 
to act in situations of coercion as identified in this report, in order to address and respond to 
coercion precisely and directly. Given the multitude of sources of coercion, as discussed in 
the problem definition, the scope of the trigger ought to be country-neutral in all scenarios 
and in any option. 

The  parameter  is  highly  relevant  for  the  deterrence  value  of  the  instrument  because  it 
defines  the  scope  of  application  of  the  instrument;  the  broader  the  scope,  the  broader  the 
deterrence  effect,  but  eventually  it  defines  the  situations  where  the  EU  may  adopt 
countermeasures, if the need arises. The mere identification in a legal act of situations that 
are undesirable and would attract countermeasures where necessary, should have the effect 
of discouraging third countries from creating such situations in the first place because third 
countries are expected to want to avoid countermeasures or other negative effects. 

The following alternative options are considered as suitable in the respect of establishing of 
an appropriate scope of application: 

(A1) The option stands for a comprehensive scope capturing any situation where there is an 
intention  or  effect  to  coerce  the  EU  or  Member  States  into  a  particular  policy  choice,  by 
applying  any  trade  or  investment  restrictions.  This  can  be  achieved  by  introducing  these 
conditions for application in the legal instrument. The fulfilment of these conditions would 
be assessed in any individual case, and where they are found to be met, the third country’s 

28 

 
 
measure in question would fall within the scope of the instrument and so may trigger an EU 
response. 

Therefore,  the  scope  extends  to  all  identified  types  and  manifestations  of  economic 
coercion  in  section  3.1,  notably  explicit,  disguised,  silent  and  boycotts,  as  well  as  any 
other possible action satisfying the conditions. Accordingly, the option comprises instances 
of coercion towards the EU or Member States also through extra-territorial sanctions (but 
it  does  not  include  instances  of  extra-territorial  sanctions  merely  used  to  pressure  EU 
private  economic  operators  which  are  exclusively  addressed  by  the  Blocking  Statute). 
Instances of coercion through extra-territorial sanctions may fall within to the scope where 
their  objective  or  effect  would  be  to  force  the  EU  or  its  Member  States  to  align  their 
policies towards a target country with  the  coercing country’s policy  as regards that target 
country,  by  restricting  trade  or  investment.  As  referred  to  in  the  baseline,  the  Blocking 
Statute  (currently  also  being  amended)  is  the  dedicated  instrument  to  address  extra-
territorial sanctions and this is irrespective of their perceived intent towards EU or Member 
States  policies.  Therefore,  from  the  perspective  of  coherence,  this  option  implies  a  co-
existence  of  two  instruments,  where  both  instruments  can  be  available  to  respond  to  the 
same  situation,  if  such  arises,  but  to  address  different  issues  (extra-territoriality  and 
coercion). As a matter of co-existence, it could be considered that the Blocking Statute is 
the  leading  instrument  in  relation  to  extra-territorial  sanctions,  while  the  legal  instrument 
for the present initiative can complement the EU’s ability to act under the Blocking Statute 
in these specific cases of coercion through extra-territorial sanctions.77The specific choice 
of instrument in any given case, can be left for the implementation  stage and should be a 
decision for the Commission to take in specific circumstances.  

If  the  specific  choice  of  an  instrument  is  left  for  the  implementation  stage,  the  situation 
would not be novel. It should be a policy choice between two available avenues guided by 
the specific circumstances in individual cases taking into account that the legal instrument 
of the current  initiative would be  the only one  available to  address  coercion  and  no other 
instrument is able to do so. In any event, coherence is achievable. 

Finally,  the  scope  does  not  extend  to  situations  of  coercion  purely  against  private  actors 
where there is no intention to coerce the EU or Member States (see section 3.1 on what falls 
outside  the  problem),  but  it  includes  situations  of  coercion  where  the  third  country  uses 
private actors as vectors of coercion towards the EU or Member States. 

(A2) This is option (A1) but explicitly excluding extra-territorial sanctions on the basis 
that they have specific distinctive features and are covered by the Blocking Statute and the 
upcoming  amendment  thereof.78  From  the  perspective  of  coherence,  the  exclusion  will 
ensure  a  delineation  between  the  two  instruments  with  one  instrument  addressing  all 
coercive  measures  except  extra-territorial  sanctions  and  the  other  addressing  only  extra-
territorial sanctions. An exclusion would restrict the scope of application as described under 
option (A1). 

Design parameter (B) Threshold for action  

77  The  majority  view  of  stakeholders  (mostly  businesses  but  some  public  authorities,  too)  is  that  the  two 
instruments  must  be  complementary  such  that  they  both  address  extra-territorial  sanctions  in  a 
complementary and adequate manner. There are also extreme views that one instrument must take over the 
other  in  respect  of  extra-territorial  sanctions,  and  a  spectrum  of  other  suggestions  in  between  (see  the 
results of the public consultation here, and a summary factual report here). 

78  Commission proposal planned for quarter 2 of 2022. 

29 

 
                                                           
This  means  that  the  EU  may  consider  responding  to  coercion,  where  the  coercive  action, 
which otherwise falls within the conditions of application of the instrument (see discussion 
under design parameter (A)), reaches a specific level of intensity as opposed to responding 
to any  incident  of  coercion.  It  would complement  the trigger  (design parameter (A)) as it 
would introduce further  layers in the assessment whether an individual coercive measures 
necessitates  an  action  under  the  instrument.  Reaching  a  certain  threshold  however  should 
not  result  in  an  obligation  to  act.  It  is  rather  that  action  would  not  be  appropriate  below 
certain  threshold.  The  parameter  is  relevant  for  all  the  specific  objectives  and  can  be 
particularly effective in deterring coercion. The following options are considered: 

(B1)  quantitative  –  monetary  or  economic  thresholds,  i.e.  action  considered  if  the  harm 
(potential or inflicted) reaches a certain minimum monetary or economic threshold; 

(B2) qualitative – action considered on a case-by-case basis e.g. in light of the degree of 
encroachment  upon  areas  of  the  EU’  or  Member  States’  sovereignty,  and  the  intensity, 
severity,  frequency,  duration,  breadth  and  magnitude  of  the  third  country’s  measures  as 
relevant in individual cases. The impact is not necessarily defined in monetary or economic 
terms. This type of threshold can also  capture  a situation of patterns and series of actions 
and  provide  for  flexibility  in  the  application.  This  would  render  the  instrument  more 
effective and its use more efficient. 

Stakeholders in the public consultation are divided on the question of a threshold in terms 
of  its  effectiveness  and  usefulness.  the  majority  were  neutral,  while  those  in  favour  are 
slightly  fewer  than  those  against  a  threshold.  On  a  related  question  on  whether  the  EU 
should  respond  to  each  case  of  coercion,  stakeholders  were  also  divided  with  negative 
replies  prevailing  over  affirmative  and  over  neutral  ones.  Those  who  see  the  need  for  a 
threshold  tend  to  prefer  a  flexible,  case-by-case  approach,  based  on  qualitative  option. 
Specific  reasons  against  a  threshold  include  the  consideration  that  any  limitation  of  the 
scope  of  application  would  invite  more  coercion  and  be  counterproductive  for  its 
usefulness, timeliness and or/effectiveness. Some argued that not tolerating coercion of any 
size as a matter of principle. 

Design parameter (C) Possible action 

This is a fundamental design parameter as it concerns the specific action which the EU may 
take under the instrument and it is of fundamental importance for the effectiveness of the 
instrument. It is suggested to have a two-step, gradual process. The first step is the same in 
all options for this design parameter, and it comprises initial measures whose objective and 
potential  is  to  end  the  coercion  in  a  manner  not  involving  recourse  to  countermeasures, 
without imposing costs on the coercing country or other actors. That step has the potential 
to  be  effective  also  as  regards    the  objective  of  de-escalation.  If  that  fails  in  halting  the 
coercion, the second step becomes available (but not mandatory). This entails an array of 
potential  countermeasures  and/or  financial  compensation  (to  choose  from  in  the  concrete 
use  of  the  instrument),  whose  objective  is  to  counteract  and  whose  potential  is  to  induce 
discontinuation of the coercion, i.e. it is interventionist and imposes costs. The launching of 
each step would be a matter of assessing if the relevant substantive conditions are met and 
conducting respective procedural steps. Any assessment would be supported by evidence. 

The figure below illustrates the sequence of the EU’s main actions in the two-step process, 
relevant for all options for this design parameter, bringing together the other relevant design 
parameters. 

Figure 1 Sequence of EU’s main actions under the two-step process 

30 

 
Step 1: First resort 
measures

Assessment of a third-
country measure -
conditions and threshold, 
including possibly inviting 
input

Public identification of 
the coercion and call on 
the third country to end 
its measure

Efforts towards direct 
negotioations, mediation 
or adjudication with the 
third country with a view 
to end coercion

Step 2: Last resort 
measures (i.e. where first 
resort measures were  
unsuccessful)

Assessment of the need 
for further action

Call on the third country 
to end its measure within 
a certain period

Selection and design of 
countermeasures, 
including stakeholder 
involvement

Imposition of temporary 
countermeasures

(range of 
countermeasures 
depends on the option)

Financial compensation 

(only under option (C3))

In general, the mere availability of responses towards the third country’s measure, and the 
range of these responses, has an important direct deterrence effect in the first place because 
it is reasonable to expect that the mere availability of appropriate response has the potential 
to  discourage  a  third  country  from  contemplating  coercion  towards  the  EU  or  Member 
States  in  the  first  place  as  the  third  country  is  expected  not  to  want  to  face  such 
countermeasures  or  other  negative  effects.  The  parameter  is  also  crucial  in  achieving  the 
other  objectives  of  de-escalation,  inducing  discontinuation  and  counteracting.  Thus,  this 
parameter  is  of  fundamental  importance  for  the  effectiveness  of  the  instrument,  as  also 
recognised by stakeholders. 

Stakeholders  across  the  groups  systematically  alluded  to  a  gradation  in  the  process  of 
taking action under the instrument. The two-step process corresponds to this. Stakeholders 
insisted that countermeasures sanctioning the third country must be a last resort. This stems 
from  considerations  of  the  potential  costs  and  negative  consequences  of  countermeasures 
but  also  from  the  idea  to  curb  escalation  first  through  diplomacy  and  negotiation. 
Dissenting  views  included  the  contention  the  efforts  to  reach  a  diplomatic  solution  may 
cause delays in effectively using the instrument, and the use of countermeasures should not 
be delayed on this account. 

Accordingly,  in  light  of  their  potential  to  bring  about  effectiveness,  the  following 
alternative options are considered as suitable: 

(C1)  A  two-step  process:  initial  measures  of  first  resort  involving  the  identification  of 
coercion, and if they fail, measures of last resort: countermeasures. 

Step  1:  Measures  of  first  resort  do  not  involve  countermeasures  and  include  the 
following:  a  formal  determination  as  regards  a  coercive  measure  on  the  basis  of  a  set  of 
conditions  (design  parameter  (A)),  space  for  a  dialogue  and  negotiations,  mediation, 
undertaking steps towards the joint submission of the dispute to third party adjudication, i.e. 
an  independent  international  tribunal  (while  the  coercive  measures  are  suspended  until  at 
least the end of the adjudicative process). Their objective is to obtain the discontinuation of 
the coercion in the short term without imposing costs through EU countermeasures (costs to 
the  coercing  country  and  potential  costs  to  the EU  economy)  and  to  de-escalate  tensions. 

31 

 
 
Some may be appropriate in situations of a threat as well, thus in preventing coercion. This 
stage does not require any step taken by private actors, it can be exclusively carried out by 
the EU institutions. 

The formal determination as regards the coercive measure does not currently exist as a legal 
possibility  because  no  available  legal  instrument  sets  out  which  conditions  should  be 
assessed  for  such  a  determination.  Thus,  a  dedicated  instrument  would  deliver  this  new 
possibility.  Otherwise,  the  rest  of  the  measures  of  first  resort  can  be  pursued  even  in  the 
absence of a dedicated instrument (i.e. diplomatic means and resort to adjudication in any 
event).  Nevertheless,  it  is  considered  that  a  dedicated  instrument  would  formalise  and 
structure  such  possibilities  in  order  to  achieve  more  effectively  both  the  deterrence 
objective and the objective of inducing discontinuation without the use of countermeasures. 
Thus, a dedicated instrument would bring about a benefit. 

  Conditions and criteria for launching the first step 

As regards the substantive conditions and criteria, there would be an assessment of whether 
a concrete third-country measure in individual cases falls within the scope of the instrument 
(design parameter (A)) and whether a certain threshold is reached (design parameter (B)). 
Procedurally,  the  assessment  may  involve  gathering  of  additional  information  from 
stakeholders  (design  parameter  (G)).  A  public  affirmative  determination  at  EU  level  may 
follow such an assessment (i.e. the first measure under the instrument). The EU may call on 
the third country to end its measures at this point. Depending on the cooperation of the third 
country in question, an affirmative determination may lead to subsequent measures, such as 
direct  negotiations,  mediation  or  international  adjudication,  with  a  view  of  ending  the 
coercion.  The  choice  of  such  subsequent  measures  would  depend  on  the  circumstance  of 
any individual case and may differ from one case to another. 

Any action under this step should be justified and supported by evidence that  the relevant 
conditions and criteria are met. The evidence base would include elements such as evidence 
that  an  individual  measure  by  a  third  country  meets  the  conditions  of  application  of  the 
instrument  (design  parameter  (A)),  and  that  a  certain  threshold  that  justifies  action  is 
reached (design parameter (B), evidence of efforts to enter into consultations with the third 
country  in  question  and  of  consultation  of  stakeholders  (design  parameter  (G))  where 
necessary. 

Step 2: Measures of last resort (i.e. countermeasures) would include measures under the 
common commercial policy that temporarily restrict trade or investment. More specifically, 
the scope potentially extends to the following: 

-  new or increased customs duties and quantitative restrictions on export and import 

of goods; 
additional charges on imported or exported goods; 
restrictions on the transit of goods; 

- 
- 
-  quantitative  restrictions  on  imports  or  exports  of  goods  through  quotas,  non-

automatic import or export licences or through other measures; 

-  new or increased restrictions on trade in services; 
- 
- 

restrictions on investments, in particular new investments;  
restrictions  on  the  protection  of  intellectual  property  rights  or  their  commercial 
exploitation,  in  relation  to  right-holders  who  are  nationals  of  a  third  country 
concerned; 
the exclusion from public procurement of suppliers of goods or services established 
in and operating from a third country concerned; 

- 

32 

 
- 

a mandatory price penalty on tenders of suppliers of goods or services established in 
and  operating  from  a  third  country  concerned  and/or  on  that  part  of  the  tender 
consisting of goods or services originating in a third country concerned; 
any other restrictions of access to public procurement; 

- 
-  blocking  exports  of  products  subject  to  export  control  measures  (i.e.  those  that 

would otherwise be permitted).79 

A similar scope exists under the EU Trade Enforcement Regulation (most notably without 
investment  and  with  some  limitations  regarding  intellectual  property  rights,  public 
procurement  access  and  measures  on  trade  in  goods),  and  a  further  extension  should  be 
examined in its review due by February 2022.80 

None  of  the  above  types  of  measures  are  novel.  They  are  known  from  various  common 
commercial  or  other  instruments  but  they  are  deployable  under  specific  objectives  and 
purposes, distinct from  anti-coercion.  In other  words, in  the absence of  a respective legal 
basis, none of the above measures is deployable to address coercion, even less so to deter 
coercion.  Moreover,  as  mentioned  above  in  the  baseline  discussion,  their  use  with  the 
specific objective of countering acts of coercion would not only be legally impossible as a 
matter of EU law, but  such use could  also  be questionable under international  law,  given 
the  triggers  for  these  instruments  are  not  aligned  with  the  relevant  conditions  under 
international  law  for  responding  to  coercion.  In  that  sense,  a  dedicated  legal  instrument 
would deliver precisely the legal basis to permit the use of the above measures. A new legal 
instrument would introduce no overlap as no other instrument contains a comparable legal 
basis for action against coercion. 

At  the  same  time,  the  provision  of  the  same  or  similar  types  of  measures  in  other 
instruments with the objective to inducing a third country to comply (for instance, under the 
EU Trade Enforcement Regulation to induce compliance with a WTO ruling), as well the 
acquired experience of their application, supports the proposition that such measures are a 
capable tool to encourage a third country to end its coercion as it would be the objective in 
the present case. 

Stakeholders  across  the  groups  broadly  support  this  scope  in  terms  of  effectiveness  and 
appropriateness, with those in disagreement being in the minority (also across the groups). 
Moreover, stakeholders felt that this scope is the minimum that the EU should envisage. At 
the same time, identified sensitivities relate mainly to intellectual property rights, but also 
to  trade  in  services  and  in  goods,  and  public  procurement,  depending  on  the  stakeholder 
(see section 7). 

79  The ECFR policy brief of June 2021 considers that export controls could be “one of the most strategic and 
effective ways for the EU to protect itself from economic coercion”. The rationale for this measure is that it 
can be very targeted at specific product or service of importance to the coercing country and it comes at 
less costs for the EU. The use of export controls is picked up by some other stakeholders. 

80  The current EU Trade Enforcement Regulation, as amended in February 2021, provides for the following 
possible  commercial  policy  measures:    customs  duties  or any  additional  charge  on  imports  or  exports  of 
goods;  quantitative  restrictions  on  imports  or  exports  of  goods,  whether  made  effective  through  quotas, 
import or export licences or other measures; restrictions on trade in services; restrictions on the protection 
of  intellectual  property  or  their  commercial  exploitation,  where  rights  are  granted  by  a  EU  institution  or 
agency and valid throughout the EU; specific narrow restrictions on goods, services or suppliers in the area 
of  public  procurement.  Pursuant  to  Article  10,  the  Commission  is  due  to  undertake  a  review  aimed  at 
envisaging  additional  commercial  policy  measures  in  the  field  of  trade-related  aspects  of  intellectual 
property rights, by February 2022. 

33 

 
                                                           
In  the  use  of  the  instrument,  this  stage  would  involve  consultations  with  relevant 
stakeholders  on  the  economic  interests  potentially  affected  by  any  countermeasures 
considered as well as by the coercive measure. Depending on the countermeasure in each 
case, public authorities may need to take action in applying the measure (e.g. levying and 
collecting customs duties; applying the access restriction to public procurement markets). 

  Conditions and criteria for resorting to countermeasures 

The  second  step  of  the  gradual  process,  i.e.  the  imposition  of  countermeasures,  would 
follow the completion of the first step only where efforts have not led to discontinuation of 
the coercion and the coercion is still ongoing. In that regard, the substantive conditions and 
criteria for proceeding with the second step would be that the first step was unsuccessful in 
ending the coercion and that it remains necessary for the EU and Member States to protect 
their interests and rights from the ongoing coercion. Before applying countermeasures, the 
EU would call on the third country in question one last time to end the coercion and find a 
solution. 

Procedurally, the second step would also involve information gathering from stakeholders 
(design  parameter  (G))  particularly  as  regards  their  interests  in  relation  to  the  design  of 
countermeasures.  The  choice  and  design  of  countermeasures  would  depend  on  the 
circumstance of any individual case and may differ from one case to another. 

Design parameter (D) discusses in detail the range of conditions for selection and design of 
countermeasures in individual cases. 

Any  action  under  this  step  would  be  supported  by  evidence.  The  evidence  base  would 
include the evidence that the measures of first resort were unsuccessful and protection from 
ongoing coercion remains necessary, consultation of stakeholders as regards their relevant 
interests, notifications of the third country in question before action is taken, and evidence 
of  the  likely  impact  of  potential  countermeasures  in  terms  of  effectiveness  but  also 
collateral damage, proportionality of response, EU’s general interest (design parameter (D) 
conditions). 

(C2) Option (C1) with additional countermeasures 

The two-step approach could be complemented with additional possibilities for last resort 
responses (option (C1)). These potentially include: 

-  Withholding of EU funding to partner countries through financing managed by the 

EIB, EBRD or other institutions and other programmes managed by the EU; 

-  Restrictions on authorisations  for banking, insurance and other  activities (licence); 

financial transactions, financial services; 
-  Restriction of access to EU capital markets; 
-  Restrictions  on  registrations  and  authorisations  under  the  REACH  Regulation  and 

the hazardous chemicals legislation or similar actions; 

-  Listing  of  companies  that  would  then  be  subject  to  various  restrictions  mentioned 

above in this list of above (in particular state owned enterprises); 

-  Restriction  of  access  to  EU  research  programmes  or  exclusion  from  EU  research 

programmes; 

-  Visa measures – this could, amongst other options, include suspending the issuing 

of multi-entry visas, suspending optional fee waivers etc. 

34 

 
In applying these and other restrictions (listed under C1) it would be necessary to analyse, 
on  a  case-by-case  basis,  the  extent  to  which  existing  authorisations/permissions/grants 
should  be  withdrawn  given  these  might  impact  an  already  established  legal  environment 
and whether the focus should be on future authorisations/permissions/grants. 

The availability of such measures in other instruments supports that they have the potential 
to  be  effective.  Thus, they have the potential to be  effective in  pursuing  the objectives of 
this initiative. 

Adding the above  countermeasures to  the  second-step range of actions  under option (C1) 
justifies  considering  the  package  as  a  separate  option  because  of  the  specificities  of  the 
additional  countermeasures.  The  additional  countermeasures  are  not  the  classic  type  of 
common commercial policy measures as under option (C1). They relate typically to other 
areas but most of them can be construed as belonging to the common commercial policy for 
the  purposes  of  this  instrument.  The  rest  can  be  construed  as  belonging  to  other  areas  of 
exclusive EU competence. 

Stakeholders  are  generally  positive  about  expanding  the  scope  of  possibilities  for 
countermeasures.  The main  preference expressed  is  to  have  a choice of  measures  that are 
less  costly  and  burdensome,  in  particularly  on  EU  businesses  (normally  tariff  measures 
have costs for EU business which are consuming the products concerned) but that are also 
effective  towards  the  coercing  country  (both  deterrence  and  counteraction).  Stakeholders 
put  forwards  measures  such  as:  restrictions  on  mutual  recognitions,  licensing  and 
certification,  data  flow  restrictions  or  mandatory  access  to  companies’  sensitive  data, 
restrictions on individual persons. 

Similarly  to  option  (C1),  in  the  use  of  the  instrument,  this  stage  would  also  involve 
consultations  with  relevant  stakeholders  and  possible  action  by  public  authorities  in 
applying the concrete measure. As for option (C1), the same conditions and criteria as well 
as evidence base would be applicable for both the first and second step, respectively. 

(C3) Option (C2) with the addition of a financial compensation – the two-step approach 
can be complemented with the possibility to compensate EU economic operators suffering 
losses  either  from  the  coercive  measures  of  the  foreign  state  or  from  the  EU 
countermeasures. This would require the creation of a fund for use under the instrument and 
for compensating businesses, with criteria for paying compensation while ensuring a certain 
degree  of  flexibility.  The  need  for  flexibility  results  from  the  difficult  predictability  of 
possible level of financing necessary in terms of frequency of the acts of coercion or their 
impacts in individual cases. Private actors could request compensation and provide data for 
the losses suffered showing also the actions taken to mitigate losses. There would need to 
be a designated administrative structure to deal  with the requests. The option corresponds 
directly  to  the  objective  of  protecting  economic  operators,  but  it  is  also  relevant  for  the 
deterrence effect of the instrument under the logic that if public budgets absorb the losses 
from coercion, it will not be (as) effective. 

Stakeholders  were  split  on  this  issue.  Around  half  of  the  respondents  in  the  public 
consultation  (mainly  businesses)  supported  the  possibility,  while  the  other  half  (including 
public  authorities)  were  sceptical  or  did  not  take  a  position.  Some  suggested  that  tariff-
based EU countermeasures could fund the specific compensating mechanism. 

As  for  option  (C1),  the  same  conditions  and  criteria  as  well  as  evidence  base  would  be 
applicable for both the first and second step, respectively. Additionally for the second step 

35 

 
under option (C3) the following would be necessary: assessment of the applicability of the 
financial compensation, in parallel to the possible use of countermeasures. 

Design parameter (D) Selection conditions for countermeasures 

A range of conditions under the instrument could guide and frame the narrowing down of 
the  possible  available  countermeasures  in  individual  cases.  The  conditions  could  assist  in 
calibrating the envisaged measures in any given case so as to manage the risks associated 
with  the  instrument  (such  as  provoking  escalation,  harming  international  relations  and 
increasing  collateral  costs).  They  relate  to  the  following  objectives  for  the  initiative: 
deterrence, discontinuation, counteraction. At the same time, they would be a central part of 
the evidence base for the use of countermeasures. 

In light of the specific objectives, the following cumulative conditions are identified: 

Commensurability – this condition stems from the general principle of proportionality of 
international and EU law and in practice would mean that the response to a harm must not 
exceed  the  harm.  A  related  question  is  about  measuring  the  harm  in  order  to  ensure 
proportionality.  It  may  be  that  harm  caused  by  some  coercive  measures  would  be  more 
challenging to measure, at least in theory, than in other cases (depending on the availability 
of  data).  It  would  also  be  the  case  that  the  sheer  uncertainty  caused  by  the  coercive 
measures is a harm in and of itself. 

Another  aspect  of  commensurability  is  the  duration  of  the  measures.  They  should  last  no 
longer  than  what  is  necessary  to  produce  the  intended  effect,  and  be  repealed  when  no 
longer  useful.  Stakeholders  broadly  support  having  countermeasures  in  place  until  the 
coercion  is  discontinued.  Differing  views  emerged  suggesting  countermeasures  should  be 
imposed for a limited period of time (e.g. suggestions for a short term of 3 to 6 months) and 
renewed if necessary, as leverage. 

Objective of discontinuation of the coercive measure – the condition implements one of 
the specific objectives of the initiative. In practice, it means that the selection and design of 
any  concrete  measures  in  a  given  case  must  seek  to  achieve  that  objective.  Nearly  all 
respondents agreed with this objective. 

Seek to provide relief to affected  EU economic operators,  to  the extent  possible  – this 
condition  is  intrinsically  linked  to  the  specific  objective  of  discontinuation  but  it 
implements  the  general  objective  of  the  initiative  that  is  the  protection  of  economic 
interests.  In  practice,  the  condition  would  mean  that  where  there  is  a  choice  between 
otherwise  equally  effective  available  measures,  those  that  have  the  potential  to  provide 
relief to EU actors should be selected. 

Smallest  possible  collateral  damage  to  EU  economic  operators  –  this  is  the  cost  that  is 
associated  with  the  countermeasures  which  must  be  kept  to  a  minimum.  In  practice,  it 
means selecting those measures, among various available options, that are less harmful for 
EU actors (industries and consumers). Possible compensation for such actors to encourage 
them to diversify away from relying on the country taking the coercive actions and can also 
reduce the collateral damage (option C3)).  

Smallest possible administrative burden for implementation and application of measures 
by  EU  national  authorities  –  this  stems  from  the  general  principle  of  avoiding 
administrative burdens where possible and aiming at simplification. 

36 

 
Action in light of the EU overall interest stands for an assessment of relevant interests; 
i.e.  those  of  economic  operators,  Member  States  and  the  EU  as  a  whole,  in  order  to 
determine  whether  the  likely  positive  effects  of  a  countermeasure  would  outweigh  the 
likely  negative  effects  it  would  or  could81  produce.  The  assessment  could  also  cater  for 
situations in which the interests of only certain Member States are directly concerned. The 
assessment can be conducted on the basis of information collected from  stakeholders  and 
Member States. Businesses and public authorities raise this question. 

Stakeholders across the groups strongly support  all of the above conditions.  In contrast, a 
condition  of  parallelism  such  as  that  countermeasures  should  correspond  in  type  and/or 
sector  of  the  coercive  measure  was  not  supported  overall  (only  some  stakeholders).  The 
report does not develop it as an option mainly because of its practical limitations (it is not 
always  feasible  or  possible  to  respond  in  the  same  sector  or  with  the  same  type  of 
measures) but also because it is not suitable in terms of general effectiveness. 

Design parameter (E) Decision-making 

The power to  take actions in  specific cases will need to  be delegated to  the Commission, 
either in the form of implementing or delegated acts under Articles 290 and 291 TFEU. The 
Commission  exercises  its  implementing  and  delegated  powers  with  the  respective 
involvement  of  the  European  Parliament,  Council  and/or  Member  States  as  currently 
assigned by the TFEU and the secondary legislation. 

Where  empowered  by  the  legislators  in  the  basic  act,  the  Commission  may  adopt  an 
immediately applicable implementing or delegated act on duly justified grounds of urgency 
and  consult  subsequently.  This  option  is  available  for  introducing  measures  or  for  their 
modification and repeal. 

This design parameter is crucial for the deterrence value of the instrument as well as for the 
objective to end coercion quickly because it relates to the efficiency of the decision-making 
procedure.  The  decision-making  procedure  can  increase  the  deterrence  and  encourage 
discontinuation  if it  can  be conducted relatively  quickly (i.e. speed of action  has  a  value) 
and the procedure is relatively straightforward (i.e. does not involve excessive risks of the 
process  being  blocked  or  delayed).  At  the  same  time,  the  decision-making  process  must 
ensure the appropriate political responsibility.82 

In addition to the inherent efficiency of the decision-making process (due to the respective 
roles of the EU institutions and applicable steps), the Commission should execute each step 
expeditiously and without an unreasonable delay while remaining flexible to accommodate 
the  political  sensitivities  towards  the  aim  of  ending  coercion.  This  would  increase  the 
efficiency of the process. 

Design parameter (F) Activating the instrument 

81  This  is  a  question  not  only  of  estimating  factual  probability,  but  also  of  evaluating  normative  relevance: 
where  for  example  the  possible  reactions  of  the  third  country  in  question  are  at  issue  (e.g.  litigation  or 
retaliation – in the latter respect see below in section 7 on the Impact of the policy options), it would have 
to be evaluated to what extent these are, apart from their likelihood, legitimated by international law and, if 
not, whether and how the EU should factor these in.  

82  Argued by some public authorities and businesses and in a detailed manner by the  ECFR policy brief of 

June 2021. 

37 

 
                                                           
Some public authorities and businesses raised the question about the availability of a formal 
complaint  mechanism  under  the  instrument  (F1).  Such  mechanism  could  mean  that 
stakeholders  could  submit  a  formal  substantiated  request  for  action  under  the  instrument. 
Accordingly, the Commission would assess the request and on that basis decide whether to 
activate the instrument.  A parallel  or  an alternative approach is  ex officio activation (F2). 
There  is  stakeholder  support  for  that  option  as  well.  Neither  option  should  preclude 
stakeholders  from  coming  forward  with  data.  These  possibilities  would  contribute  to  the 
effectiveness  of the instrument,  by  ensuring that all instances of coercion are flagged and 
the instrument effectively deployed to bring about deterrence. 

Design parameter (G) Stakeholder involvement 

Stakeholder  involvement  in  the  process  of  decision-making  under  the  instrument  is  a 
fundamental design point in general and in relation to the specific objectives of deterrence, 
discontinuation  and  counteraction.  Stakeholder  involvement  facilitates  and  promotes  the 
consideration of relevant economic interests. To that end, relevant stakeholders should have 
a  meaningful  opportunity  to  express  their  views  when  their  interests  are  affected.  There 
would be two groups of stakeholders in each case, those affected by the foreign country’s 
measure, and those potentially affected by the EU’s planned response under the instrument. 
There could be overlaps between the two groups. 

Respondents  in  the  open  public  consultation  are  close  to  unanimous  in  requesting 
meaningful  involvement  where  the  instrument  is  used.  The  difference  in  views  concerns 
only  the  form  of  this  involvement.  Typically,  businesses  are  interested  in  a  greater 
involvement,  longer  periods  of  consultation  (ranging  from  seven  days  to  three  months), 
opportunities for private and public hearings and receiving precise requests  for input. For 
other groups of stakeholders the minimum period is five days, ten days or 10-20 days. 

Accordingly, two  options  are identified, reflecting  also  stakeholder’s views.  (G1) a  more 
prescriptive approach, whereby the instrument would prescribe the involvement in detail, 
for  example,  with  a  minimum  period  for  consultations,  and  a  mandatory  process  of 
hearings.  (G2)  a case-by-case approach, whereby there  will be a  degree of  flexibility in 
how the involvement can happen in individual cases, depending on the nature of potential 
action. The benefit of this flexibility was also recognised by stakeholders.  

7. 

IMPACT OF THE POLICY OPTIONS 

This  section  assesses  the  impact  of  a  new  legal  instrument  and  of  the  policy  options  as 
regards its main design parameters, against the baseline scenario. 

7.1.  General remarks 

The instrument under assessment would be a regulation of the European Parliament and the 
Council  establishing  a  framework  for  possible  future  EU  action  under  specific 
circumstances and conditions. The EU’s action takes place via subsequent secondary legal 
acts, if and when the instrument is used. Furthermore, the main purpose of the instrument is 
not  its  use,  but  its  non-use  (because  the  mere  availability  of  the  instrument  aims  to  deter 
coercion). The best-case scenario is that there is no need for using the instrument. 

Where the instrument is used, the envisaged possibilities for the EU’s action are numerous 
in  any  of  the  options  for  the  design  parameter  (C)  (possible  action).  The  choice  of  a 
concrete  action  in  a  given  case  is  a  function  of  a  variety  of  circumstances,  such  as:  the 
identity of the coercing country, the international relations with this country,  the coercive 

38 

 
measure  and  the  intention  of  the  coercion,  the  economic  and  political  consequences  and 
effects  of  the  coercion,  which  concrete  EU  measures  are  available  and  recommendable 
towards  this  particular  country,  which  concrete  measures  are  effective  in  pursuing  the 
objective  of  discontinuation  of  the  coercion  from  that  particular  country,  possible  future 
developments. 

The frequency of use is yet another variable which essentially depends on choices made by 
a  third  country  about  resorting  to  coercion  (see  section  3.2  on  drivers),  and  can  be 
influenced by  a successful  deterrent.  This  report  assumes  that use would  be irregular and 
low, but with some caveats and limitations.  Initially, the use could theoretically be higher 
or lower compared to later years. This would be due to the geo-economic environment, the 
expectations  of  stakeholders  and  their  willingness  to  request  the  use  of  the  instrument  in 
individual  cases.  In  the  medium-  to  long-term  the  use  can  be  grossly  estimated  as 
approximately two-three cases per year, of which fewer than one case per year would result 
in  action  in  the  form  of  countermeasures.  The  assumption  is  based  on  the  observed 
frequency of incidents of coercion in the past, the likely evolution of the problem (section 
3.3), the likely successful deterrence effect of the instrument, the likely effectiveness of the 
measures  of  first  resort,  and  stakeholders’  views.83  An  important  limitation  of  the 
assumption is that it is impossible to predict third countries’ choices.  

Any potential impact will also depend on the duration of the EU’s action and whether it is 
one-off or continuous in individual cases. The overall duration of countermeasures would 
vary  from  a  case  to  another  because  it  would  depend  on  the  rapidity  in  producing  the 
desired  effects  (bringing  an  end  to  the  coercion).84  Some  measures  would  produce  their 
intended  effects  rapidly  because  the  third  country  in  question  reacts  promptly.  In  another 
case, the desired effect might emerge more slowly.    

The  above  considerations  illustrate  that  it  is  not  feasible  to  estimate  with  sufficient 
precision  in  advance,  or  in  the  abstract,  the  potential  impact  arising  from  the  use  of  the 
instrument,  neither  it  is  useful  as  it  could  even  be  misleading.  Generally,  stakeholders 
viewed the impact assessment as a useful exercise but they also pointed out that the impact 
depends on the concrete countermeasures in any given case. 

Consequently, the assessment focuses on the likely impact of the creation and existence of 
the  instrument  and  it  is  by  necessity  qualitative.  Additionally,  the  assessment  also  covers 
the likely impact arising from the potential use of the instrument. 

7.2.  Economic impact 

7.2.1.  Non-EU countries that use or contemplate coercion towards the EU or 

Member States 

The legal instrument aims to change the conduct of third countries that use or contemplate 
using coercion towards the EU or Member States. The desired change is that third countries 
refrain  from  using  coercion  in  the  first  place,  or  that  they  discontinue  their  coercion 

83  Stakeholders across the groups advocate and recognise that this instrument should not be for a regular use. 
84  Stakeholders  broadly  support  having  countermeasures  in  place  until  the  coercion  is  discontinued.  As 
pointed out by a business association, under public international law there is no time limit for the duration 
of countermeasures, only specific conditions in which countermeasures should be lifted (Article 52 of the 
International  Law  Commission’s  Articles  on  State  Responsibility).  The  differing  views  are  that 
countermeasures should be imposed for a limited period of time (e.g. suggestions for a short term of 3 to 6 
months) and renewed if necessary, as leverage. 

39 

 
                                                           
quickly.  In that sense,  these third countries are addressees of the instrument. The EU  and 
Member States are the main beneficiaries since the instrument is meant to protect the ability 
of the EU and its Member States to take measures in its own interest. 

There  are  no  direct,  indirect  or  enforcement  costs  for  the  third  countries  arising  from  the 
creation and the existence of the instrument. If by refraining from coercion (as a result of 
the  deterrence  effect),  the  third  country  incurs  losses  by  foregoing  the  political  or 
commercial  benefits  which  it  would  expect  from  its  coercion,  then  this  cannot  be 
considered  a relevant  cost.  Refraining from  interfering in  the jurisdiction of the EU or its 
Member States is not a cost to a legitimate interest which the EU must take into account. In 
fact,  third  countries  refraining  from  coercion  is  exactly  a  desired  benefit  for  the  EU, 
producing gains or savings, not losses. Also, this would translate into a benefit in terms of 
the rejection of international coercion as a policy. 

Costs and other negative effects may arise from the use of the instrument and they will be a 
function of the  type and duration of the  countermeasure (design parameter (C) possible 
action)  in  individual  cases,  and  frequency  of  use  in  general.  The  measures  of  first  resort 
(i.e.  the  first  step  for  each  option)  could  involve  direct  and  indirect  costs  associated  with 
any negotiation or agreed litigation, should such avenues be followed; or reputational costs 
for  the  third  country  when  the  third  country’s  action  is  publicly  qualified  as  coercive. 
Diplomatic efforts to resolve any crisis are not expected to involve any direct costs. In any 
event,  such  costs  would  be  the  same  as  for  the  baseline  where  diplomatic  means  are  an 
available  option.  The  measures  of  last  resort  in  options  (C1)  and  (C2)  are  diverse  and 
would be deployed depending on what is most effective and feasible in any particular case. 
The  economic  impact  would  be  targeted  and  strictly  case-  and  country-specific,  some 
measures may not be available for certain countries or might not be considered effective, or 
not effective at a particular moment. Hence, the impact cannot be estimated in the abstract.  

As regards design parameter (A) triggers for action, namely the coverage of situations in 
which the EU may take action, this is likely to influence the frequency of use and thus to 
increase the instances where an impact will arise. Thus, only on basis of coverage, option 
(A1) covering extra-territorial sanctions implies in principle more frequent use than option 
(A2)  that  does  not  cover  them.  Since  the  Blocking  Statute  would  remain  the  primary 
instrument  to  counter  extra-territorial  sanctions,  the  use  of  the  instrument  is  likely  to  be 
higher only to a limited degree (the instances when the instrument is applied in addition to 
the  Blocking  Statute)  under  option  (A1).  However,  this  is  relative  and  qualitative  and 
cannot  be  estimated  quantitatively  with  any  precision.  The  use  of  the  instrument  will 
primarily depend on the choice of a third country whether to resort to coercion, and second 
on the effectiveness of the initial, first resort measures in individual cases. It is recalled that 
only if the first resort measures (with relatively fewer costs) fail, that the EU will proceed 
with countermeasures (relatively more costs). The same reasoning applies as regards design 
parameter (B) threshold for action. A higher threshold (either quantitative or qualitative) 
will decrease the instances of potential use in relative terms.  

More importantly, the overall design of the instrument  entails a restraint  in the first place 
and  counteraction  only  if  an  engagement  with  the  coercion  country  does  not  produce  the 
necessary effects. Also relevant is that the instrument is activated exclusively in response to 
a third country’s coercion and it is never the EU that creates the situation. 

Furthermore, those third countries may theoretically decide to respond to the action which 
the EU is taking under this initiative by retaliating through further measures taken against 

40 

 
the EU.85 This risk of escalation through retaliation should not be taken for granted, and 
needs to be placed in context. A detailed discussion follows in the box. 

  First,  the other country in  question would in  no way be entitled to  respond in  this 
manner, except in the form of a retorsion. Countermeasures (reprisals) would not be 
allowed  in  response  to  a  permitted  EU  response  action  (whether  it  is  a  reprisal  or 
retorsion).  

  Second,  it  also  seems  wrong  to  expect  a  further  retaliatory  response  in  all  cases 
because the EU’s anti-coercion reaction would already have the effect of putting the 
coercing third country on notice that the EU is not tolerating the coercion. Further 
escalation is thus unlikely to foster a positive solution or de-escalation, and the EU’s 
proportionate anti-coercion measure would encourage the third country to  work in 
the direction of such a solution, rather than escalation. 

  Third,  empirically,  it  is  by  no  means  the  case  that  countermeasures  always  elicit 
further measures.86 Even in trade wars, such as that between the US and China that 
started  to  become  real  with  punitive  tariffs  of  USD  50  billion  imposed  in  March 
2018, there is no general trend of endless escalation. What can be observed in many 
cases is, rather, that after one or two exchanges of measures, a new stable situation 
is reached from where the participants work towards a solution, even if the countries 
involved consider each other’s measures illegal.87 The cases in which the targets of 
coercion have chosen not to react formally, but instead opt for mitigation measures 
or  WTO  dispute  settlement  sometimes  nevertheless  feature  continuous  rounds  of 
further measures (cf. China – Australia), and sometimes do not. 

To the extent that there remains a risk of retaliation with costs associated for the EU, these 
risks and costs have to be weighed against the costs if the EU continues not to have a well-
calibrated instrument in which case the EU would forego the benefits of deterring coercion.   

A third country subject to EU anti-coercion measures may also consider resorting to dispute 
settlement  procedures  available under  the WTO Agreement or  a bilateral trade agreement 
with  the  EU.  This  risk  of  litigation  against  the  EU  applies  only  where  the  EU 
countermeasure involves a departure from EU obligations under the WTO Agreement and 
certain  trade  agreements,  respectively.  Whether  the  WTO  Agreement  and  bilateral  trade 
agreements can be invoked to oppose such countermeasures remains unsettled, but it can be 
reasonably  argued  that  they  cannot,  in  so  far  as  the  countermeasures  are  compatible  with 
customary international law. 

85  This  risk  is  raised  by  some  stakeholders  including  businesses  and  public  authorities,  associating  with  it 

with further costs for businesses and trade tensions. 

86  Dursun Peksen and Jin Jeong studied this question and arrived at the conclusion that the economic weight 
of the country that would be subject to the retaliation and the salience of the issue instigating the measures 
it has taken are inversely correlated to the likelihood of retaliation. Dursun Peksen & Jin Jeong, Coercive 
Diplomacy  and  Economic  Sanctions  Reciprocity:  Explaining  Targets’  Counter-Sanctions,  Defence  and 
Peace  Economics  2021,  1-17.  This  has  the  potential  of  working  to  the  EU’s  benefit,  based  on  the  EU’s 
economic weight and an assumption that it would take anti-coercion measures on important matters. 

87  Louis Henkin, How Nations Behave: Law and Foreign Policy (1979), p. 47: “Almost all nations observe 
almost  all  principles  of  international  law  and  almost  all  of  their  obligations  almost  all  the  time.”  which 
supports the argument that retaliation should not be taken for granted in the relationship between subjects 
of international law most of which most of the time abide by most of their international obligations. 

41 

 
 
                                                           
It should, moreover, not be taken for granted that a coercing country would invoke WTO 
dispute settlement action against the EU anti-coercion measure. One reason is that the third 
country  was  the  first  to  step  outside  the  international  legal  order.  If  that  third  country 
invokes e.g. WTO dispute settlement procedures, then the EU would defend itself and the 
legality  of  its  anti-coercion  action  including  based  on  customary  international  law.  This 
could  well  imply  a  full  presentation  of  the  coercive  action  and  its  international  illegality. 
The coercing country might well be reluctant to undergo such discussion and scrutiny. 

7.2.2.  International relations 

This section refers to relations with non-EU countries in general. Third countries which use 
coercion are discussed separately above. 

There  are  no  direct  costs  for  third  countries  in  general  either  from  the  existence  of  the 
instrument,  or  from  its  use.  On  the  other  hand,  potential  benefits  may  arise  in  terms  of 
establishing  international  cooperation  to  tackle  economic  coercion.  This  is  possible  also 
today  and  forms  part  of  the  baseline.  However,  a  dedicated  EU  instrument  sends  a  more 
visible,  powerful  and  effective  message  as  regards  where  the  EU  stands  and  provides  a 
platform for international cooperation more effectively in comparison to the baseline.  

At  the  same  time,  there  are  potential  risks  to  be  managed  in  respect  of  international 
relations in general. See the discussion in the boxes below. 

As  also  some  stakeholders  point  out,  third  countries  may  perceive  the  instrument  as 
harming political or economic international relations, or perceive it as protectionist.88  

The careful design of the instrument manages these risks. 

  Design  parameter  (A)  triggers  for  action  ensures  that  the  instrument  is  activated 
exclusively in response to a third country’s coercion and it is never the EU that starts a 
standoff. Only specific situations  attributable to the non-EU country would trigger the 
instrument.  Stakeholders  also  put  forward  that  it  is  not  the  EU  that  would  harm 
international relations through the anti-coercion instrument but it is the non-EU country 
that  harms  those  relations  by  resorting  to  coercion  in  the  first  place.  The  triggers  are 
based on observed situations of coercion. 

  Design  parameter  (C)  possible  action  ensures  that  the  instrument  operates  in  two 
steps.  The  first  step  is  always  non-interventionist  and  aims  to  stop  the  coercion.  The 
EU’s (counter)-action would be grounded on EU and international law. 

  Design  parameter  (B)  threshold  ensures  that  the  instrument  targets  only  cases  with 
certain important and relevant negative impact on the EU or Member States (as opposed 
to any act of coercion). 

  Design parameter (D) selection criteria ensures that the action taken is commensurate 

and targeted and does not go beyond, and does not last beyond, what is necessary. 

88  Stakeholders across the groups expressed concerns or called for a careful assessment and management of 
this risk. The ECFR Policy brief of June 2021 identifies a risk of encouraging protectionism and suggests 
mitigation  strategies  for  the  new  instrument.  The  analysis  in  this  report  aims  to  address  the  concerns,  in 
line with stakeholders’ input.  

42 

 
                                                           
  Design  parameter  (G)  stakeholder  involvement  ensures  that  the  application  of  the 
instrument  is  done  taking  into  account  relevant  economic  interests  as  raised  by 
stakeholders. 

  Furthermore,  it  is  recalled  that  the  primary  objective  of  the  instrument  is  deterrence 

and not necessarily its use. 

Furthermore,  there  may  be  a  perception  by  some  that  the  EU’s  creating  an  anti-coercion 
instrument  would  be  a  challenge  to  multilateralism  or  to  the  perception  of  the  EU  as 
strong supporter of multilateralism. 

  First  of  all,  the  creation  of  the  instrument  would  not  weaken  multilateralism  either  in 
the  field  of  trade  or  in  the  field  of  international  peace  and  security.  The  WTO  would 
remain  the  core  multilateral  forum  for  addressing  trade  concerns,  and  the  EU  would 
continue  to  take  to  the  WTO  any  grievances  it  has  with  regard  to  third-country  trade 
restrictive measures if the EU considers those to be at odds with WTO disciplines. This 
includes  cases  of  coercion  when  these  simultaneously  present  infringements  of  WTO 
disciplines. 

  The  WTO  however  is  not  an  effective  and  suitable  forum  for  debates  about  the 
disrespect of non-WTO rules of international customary law, such as the prohibition of 
intervention  or  interference  in  the  internal  or  external  affairs  of  another  country.  This 
however  is  precisely  what  the  anti-coercion  instrument  aims  to  tackle;  hence 
multilateralism in trade is not thereby challenged because trade rules do not cover this 
exact question. 

  This applies mutatis mutandis to bilateral trade agreements of the EU. 

7.2.3.  UN Sustainable development goals 

The UN Sustainable Development Goals are relevant to this initiative. This is particularly 
the  case  for  Goal  (16)  to  “Promote  peaceful  and  inclusive  societies  for  sustainable 
development, provide access to justice for all and build effective, accountable and inclusive 
institutions  at  all  levels”  and  Goal  (17)  to  “Strengthen  the  means  of  implementation  and 
revitalize the global partnership for sustainable development”.  

The initiative would support the achievement of these goals as it would support the rule of 
law  and  the  respect  for  international  law.  It  would  also  protect  the  stability  and 
predictability  of  the  international  economic  order,  which  are  being  disrupted  when  third 
countries take coercive measures that restrict international trade or investment.   

7.2.4.  EU economic operators and consumers 

The group consists of two categories, those affected by the coercion and those affected by 
the EU’s action. There could be overlaps. 

There are no direct,  indirect  or enforcement costs  for this  group arising from the creation 
and the existence of the instrument. Costs will arise only from the use of the instrument and 
specifically  from  the  application  of  countermeasures  (assumed  to  be  less  than  once  per 
year). As noted earlier, these depend on the concrete countermeasure, its duration and the 
third country concerned. In qualitative terms, the following applies: 

43 

 
 
Design parameter (C) possible action ensures that, in any option, preference is  given to 
first  resort  measures,  which  do  not  involve  costs  for  EU  economic  operators  and 
consumers.  This  solution  reflects  stakeholders’  views  across  the  groups,  there  is  strong 
support for careful initial engagement with the coercing country. Possible countermeasures 
under  option  (C1),  which  similarly  exist  under  the  other  options  would  restrict  trade  or 
investment and thus would affect this group. The impact would vary per type of measure. 
The  negative  effect  would  likely  be  produced  in  the  short-term  after  the  imposition  of  a 
countermeasure, and may last as long as the countermeasure lasts. This would concern only 
those  EU  economic  operators  with  trade  or  investment  links  to  the  coercing  country,  or 
those with any corporate links to affected foreign entities, and then within specific sectors. 
The following breakdown per type of countermeasure illustrates the typology of costs  for 
this group under this option. 

Restrictions  on  trade  in  goods:  the  countermeasures  may  increase  costs  for  EU  importers 
for goods from a specific non-EU country, or may lower market opportunities for specific 
EU  exporters  of  a  specific  good.  Indirect  costs  could  include  costs  related  to  substitution 
(e.g.  reliance  on  alternative  sources  of  supply),  transaction  costs,  any  price  pass-through 
effects  and  negative  impacts  on  market  functioning  such  as  reduced  innovation  or 
investment.  Stakeholders  reported  also  potential  negative  effects  such  as  uncertainty  in 
conducting  business  caused  by  possible  additional  costs  on  long-term  contracts, 
compromised conditions on cooperation, and in an extreme case the loss of business. Some 
business associations urge that countermeasures do not rely exclusively on trade in goods, 
as goods have continuously been taken hostage of trade disputes in the past years, bearing a 
disproportionate  burden  while  often  being  entirely  unrelated  to  the  core  nature  of  the 
disputes. They would see merit in focusing on trade in services. 

Restrictions on trade in services: the countermeasures may increase the costs for the cross-
border provision of services of the concrete service in respect of a specific non-EU country. 
Indirect costs could be similar to those for restrictions on trade in goods. Some stakeholders 
expressed  concerns  with  the  possibility  of  countermeasures  that  affect  essential  services 
sectors, such as logistics, on which the entire range of EU sectors would rely, because of a 
detrimental  effect  on  the  that  sector.  Furthermore,  concerns  were  flagged  with  targeting 
digital trade and sectors where the EU has a trade surplus. 

Restrictions  on  commercial  aspects  of  intellectual  property  rights:  countermeasures  may 
prevent or increase the costs for a third country intellectual property owner to benefit from 
protection.  Stakeholders,  including  businesses,  expressed  caution  about  using  restrictions 
regarding commercial aspects of intellectual property rights. 

Restrictions  on  public  procurement  access:  restrictions  or  exclusions  of  specific  third 
countries’  providers,  goods  or  services  from  public  procurement  in  the  EU  could  limit 
competition on the EU market. 

Restrictions on foreign direct investment into the EU: countermeasures could result in less 
investment  (capital  and  jobs)  in  the  EU;  if  not  targeted  precisely,  investment  restrictions 
could  indirectly  affect  the  EU’s  or  other  third  countries’  companies  whenever  there  are 
links between companies operating in global value chains. 

Export  controls:  fall  under  the  national  security  exceptions  but  may  be  an  effective 
countermeasure in case of refused licence for export of a specific product to a specific non-
EU country (the coercing non-EU country), export controls may result in foregone business 
(opportunities)  and  in  direct  costs  for  the  affected  EU  economic  operators  who  in  some 
cases may not have sufficient alternative export destinations.  

44 

 
Stakeholders suggested also general potential negative effects valid for most of the above 
countermeasures such as uncertainty in conducting business caused by possible additional 
costs  on  long-term  contracts,  compromised  conditions  for  cooperation,  and  in  an  extreme 
case the loss of business. This confirms the identification of the costs. 

Stakeholders  pointed  to  a  number  of  sensitive  areas  and  sectors  to  better  avoid  for 
countermeasures,  notably:  critical  infrastructure,  health  sector,  humanitarian  sector,  basic 
public services, certain  fundamental values, essential services, such as logistics, on which 
the  entire  range  of  EU  sectors  would  rely,  ,  the  areas  provided  for  in  Article  50  of  the 
International  Law  Committee’s  Articles  on  State  Responsibility  in  the  context  of 
countermeasures,  sectors  in  which  the  EU  enjoys  a  strong  trade  surplus  which  is  more 
likely to be targeted by the third country’s retaliation. 

the 

sector 

energy, 

financial 
information  and  communication 

On  the  other  hand,  stakeholders  suggested  the  following  areas  and  sectors  for 
countermeasures: 
transport, 
banks), 
telecommunications, 
technologies,  prohibition  of 
investments above a certain threshold for people with permanent residence in specific third 
countries,  specific  investment  prohibition  for  real-estate  property  or  acquisitions  of 
companies  for  people  with  permanent  residence  in  such  countries,  including  any  legal 
entities owned, controlled by them, regardless of the place of incorporation; restriction of 
key  patents  for  transfer  /use  in  targeted  non-EU  countries;  or  sectors  that  are  politically 
sensitive for the coercing country. 

(including 

With respect to any EU departure from EU’s international obligations (WTO or other trade 
agreements),  such  departures  would  not  necessarily  occur  and  would  be  a  matter  for 
political  decision  in  individual  instances  that  would  be  taken  in  line  with  the  EU’s  rights 
under  general  international  law,  including  the  permission  to  take  countermeasures  in 
response to a coercive measure that infringes on general international law. 

Under option (C2), additional possible countermeasures would have relatively less impact 
on  this  group  because  of  their  nature  (e.g.  visa  restrictions,  restricted  access  to  funding, 
financial  market  restrictions),  or  may  have  no  direct  impact  at  all  if  the  group  is  not 
concerned. The following qualitative impact can be identified: 

Restriction  of  access  to  EU  research  programmes  or  exclusion  from  EU  research 
programmes  of  actors  from  the  coercing  non-EU  country  –  may  restrict  innovation 
indirectly; otherwise no direct costs for EU economic operators as the specific restrictions 
are not related to them; 

Visa restrictions for nationals of from the coercing non-EU country – no direct or indirect 
costs for EU economic operators as the specific restrictions are not related to them; 

Withholding of EU funding to the coercing non-EU country – no direct or indirect costs for 
EU economic operators as the specific restriction is not related to them; 

Restrictions on authorisations for banking, insurance and other activities (licence) to actors 
from  the  coercing  non-EU  country;  financial  transactions,  financial  services  –  such 
measures  may  have  (direct  or  indirect)  effect  in  case  of  corporate  links  of  EU  economic 
operators with the coercing non-EU country. More generally, such measures must take into 
account  any  risk  to  the  financial  stability  of  the  EU  financial  sector  and  the  need  to 
adequately protect the financial market participants and other persons in the EU; 

45 

 
Restriction of access to EU capital markets by actors from the coercing non-EU country – 
such  measures  may  have  (direct  or  indirect)  effect  in  case  of  corporate  links  of  EU 
economic operators with actors concerned; 

Restrictions  on  registrations  and  authorisations  under  REACH  Regulation  and  the 
hazardous chemicals legislation or similar actions – such measures may affect (directly or 
indirectly)  EU  economic  operators  in  case  they  act  as  representatives  of  importers  or 
manufacturers from the coercing non-EU country which request registration; or in case of 
authorisation, if EU operators request authorisation to use certain chemicals on behalf of an 
economic operator from the coercing non-EU country. 

Restrictions  on  individual  persons  linked  to  a  government  which  has  adopted  coercive 
measures  –  no  direct  or  indirect  costs  for  EU  economic  operators;  such  measures  do  not 
affect them. 

Listing  of  companies  –  applying  various  restrictions  mentioned  above  to  companies  (in 
particular  state  owned  enterprises)  or  other  persons  which  have  been  listed  –  the  impact 
would be the respective type identified per specific measure, i.e. there would be impact if 
there  is  a  trade,  investment  or  corporate  link  between  EU  economic  operators  and  the 
coercing non-EU country and/or its operators. 

Option  (C3)  does  not  involve  additional  costs  as  it  provides  financial  compensation  for 
losses  for  EU  economic  operators.  At  the  same  time,  to  benefit  from  financial 
compensation,  concerned  economic  operators  will  need  to  make  a  substantiated  request 
with any possible associated administrative costs. The financial compensation granted may 
not  offset  the  totality  of  claimed  costs.  Stakeholders  also  pointed  at  complexity  and 
difficulty in determining losses and compensation. 

It  follows  that,  in  all  cases  discussed  for  design  parameter  (C),  the  magnitude  of  the 
impact would vary from a case to another. More importantly, however, the impact would be 
knowable  in  concrete  cases  through  the  possibility  of  stakeholder  consultation  etc.  and 
measures with no or smaller negative impact could be prioritised. 

As previously noted,  regards design parameter (A) triggers for action, or the coverage of 
situations in which the EU may take action, this is likely to influence the frequency of use 
and  thus  to  increase  the  instances  where  an  impact  will  arise.  Thus,  only  on  the  basis  of 
coverage, option (A1) including extra-territorial sanctions implies more frequent use than 
option (A2)  that excludes them, keeping in  mind that the Blocking Statute would remain 
the  main  vehicle  for  responding  to  extra-territorial  sanctions  meaning  the  difference  may 
not be significant.  

Again,  as  previously  noted,  similar  reasoning  on  frequency  applies  as  regards  design 
parameter  (B)  threshold  for  action.  A  higher  threshold  will  decrease  the  instances  of 
potential  use  in  relative  terms.  However,  there  are  specific  advantages  and  disadvantages 
for  each  option  for  this  parameter  from  the  perspective  of  this  group.  A  quantitative 
threshold enhances the clarity and predictability, it is objective and technically easy to set. 
On the other hand, it may be challenging to identify an optimal universal threshold that will 
apply  across  the  board,  thus  there  is  a  risk  that  a  chosen  number  misses  the  target  and 
important  cases  of  coercion  are  left  out  only  because  they  do  not  reach  a  particular 
quantitative threshold. A qualitative threshold offers more flexibility in taking into account 
a  variety  of  dimensions  beyond  the  commercial  or  economic  dimension,  but  it  could  be 

46 

 
criticised for lack of sufficient clarity and predictability.89 The formulation of the threshold 
in the legal text should aim to mitigate this risk. 

Furthermore, it is  recalled that the  primary objective of the instrument  is deterrence and 
not necessarily its use. Therefore, any negative impact on this group will materialise only as 
a last resort, after the other options fail to provide a resolution. 

Design parameter (D) selection criteria ensures specifically that any collateral effect is as 
small  as  possible, which is  of direct  relevance for this group, and  that  the action taken is 
commensurate  and  targeted  and  does  not  go  beyond  the  necessary.  Moreover,  the  action 
must be in the general interest of the EU in all cases, comprising the interests of this group. 

Design parameter (G) stakeholder involvement ensures in relation to this group that the 
application of the instrument accounts for relevant economic interests.  EU businesses and 
consumers,  which  are  potentially  affected,  will  have  an  opportunity  to  come  forward  and 
make  their  views  known  as  regards  their  interests.  The  possibility  for  stakeholder 
involvement  is  considered  beneficial  for  this  group,  as  is  recognised  by  stakeholders 
themselves. Some expressed the view that the participation helps in mitigating the potential 
impact. Participation in the consultation may however result in an administrative burden in 
parallel,  i.e.  costs  borne  as  result  of  responding  to  information  requests,  although 
participation will be voluntary. Option (G1) may be preferable for stakeholders in terms of 
clarity and predictability but it may be otherwise inappropriate in some consultations where 
for example only a limited number of potential measures  are under consideration. Option 
(G2)  has  the  advantage  of  flexibility  and  adapting  the  parameters  of  involvement  to  the 
concrete needs in a given case (e.g. more potential measures: longer periods, more complex 
measure: more possibilities for input, including hearings and assistance). At the same time, 
such flexibility will decrease to an extent the clarity and predictability for this group (which 
should be resolvable on a case-by-case basis). The other advantage of this option is that it 
allows adapting the duration and process of consultations to a particular need for speed of 
action in a given case. This is directly relevant for the effectiveness of the concrete action, 
as well as for the deterrence value of the instrument (i.e. a signal that measures can be put 
in place swiftly, if necessary). 

As regards the activation of the instrument (design parameter (F)), a formal complaint 
mechanism (option (F1)) will lead to administrative costs to those who request the use of 
the instrument as the request would have to be substantiated. It is very likely that such costs 
would be offset by the potential benefits of the EU’s action requested. Ex officio initiation 
(option (F2)) will not lead to such costs, although this option should not prevent those that 
have relevant  information to  come forward. Under both  options,  but  particularly  a formal 
complaint mechanism, stakeholders may be concerned with the issue of confidentiality, for 
fear  of  retaliation.  Necessary  guarantees  and  mechanisms  will  have  to  be  put  in  place  in 
order to ensure that the flow of information, to ensure that the use and effectiveness of the 
instrument  is  not  prejudiced  by  the  fear  of  retaliation  against  those  commercial  actors  in 
third-country  markets  where  they  are  vulnerable  vis-à-vis  governments  not  effectively 
bound  by  the  rule  of  law  and  capable  of  arbitrarily  punishing  economic  operators  that 
defend  their  rights  and  interests.  Furthermore,  stakeholders  may  not  have  access  to 
sufficient  evidence to  substantiate their requests which will  prevent  them from  requesting 
action.  Therefore,  a  reliance  on  formal  complaint  based  requests  for  action  would  imply 

89  Stakeholders  who  see  the  need  for  a  threshold  (20%)  find  more  appropriate  a  flexible,  case-by-case 
approach,  corresponding  to  the  qualitative  option  discussed  here.  No  stakeholder  argued  in  favour  of  a 
quantitative threshold. 

47 

 
                                                           
uncertainty because of the difficulties for private operators to come forward with evidence. 
It therefore does not seem advisable.  

On  the  other  hand,  substantive  benefits  for  this  group  are  expected  at  both  levels:  the 
creation  and existence of the instrument,  and its use. Benefits  will  first  materialise where 
the deterrence effect is successful in averting coercion, i.e. avoiding the negative effects of 
the  coercive  measures  and  countermeasures’  potential  negative  effects  on  EU  economic 
operators  and  consumers.  In  this  respect  the  scope  of  the  triggers,  notably  the  specific 
situations  of  coercion  that  trigger  the  instrument,  plays  a  role.  The  wider  scope  under 
option (A1) would produce a wider deterrence effect and avert a wider scope of coercion, 
in  comparison  to  option  (A2).  However,  option  (A2)  implies  that  the  extra-territorial 
sanctions  not  covered  by  the  anti-coercion  instrument,  would  be  addressed  by  another 
instrument,  namely  the  Blocking  Statute.  Therefore,  extra-territorial  sanctions  would  be 
addressed one way or another. Among the potential costs associated with coercion by third 
countries, stakeholders identify the loss of market access causing a fall in revenues, higher 
transaction  costs  when  goods  are  stranded  in  ports  or  are  destroyed,  and  damage  to  their 
reputation and commercial attractiveness in third country markets that can arise even with a 
threat  of  coercion.  Second,  benefits  will  materialise  though  the  use  of  the  instrument,  in 
providing  protection 
to  EU  economic  operators  and  consumers  concerned  and 
counteracting  negative  effects  of  the  coercion  while  aiming  at  a  discontinuation  of  the 
coercion. The measures of first resort are equally beneficial in that they also aim to stop the 
coercive  measures.  The  financial  compensation  (Option  (C3))  could  help  affected  EU 
economic operators. For example, exporters suffering from a sudden drop of their sales to a 
coercing country could use public funds to make up for some of their losses while they find 
alternative destination markets for their products. The importers of  the coercing country’s 
products, experiencing higher costs, may be able to source the inputs elsewhere or modify 
their  production  processes  (or  provision  of  services).  If  the  financial  compensation  is 
properly designed, it could neutralise negative effects imposed by a coercive country and/or 
those identified in options (C1) and (C2) on EU trade and investment flows. 

7.2.5.  SMEs 

Where they engage in international trade, SMEs would experience similar type of impacts 
as other EU economic operators, with the possible difference that because of their smaller 
size they would be  less  exposed to  being used by  third-country  governments  as symbolic 
examples.  SMEs  reported  additionally  that  a  lack  of  EU  policy  intervention  may  lead  to 
reluctance  on  their  part  to  carry  out  their  trade  and  investment  activities  abroad  as  they 
would fear that they would not be protected against economic coercion. At the same time, 
SMEs may experience the same impact more acutely, they are also less capable of directly 
voicing  their  interests  vis-à-vis  foreign  and  their  home  governments  and  of  sustaining 
losses (less resources at their disposal, such as human, financial, technology).90  

7.2.6.  Trade and investment flows 

The  mere  creation  and  existence  of  the  instrument  may  have  consequences  for  trade  and 
investment  flows.  To  the  extent  that  the  instrument  is  effective  in  preventing  coercion,  it 
safeguards  trade  and  investment  flows  that  could  otherwise  be  targeted  by  the  relevant 
coercion and would allow trade and investment decisions based on the respect for the rules-

90  One  SME  came  forward  in  the  public  consultation.  Participating  business  associations  represented  also 
SMEs’  interests  (e.g.  European  Confederation  of  the  Footwear  Industry;  Cerame-Unie;  SEMAE  (ex 
GNIS); EURATEX, SPECTARIS, and others). 

48 

 
                                                           
based  international  order.  Thus,  medium-  to  long-term  economic  effects  on  trade  and 
investment flows will be positive, in particular because reductions and distortions in trade 
or  investment  flows  can  be  avoided.  More  generally,  the  instrument  will  increase  the 
perception  of  stability  in  the  international  trading  system,  fostering  confidence  in  and  of 
economic operators. 

The imposition of countermeasures will have a direct impact on trade and investment flows 
which  will  depend  however  on  the  specific  countermeasure  in  individual  cases.  This  is 
discussed in details in relation to EU economic operators and third countries above.  

7.2.7.  Public authorities (EU, national, regional or local administrations) 

The  creation  and  existence  of  the  instrument  does  not  result  in  direct,  indirect  or 
enforcement costs for public authorities. Such costs will potentially arise only in the use of 
the  instrument.  National  public  administrations  could  be  involved  in  applying  specific 
countermeasures if such are imposed in concrete cases (i.e. design parameter (C) possible 
action).  Countermeasures  would  fall  under  the  common  commercial  policy  and  the 
regulation  would  be  directly  applicable  in  all  EU  Member  States.  There  are  no  costs  as 
regards first resort measures in any of the options. 

Thus, the only action likely to be required at national level, if any, would be administration 
and  application  of  countermeasures  (e.g.  national  customs  services  enforcing  EU 
legislation, visa restrictions, etc.). The range of possible measures is familiar to the public 
authorities as it exists in the respective fields already and other instruments (e.g. EU Trade 
Enforcement  Regulation).  Therefore,  it  is  unlikely  that  a  national  action  would  require 
substantial  additional  resources  in  comparison  to  the  baseline  scenario.  A  similar 
assessment  applies  as  regards  EU  agencies  that  may  be  involved  in  the  application  of 
countermeasures  under  option (C2).  It is  of note that it is not  intended and expected that 
the instrument is applied regularly. Its design and objectives rather imply limited use. 

Nevertheless, public authorities participating in the public consultation expressed concerns 
about  administrative  cost  of  restrictions  on  trade  in  services  (they  argued  that  uniform 
implementation  in  non-harmonised areas would,  in  particular, be  complicated)  and public 
procurement.  It  was  said  that  more  important  than  defining  the  areas  of  action  is  their 
effectiveness and proportionality, which should always be assessed on a case-by-case basis. 

Any applicable costs, as identified in a concrete case of the use of the instrument, as well as 
any  views  of  the  public  authorities  would  be  taken  into  account  when  adopting  specific 
countermeasures.  According  to  design  parameter  (D)  selection  conditions,  the  smallest 
possible  administrative  burden  is  among  the  conditions  for  selection  of  specific  measures 
such that those that are less burdensome should be preferred. 

As regards design parameter (E) decision-making, Member States may need to  appoint 
delegates to serve as members of a committee in case of implementing powers conferred on 
the Commission, or experts in case of delegated powers conferral. The resources involved 
would depend on the frequency of use. 

None of the other design parameters involves an action at national level, therefore, there is 
no additional impact to be created by the other design parameters. 

On the other hand, benefits will arise from averting coercion that targets public authorities 
through the mere existence and availability of the instrument, or its discontinuation,  using 

49 

 
the  instrument.  The  result  would  be  that  public  authorities  would  withstand  foreign 
interference in their policy choices and would preserve their autonomy. 

As  regards  the  Commission,  potential  costs  would  occur  for  administration,  monitoring, 
enforcement and adjudication in relation to the instrument and its use. Significant costs in 
individual  cases  would  be  associated  with  the  collection  of  evidence  on  the  nature  and 
effects  of  the  third-country  measure,  and  on  potential  effects  of  contemplated  counter-
measures. This would involve additional human resources for the Commission (around two 
or  three  FTEs  depending  on  the  frequency  of  use).  On  the  other  hand,  the  financial 
compensation (option (C3)) implies substantial additional resources in terms of creation of 
a fund and increased administrative burden in terms of managing the fund, other than to the 
extent that existing schemes may be used (under the Common Agricultural Policy).  

7.2.8.  EU citizens and society as a whole 

The  report  looks  also  at  impacts  that  are  widespread  and  do  not  affect  a  particular  sub-
group in a specific way. No direct impact is expected, but a general benefit from deterring 
or discontinuing coercion quickly is expected, in particular if this makes it easier for the EU 
or Member States to act to protect citizens.91 

7.3. 

Social impact 

Generally,  the  existence  of  the  instrument  is  expected  to  have  a  positive  effect  on  social 
indicators,  in  that coercion may  decrease or  be prevented. The positive  effect  arises  from 
preserving the status quo and averting adverse changes that are associated with the coercion 
(e.g. on employment, competitiveness, risk of investments and loss of market opportunities 
in  third  countries,  increased  uncertainty  in  conducting  business).  Where  the  instrument  is 
used,  benefits  will  arise  if  the  EU’s  action  is  successful  in  ending  the  coercion  quickly. 
Some  stakeholders  argue  that  if  both  coercive  and  anti-coercion  measures  would  stay  in 
place for long, this could have a significant adverse impact on income and employment. As 
also  pointed  out  by  stakeholders,  it  is  expected  that  the  instrument  will  contribute  to  the 
EU’s capability to set ambitious social standards (for instance, it would protect the EU in 
the  event  that  third  countries  sought  to  impose  retaliation  in  respect  of  the  EU’s  due 
diligence  legislation).  Stakeholder  involvement  (design  parameter  (G))  will  assist  in 
identifying any relevant negative impact so that any such impact is factored in the selection 
and design of concrete countermeasures before their application. Ultimately, the instrument 
should help build a more stable environment for using regulatory powers. 

7.4.  Environmental impact 

There is no discernible adverse impact on the environment from the instrument or its use. 
Furthermore,  and  as  pointed  out  by  stakeholders,  it  is  expected  that  the  instrument  can 
contribute  to  the  EU’s  capability  to  develop  ambitious  environmental  standards  in  a 
predictable  way  (for  instance,  it  would  protect  the  EU  in  the  event  that  third  countries 
sought  to  impose retaliation  in  respect  of the  EU’ climate change  mitigation legislation – 
something which has already happened when the Emission Trading Scheme was originally 
extended  to  aviation).  Stakeholder  involvement  (design  parameter  (G))  will  assist  in 
the  selection  and  design  of  concrete 
identifying  any  relevant 

impact  so 

that 

91  Participating  citizens  (6)  from  Germany,  France,  Italy,  Hungary  spoke  generally  about  business  and 
political  interests  and  potential  benefits  of  having  a  dedicated  instrument,  rather  than  from  a  societal 
perspective. Those views are integrated into the respective impact sections. 

50 

 
                                                           
countermeasures factor them in. Ultimately, the instrument should help build a more stable 
environment for using regulatory powers, one that protects the environment in the EU.  

7.5. 

Fundamental rights 

The creation of an anti-coercion instrument itself would affect fundamental rights only by 
protecting them, in implementation of the EU’s positive obligation to  protect the rights of 
its  citizens  against  infringements  from  other  sources,  in  this  case  foreign  governments, 
when the existence of the instrument can make a contribution towards deterring their acts of 
coercion  which  could  negatively  affect  those  rights.92  The  use  of  an  anti-coercion 
instrument  could  similarly contribute to  this  protective effect.  It  could  also, however, and 
depending on the EU’s action chosen in the individual case, imply EU-imposed restrictions 
on  trade  or  investment  (under  any  option),  thereby  restricting  the  freedom  to  engage  in 
international  trade  or  investment  as  part  of  the  freedom  of  professional  activity.93 
Intellectual  property  rights  could  also  be  affected  (under  any  option).94  Individual  EU 
stakeholders affected by these restrictions contrary to other stakeholders (e.g. because they 
import  the  products  subject  to  restrictions)  can  also  feel  affected  in  their  right  to  equal 
treatment.95 These restrictions, however, would be a legitimate action by the EU authorities 
bound by the Charter because they would be taken in conformity with the requirements that 
the  action  be  taken  on  the  basis  of  a  proper  legal  basis,  by  the  competent  authorities,  in 
pursuit  of  a  legitimate  objective,  and  in  line  with  the  principle  of  proportionality.96 
Ultimately, the instrument would be apt to help build a more stable environment for using 
regulatory powers, one that promotes fundamental rights in the EU and abroad. 

8.  HOW DO THE OPTIONS COMPARE? 

Following the assessment of the impact of the various design parameters and options, this 
section presents three alternative policy packages for a legal instrument and examines how 
they compare based on effectiveness, efficiency and coherence with other EU policies. 

8.1.  Configuration of policy packages 

The  identified  policy  packages  represent  the  most  suitable  configurations  of  policy 
parameters  or  their  options  based  on  the  likely  impact  as  identified  and  their  potential  to 
achieve  the  initiative’s  objectives.  The  configurations  resulted  from  the  following 
methodological steps: 

First  step:  The  policy  packages  are  built  around,  and  vary,  on  the  basis  of,  the  EU’s 
possible  action  that  is  being  considered  (design  parameter  (C)).  That  parameter  came 
across as the most determinative in the design of an appropriate and effective instrument; it 
carries the most weight in terms of potential impact, both positive and negative. 

Second  step:  Each  policy  package  includes  the  two  alternative  options  for  triggers  (for 
design parameter (A)) as considered, i.e. both options are retained as suitable, for reasons 
discussed below, and the choice is left for the legislative proposal. 

Article 52(1), in fine, of the Charter of Fundamental Rights of the European Union. 
Articles 15(1) and 16 of the Charter of Fundamental Rights of the European Union. 

92   
93   
94  Article 17(2) of the Charter of Fundamental Rights of the European Union. 
95  Article 20 of the Charter of Fundamental Rights of the European Union. 
96  Article 52(1) of the Charter of Fundamental Rights of the European Union. 

51 

 
                                                           
Third  step:  The  other  components  for  a  legal  instrument  are  the  same  across  the  policy 
packages  (the  constant  parameters).  Three  of  them  (threshold,  activation,  stakeholder 
involvement)  correspond  to  the  most  viable  option  per  respective  design  parameter  and 
they  have  the  function  of  enhancing  the  main  component  (i.e.  possible  EU  action).  The 
rationale  for  identifying  the  most  viable  option  is  based  on  its  likely  impact  as  identified 
and  potential  to  support  the  initiative’s  objectives,  as  discussed  in  more  detail  below. 
Finally,  the  remaining  two  components  (selection  conditions  and  decision-making)  are 
constant and do not foresee policy options from the outset. They also apply equally across 
the  three  policy  packages.  Their  overall  effectiveness  and  efficiency  is  discussed  as  an 
integral part of the policy packages in the next section (8.2). 

8.2. 

Policy packages 

Following the above steps of configuration, policy package 1 proposes a two-step process 
for possible action under the instrument, namely first resort measures, and, if they fail, last 
resort measures limited to countermeasures under option (C1). Policy package 2 proposes 
the  same  two-step  process  for  possible  action  but  with  an  additional  possibility  for 
countermeasures under option (C2). Policy package 3 proposes the same two-step process 
as policy package 2 but with yet another possibility that is granting financial compensation. 
Thus, all policy packages include the same first resort measures but there is a progression in 
the level of ambition as regards the second step. Policy package 1 is sufficiently ambitious, 
policy package 2 is more ambitious and the policy package 3 is the most ambitious of the 
three. Finally, they all include trade and investment measures. 

Next, each package contains two alternatives for triggers (options (A1) and (A2)). The two 
alternatives  differ  as  regards  the  coverage  of  extra-territorial  sanctions  when  they  also 
coerce the EU or Member States public authorities. Each option is considered suitable, thus 
they  are  retained  as  alternatives.  Option  (A1)  (i.e.  including  those  extra-territorial 
sanctions)  is  more  ambitious  than  option  (A2).  Based  on  likely  impact  and  potential  to 
support  the  initiative’s  objectives,  it  is  considered  viable  and  appropriate  for  this 
instrument,  and  it  is  suitable  for  each  of  the  three  policy  packages.  It  covers 
comprehensively coercive measures and potential evolutions, excluding only those that are 
directed at private actors and do not seek to coerce public authorities. Coercion by means of 
extra-territorial  sanctions  would  entail  substantial  costs  for  EU  economic  operators,  and 
therefore  be  harmful  and  requires  adequate  attention.  The  Blocking  Statute  remains  the 
principal  instrument  for  the  EU  to  deal  with  extra-territorial  sanctions,  while  the  anti-
coercion  instrument  should  operate  in  the  background,  and  only  come  into  play  when 
further actions may be required at EU level, to top up the response where needed. 

Option  (A2)  carves  out  extra-territorial  sanctions  with  a  coercive  effect  which  otherwise 
fall  within  option  (A1),  is  also  viable  and  would  be  appropriate,  and  equally  suitable  for 
each of the three policy  packages.  It  is  an appropriate alternative because of the potential 
reform  of  the  Blocking  Statute  that  is  foreseen  to  update  the  response  to  extra-territorial 
sanctions  and  to  ensure  effective  deterrence,  protection  and  counteraction.  Otherwise,  the 
remaining  scope  of  triggers  under  option  (A2)  covers  sufficiently  the  other  observed 
coercive measures (explicit, disguised, silent, boycotts). It implies a less frequent use than 
option  (A2)  which  would  potentially  reduce  the  cost  of  using  the  instrument  (all  other 
factors  equal).  The  deterrence  as  regards  the  covered  forms  of  coercion  would  remain 
unchanged in this option. 

The other (constant) components of the policy packages are the same across the packages 
and they serve to strengthen the EU’s possible action. They are identified as follows: 

52 

 
Qualitative threshold for action (B2) – this option is more appropriate and viable than the 
quantitative threshold option in cases such as economic coercion because it could provide 
for a flexible and sophisticated approach in deciding which incidents of coercion should be 
tackled  at  a  given  time.  It  allows  for  taking  into  consideration  not  only  the  commercial 
dimension  of  the  coercion  but  any  other  relevant  dimensions  like  relations  with  the 
coercing  country,  industry  affected,  significance  of  the  interests  affected,  political 
considerations. No substantial differences in impact were otherwise identified. 

Ex officio activation of the instrument (F1) – this is a more viable option than setting up 
a formal complaint mechanism for this instrument in several respects. A formal mechanism 
would cause additional administrative costs both for the stakeholders that will contemplate 
using  it,  and  for  the  Commission  to  set  it  up  and  respond  to  requests.  More  importantly, 
however,  a  private  stakeholder-driven  mechanism  might  not  be  a  suitable  solution  for  an 
instrument  that  addresses  coercion  against  EU  public  authorities,  where  political 
considerations play an important role in a given case. It is also more suitable not to require 
a formal complaint to  avoid  that petitioners are subject  to  retaliatory  actions. Thus,  an ex 
officio mechanism would respond to the uncertainty associated with identified difficulties 
for private operators to come forward with evidence. 

Mandatory  stakeholders  involvement  with  a  case-by-case  approach  (G2)  –  this  is  a 
more viable and appropriate option for this instrument in general. It will allow adapting the 
process of consultation to concrete needs, including the duration and form of consultations. 
Mandatory  public  hearings  may  not  be  useful  in  all  circumstances  and  will  lead  to 
additional  expenses  for  both  stakeholders  and  the  Commission.  However,  where  useful, 
public  hearings  could  be  arranged  on  a  case-by-case  basis.  At  the  same  time,  private 
meetings with stakeholders in the context of a consultation, to provide assistance, remain a 
possibility as well under this option. Similarly, it is more practical and reasonable to adapt 
the duration of the consultation to the specific circumstances of each case, keeping in mind 
that in some cases there is a need for longer periods, and in others for shorter periods (e.g. 
reflecting the complexity of potential countermeasures, number and magnitude of potential 
countermeasures;  available  timeframe  for  effective  action).  Either  way,  the  objective 
remains that stakeholders receive a meaningful opportunity to provide input. 

Table 3 Overview of policy packages 

Design parameter 

Policy package 1 

Policy package 2 

Policy package 3 

(A)  Triggers for 
action 

(A1) 

(A2) 

(A1) 

(A2) 

(A1) 

(A2) 

Explicit, 
disguised, 
silent 
coercion 
and 
boycotts 

(A1) 
without 
Extra-
territorial 
sanctions 

Explicit, 
disguised, 
silent 
coercion 
and 
boycotts 

(A1) 
without 
Extra-
territorial 
sanctions 

Explicit, 
disguised, 
silent 
coercion 
and 
boycotts 

(A1) 
without 
Extra-
territorial 
sanctions 

(B)  Threshold for 

(B2) Qualitative threshold 

action 

(C)  Possible action 

(C1) 

(C2) 

(C3) 

(C1) and Additional 
countermeasures 

(C2) and Financial 
compensation 

First resort actions 
and Countermeasures 
restricting trade in 
goods or services, 

53 

 
commercial aspects of 
intellectual property 
rights, access to EU 
public procurement 
market, as well as 
foreign direct 
investment 

(D)  Selection 

conditions 

Effectiveness, minimal collateral damage, minimal administrative burden, 
EU’s general interest 

(E)  Decision-

making 

(F)  Activating the 
instrument 
(G) Stakeholders 
involvement  

Stemming from the Treaties’ framework: Delegated/Implementing acts  

(F2) Ex officio 

(G2) Case-by-case 

8.3.  Comparison 

8.3.1.  Effectiveness or the extent to which the policy packages would achieve 

the objectives (deter, de-escalate, discontinue, counteract) 

  Deter coercion (objective 1) 

As explained already, the deterrence value of the instrument depends on the possibility for 
the EU to  respond effectively and quickly and in a credible way. It is  considered that the 
mere  possibility  of  using  the  instrument  has  the  potential  to  produce  the  necessary 
deterrence effect on third countries so that they do not use coercion in the first place, and 
hence,  the  EU  does  not  need  to  impose  countermeasures.  This  is  the  best-case  scenario. 
Ultimately, however, whether coercion takes place depends on the third country’s choices 
and  these  are  factors  beyond  the  control  of  the  EU  or  Member  States  (see  section  3.2  on 
drivers).  Consequently,  even  if  the  instrument  is  designed  to  produce  a  deterrence  effect, 
coercion  may  nevertheless  occur.  If  it  happens  less  frequently,  that  would  be  also 
beneficial.  In  any  event,  in  comparison  to  the  baseline,  the  availability  of  a  dedicated 
instrument,  under  any of the three policy  packages,  significantly increases the chances of 
preventing or persuading the third country not to engage in coercion. 

Specifically, policy package 1 has solid prospects of achieving the objective of deterrence 
by providing for a potentially very broad menu of effective and versatile measures as a last 
resort.  Policy  package  2  has  even  better  prospects  because  it  adds  to  the  menu  further 
versatile possible measures to allow even better tailoring and effective impact on the third 
country  concerned.  Policy  package  3  may  slightly  increase  the  deterrence  effect  further 
because the financial compensation could offset the negative effects of the coercion on EU 
economic operators. 

The  scope  of  the  triggers  will  very  likely  broaden  the  deterrence  effect  as  regards  a 
sufficiently  broad  range  of  known  and  potential  coercive  measures.  Option  (A1)  captures 
and thus has the potential to deter any form of coercion as long as the target of the coercion 
is a public authority including threats and evolving forms of coercion. It is, however, only 
theoretically more encompassing that option (A2), since the revised  Blocking Statute will 
remain  the  primary  instrument  to  address  extra-territorial  sanctions  in  any  event.  Option 
(A2) excluding extra-territorial sanctions, would enhance the deterrence effect in the same 

54 

 
 
way for all forms of coercion with the exception of extra-territorial sanctions (which would 
be further addressed in the Blocking Statute). 

Some  of  the  constant  components  would  further  enhance  the  deterrence  potential  of  each 
policy  package.  The  decision-making  process  is,  in  particular,  very  determinative  for  the 
deterrence effect. The possibility for a swift adoption of countermeasures without excessive 
risks  of  blockages  or  delays,  will  significantly  contribute  to  that.  Conversely,  if  the 
decision-making process is lengthy and prone to blockages and delays, the deterrence effect 
would significantly decrease, regardless of how broad the triggers are and how versatile the 
countermeasures.  Finally,  the  possibility  to  swiftly  consult  stakeholders  on  potential 
countermeasures could also contribute to the effectiveness of the decision-making process, 
and thus to the deterrence effect. 

  De-escalate specific coercive measures (objective 2) 

There  is  no  difference  between  the  three  policy  packages  in  this  respect  as  all  of  them 
incorporate  the  same  first  resort  measures.  In  comparison  to  the  baseline,  all  three  policy 
packages  have  the  potential  to  be  effective  because  they  provide  for  a  structure  and 
predictability  as  well  as  for  additional  responses  as  compared  to  the  use  of  diplomatic 
means available in the baseline. The difference in coverage of triggers means that in option 
(A1)  relevant  extra-territorial  sanctions  could  be  addressed  via  this  step  under  the  anti-
coercion instrument, while in option (A2) they will not be addressed in this instrument (i.e. 
exclusively by the Blocking Statute), but this has no effect on the response for the rest. 

 

Induce discontinuation of specific coercive measures (objective 3) 

There  is  no  difference  between  the  policy  packages  when  it  comes  to  the  first  resort 
measures and their potential  to  induce  the discontinuation of the coercion.  Achieving this 
objective  without  inflicting  cost  will  always  be  preferable.  However,  if  that  were  no 
solution, the EU would be able to adopt countermeasures as a last resort. 

Policy packages 1 and 2 have the potential of inducing discontinuation using the range of 
countermeasures available. The already broad menu of possibilities under option (C1) has 
sufficient  potential  (policy  package  1).  Increasing  the  possibilities  to  choose  the  most 
appropriate  and  effective  measures  (option  (C2)),  will  increase  the  potential  as  well,  i.e. 
policy package 2 scores even better. The possibility for financial compensation may bring 
the  advantage  of  absorbing  the  coercion  and  hence  contributing  to  its  deterrence  and 
discontinuance (policy package 3). 

The constant components would contribute to achieving this objective as well. In particular, 
the  selection  conditions  explicitly  require  that  measures  must  be  capable  of  inducing 
discontinuation. Stakeholder involvement will allow for relevant views to reach the EU so 
that the EU’s action takes into account all relevant circumstances. 

The  scope  of  the  triggers  under  option  (A1)  would  allow  that  relevant  extra-territorial 
sanctions be addressed under the instrument as a complement to the Blocking Statute, while 
option (A2) excludes them without affecting the other triggers. 

  Counteract specific coercive measures (objective 4) 

Policy  packages  1  and  2  achieve  the  objective  through  the  use  of  the  available  range  of 
countermeasures.  The  already  broad  menu  of  possibilities  in  policy  package  1  serves  the 
objective sufficiently  well, while adding to  the menu possibilities under policy package 2 

55 

 
will serve the objective even better because of the broader choice and increased chance of 
selecting  an  appropriate  countermeasure.  The  possibility  for  financial  compensation  does 
not  have  direct  relevance  but  it  is  not  excluded  that  it  may  be  used  to  counteract  the 
coercion while it does not inflict a harm on the coercing country (policy package 3). 

The constant components would serve this objective essentially by setting requirements that 
the countermeasures are proportionate, carefully targeted, cause as little collateral damage 
as possible and minimise administrative burdens (selection conditions) and that they apply 
only as a last resort, in the general interest of the EU and following appropriate consultation 
of stakeholders. 

Again,  the  scope  of  the  triggers  under  option  (A1)  would  allow  that  extra-territorial 
sanctions  be  counteracted  under  the  instrument  as  a  complement  to  the  Blocking  Statute, 
while option (A2) excludes them without any bearing on the other triggers. 

8.3.2.  Efficiency  

In  terms  of  the  main  potential  costs  and  negative  effects  such  as  collateral  harm  to  EU 
economic  operators  from  the  specific  application  of  countermeasures  and  the  risk  of 
negative  perception  and  escalation  of  geopolitical  tensions,  there  is  a  light  progression 
between  the  policy  packages.  Policy  package  1  is  associated  with  fewer  costs  and  fewer 
risks  than  policy  package  2  because  of  the  additional  range  of  possible  measures  under 
policy package 2, and the potential collateral harm and potential risks that such an addition 
implies.  Policy  package  3  is  the  most  costly  because  of  the  addition  of  a  financial 
compensation to  the range of measures under policy package 2. At the same time, policy 
package  3  should  not  make  any  difference  as  regards  the  other  potential  negative  effects 
because  the  financial  compensation  would  have  no  negative  effect  on  the  third  country 
concerned  or  would  run  no  additional  risks  of  negative  perception  and  escalation  of 
geopolitical  tensions  in  comparison  to  the  other  policy  packages.  However,  the  likely 
difference in costs and negative effects between the policy packages much depends on any 
given case, as the main variables are unforeseeable: which countermeasures exactly would 
apply,  for  how  long  and  under  which  circumstances?  It  is  therefore  conceivable  that 
although policy package 2 is more costly than policy package 1 in theory, in a given case 
the concrete countermeasure would be more efficient (bring about the intended effect at a 
lower  cost  and  applicable  for  a  limited  period  of  time)  and  run  no  risk  of  negative 
perception  and  escalation  of  geopolitical  tensions.  In  any  event,  managing  any  applicable 
risks and keeping collateral harm as small as possible in the concrete use of the instrument 
is inherited in the design of each of the three policy packages for a framework legislation. 

In terms of main potential benefits such as averting or minimising the costs associated with 
the  coercion  and  protecting  the  EU’s  and  Member  States’  interests  and  legitimate 
policymaking space, there is a gradation, but in reverse. Policy package 1 is less beneficial 
in comparison to policy package 2 because of the broader scope of possible EU’s action in 
policy  package  2,  while  policy  package  3  is  the  most  beneficial  as  the  scope  of  possible 
EU’s action includes also financial compensation. However, as mentioned above, the likely 
differences  in  benefits  between  policy  packages  would  depend  on  the  particular 
circumstances in a given case. Effectiveness of the EU response is an inherent feature of the 
design of the framework legislation for each of the three packages. 

On  balance,  the  three  policy  packages  score  similarly  in  efficiency  rates  because  of  the 
synergies.  For  instance,  the  broader  scope  for  the  EU’s  action  under  policy  package  2  is 
potentially  more  costly  but  its  deterrence  effect  is  stronger  notably  because  of  the  broad 
scope. The same is  true for policy option 1, where the costs are lower but its potential to 

56 

 
avert incidents of coercion in comparison to other policy packages is similar. The financial 
compensation  (in  policy  package  3)  is  associated  with  additional  costs  (EU  funds, 
budgetary  implications)  but  also  with  additional  benefits  (offsetting  harm,  potentially 
absorbing the coercion). The main benefit of the instrument is its deterrence value, which, if 
successful,  can  avert  costly  coercion  without  inflicting  harm.  In  all  three  options,  the 
threshold  for  action,  selection  conditions,  involvement  of  stakeholders  and  the  decision-
making process have the purpose to drive the potential costs and risks down, and strengthen 
and  support  the  potential  benefits.  Thus,  efficiency  would  be  also  aimed  at  through  the 
application of the instrument in individual cases. 

Finally,  the  two  alternative  options  for  triggers  imply  a  different  frequency  of  use  of  the 
instrument (all other factors equal). Specifically, under option (A1) the use may be slightly 
more frequent as more situations are covered, while under option (A2) the use may be less 
frequent  in  comparison  because  of  the  exclusion  of  the  extra-territorial  sanctions.  More 
frequent  use  may  result  in  more  counteraction,  but  with  the  respective  synergies  between 
costs and benefits of the counteraction. Thus, this has no bearing on the overall efficiency, 
but only on the policy decision between the two options. 

8.3.3.  Coherence  with  other  EU  policy  objectives,  including  the  Charter  for 

fundamental rights, and with other policy initiatives and instruments 

All  policy  packages  aim  at  enhancing  EU’s  open  strategic  autonomy,  and  are 
complementary to efforts on the economic front  for the EU to recover from the  Covid-19 
crisis, remain competitive and address strategic dependencies that could make the EU or the 
Member  States  vulnerable  to  coercion.  They  are  also  coherent  on  the  external  front  of 
updating the Blocking Statute and cooperating on coercion as discussed in the G7 context 
(May 2021). As regards the Blocking Statute,  coherence at the level of both options (A1) 
and (A2) is considered equal, irrespective that they offer contrary solutions. It is considered 
that  maximum  coherence  is  achievable  for  both  options.  Option  (A1)  would  ensure 
coherence  by  maintaining  the  Blocking  Statute  as  the  main  vehicle,  at  EU  level,  for 
responding to extra-territorial sanctions, while the alternative option (A2) excluding extra-
territorial  sanctions  avoids  the  interaction  completely.  Under  option  (A1),  the  choice  of 
whether  the  instrument  may  be  used  to  complement  the  Blocking  Statute  in  individual 
cases,  can  be  left  for  the  implementation  stage.  Under  option  (A2),  the  legislative  text  – 
either for the current initiative or on the future amendment of the Blocking Statute, would 
need  to  include  a  specific  clause  to  the  effect  of  excluding  coercive  extra-territorial 
sanctions  from  the  scope  of  triggers  under  the  instrument.  Given  that  the  revision  of  the 
Blocking  Statute  is  subsequent  to  the  current  initiative,  it  is  not  possible  for  the  current 
impact assessment to provide further precision and consideration. Nor does it preclude any 
option that the amendment of the Blocking Statute might consider and pursue. 

Package 2 ensures maximum policy coherence as it brings a range of EU policies working 
together in sync in terms of possible countermeasures. Solely on the account of the option 
for a financial compensation (the single difference to package 2), package 3 raises the issue 
of  coherence  with  the  current  Multiannual  Financial  Framework  (MFF).  The  MFF  would 
need to be reopened to provide the necessary financial resources to support this option. This 
may be difficult to do during the current MFF at this point in time despite the merits of this 
option, but the question could be revisited in the next MFF. 

All  three  packages  for  the  creation  of  a  legislative  framework  are  in  line  with  the  EU’s 
international  obligations,  in  the  sense  that  the  sole  existence  of  an  instrument  does  not 
breach  any 
the  appropriate 
countermeasure  would  in  any  event  be  made  in  individual  circumstances  while  duly 

international  obligation  of 

the  EU.  The  choice  of 

57 

 
considering all relevant  circumstances,  including  international  legality. Therefore, there is 
no difference between the policy packages in these terms.   

Finally, all three packages are coherent with the  EU’s human rights policy and consistent 
with  the  Charter  of  Fundamental  Rights.  Where  the  use  of  the  instrument  results  in 
restrictions  that  affect  fundamental  rights  (relevant  for  all  packages),  this  would  be  a 
legitimate  action  by  the  EU  authorities  bound  by  the  Charter.  The  existence  of  an  anti-
coercion 
in 
implementation  of the EU’s positive obligation to  protect  the rights  of its citizens against 
infringements from other sources, in this case foreign governments. 

instrument,  alone,  would  only  positively  affect  fundamental  rights, 

Table 4 Overview of policy packages comparison 

Basis for comparison 

Baseline 

Policy  package 
1 

Policy  package 
2 

Policy  package 
3 

Effectiveness  Objective: deter 

Objective: de-
escalate 

Objective: induce 
discontinuation 

0 

0 

0 

Objective: counteract  0 

Efficiency 

Coherence with other EU policies 

0 

0 

9.  PREFERRED OPTION 

++ 

+++ 

++ 

++ 

++ 

++ 

+++ 

+++ 

+++ 

+++ 

++ 

+++ 

++++ 

+++ 

+++ 

+++ 

++ 

+ 

Based on its overall high score in terms of effectiveness, efficiency and coherence (see the 
comparison in section 8), policy package 2 emerges as the preferred option. 

Design of the preferred option to achieve the specific objectives 

Policy package 2 shows the potential to achieve the policy objectives of the initiative. It is 
capable  of  exerting  a  deterrence  effect  on  the  basis  of  a  broad  and  versatile  menu  of 
possible EU  response to  coercion  in  either  trigger option (with or without  coercive extra-
territorial sanctions). It also has the potential to ensure swift EU action. 

More specifically, the envisaged range  of possible actions provides  for  a  broad  menu of 
versatile  and  effective  responses  to  choose  from  in  individual  cases.  Those  measures 
should  be  quickly  deployable.  This  is  crucial  for  the  deterrence  objective  in  particular. 
Furthermore,  the  broad  choice  of  countermeasures  would  permit  the  EU  to  tailor  its 
approach  to  a  particular  case,  to  ensure  that  the  countermeasures  are  most  likely  to  bring 
about de-escalation, discontinuation and counteraction. 

Either  option  for  triggers  is  considered  capable  of  deterrence  as  regards  the  respective 
coercive  measures  captured.  Option  (A1)  captures  a  comprehensive  range  of  possible 
coercive  measures,  corresponding  to  incidents  of  coercion  observed  in  the  recent  past,  as 
also reported by stakeholders, and takes into account possible further developments. Under 
option (A2), coercive extra-territorial sanctions would be outwith the scope and exclusively 

58 

 
 
addressed  in  another  instrument,  without  affecting  the  rest  of  the  triggers  and  their 
deterrence effect. 

It  is  expected  that  all  these  elements  can  contribute  to  averting  the  targeted  coercive 
measures. Should coercive measures take place nevertheless, the EU would be in a position 
to take a specific action in a given case. 

In  this  respect,  the  preferred  option  serves  optimally  the  specific  objectives  of  de-
escalation, discontinuation and counteraction of coercive measures. First, it provides for 
a  two-step  action.  The  first  step  refers  to  deploying  measures  of  a  first  resort,  with  the 
prime  aim  to  de-escalate  the  coercion  and  encourage  the  third  country  to  withdraw  their 
measures. This  is  a non-interventionist approach  but  has  the potential to  be powerful  and 
effective without the need to impose costs. This is the best-case scenario if deterrence does 
not work in a given case. 

The  second  step  relates  to  the  objective  to  counteract  and  refers  to  the  use  of 
countermeasures.  While  the  countermeasures  aim  to  respond  to  the  coercive  measures 
and/or their adverse effects and to induce discontinuation of the coercion, they would do so 
only after all other avenues are exhausted without satisfactory solution. Their use as a last 
and non-mandatory resort also reflects the objective of de-escalation.  

The variety of possibilities allows calibrating the potential countermeasures, so that they be 
effective and efficient in individual cases. It would also allow navigating potential concerns 
and would provide for measures capable of diminishing potential costs and managing real 
and perceived risks (collateral damage, escalation risks, negative perception). 

The  other  design  parameters  would  additionally  strengthen  the  intended  deterrence  effect 
and would facilitate the calibration of the appropriate action by the EU in individual cases 
in  terms  of  the  other  specific  objectives.  The  qualitative  threshold  for  action  ensures  a 
flexible and sophisticated approach in deciding which incidents of coercion to tackle, taking 
into  account  all  dimensions  of  the  coercion  (such  as  economic  effects,  relations  with  the 
coercing  country,  industry  affected,  significance  of  the  interests  affected,  political 
considerations). The selection criteria would guide the narrowing down of possible options 
in terms of proportionality, EU general interest, reducing collateral costs and administrative 
burden. Stakeholders could participate, so that the potential EU action takes account of all 
relevant interests. 

In terms of process, the application of the instrument would involve the following steps: 

-  The  first  step  starts  through  an  assessment  of  whether  a  concrete  third-country 
measure in individual cases falls within the scope of the instrument and whether a 
certain  threshold  is  reached,  with  the  possibility  for  gathering  of  additional 
information from stakeholders. 

-  A public affirmative determination at EU level may follow such an assessment (i.e. 
the first measure under the instrument). The EU may call on the third country to end 
its measures at this point. 

-  Depending  on  the  cooperation  of  the  third  country  in  question,  an  affirmative 
determination  may  lead  to  subsequent  measures,  such  as  direct  negotiations, 
mediation  or  international  adjudication,  with  a  view  of  ending  the  coercion.  The 
choice  of  such  subsequent  measures  would  depend  on  the  circumstance  of  any 
individual case and may differ from one case to another. 

-  Where  the  above  efforts  have  not  led  to  discontinuation  of  the  coercion  and  the 
coercion is still ongoing, and it remains necessary for the EU and Member States to 

59 

 
protect  their  interests  from  the  ongoing  coercion,  the  second  step  becomes 
available, notably the recourse to countermeasures, as last resort; 

-  Before  applying  countermeasures,  the  EU  would  call  on  the  third  country  in 

- 

question one last time to end the coercion and find a solution; 
Information  gathering  from  stakeholders  particularly  as  regards  their  interests  in 
the  design  of  countermeasures.  The  choice  and  design  of 
relation 
countermeasures would depend on the circumstance of any individual case and may 
differ from one case to another (design parameter (D) discusses in detail the range 
of conditions for selection and design of countermeasures in individual cases). 

to 

Any  action  under  the  instrument  would  be  justified  and  supported  by  evidence  that  the 
respective conditions and criteria are met. The evidence base would include elements such 
as: 

- 

- 
- 

- 

evidence  that  an  individual  measure  by  a  third  country  meets  the  conditions  of 
application of the instrument, 
a certain threshold that justifies action is reached, 
evidence of efforts to enter into consultations with the third country in question and 
of consultation of stakeholders where necessary, 
the measures of first resort were unsuccessful and protection from ongoing coercion 
remains necessary, 
consultation of stakeholders as regards their relevant interests, 

- 
-  notifications of the third country in question before application of countermeasures, 

- 

and 
evidence of the likely impact of potential countermeasures in terms of effectiveness 
but  also  collateral  damage,  proportionality  of  response,  EU’s  general  interest 
(design parameter (D) conditions). 

On  the  other  hand,  the  decision-making  process  under  the  instrument  requires  further 
consideration  for  the  legislative  proposal.  Relevant  considerations  are  the  role  of  the 
Member  States,  Parliament  and  Council,  and  the  need  for  speed  of  action  to  support  the 
intended  deterrence  and  counteracting  functions.  The  inherent  efficiency  of  the  decision-
making  process  in  either  avenue  (due  to  the  respective  roles  of  the  EU  institutions  and 
applicable  steps),  would  be  enhanced  if  the  Commission  executes  each  procedural  step 
expeditiously and without unreasonable delay while remaining flexible to accommodate the 
political sensitivities towards the aim of ending coercion. 

Broader considerations in support of the preferred option 

A  single  and  comprehensive  legal  instrument  would  respond  to  the  need  for  the  EU  to 
handle the new geo-economic normal that accentuates the challenge of economic coercion. 
It  would  increase  the  assertiveness  and  the  resilience  of  the  EU,  and  would  fit  with  the 
efforts to secure the EU’s open strategic autonomy. It can be a clear signal to international 
partners  that  the  EU  is  not  willing  to  accept  coercion.  It  would  enhance  the  existing 
framework that otherwise fails to  offer a satisfactory solution  to  the  problem of coercion. 
Furthermore, it would underline the EU’s adherence to a rules-based approach. 

The preferred solution is compatible with the EU’s international obligations. The creation 
of an anti-coercion instrument, of the design considered, would in no event, as such (i.e. by 
virtue  of  its  sole  existence),  constitute  a  breach  of  WTO  obligations  or  other  trade 
agreements concluded by the EU. When it comes to the actual taking of measures under a 
future anti-coercion instrument, there are different views but it is considered that these can 
be  imposed  in  a  manner  consistent  with  the  EU’s  international  trade  and  investment 

60 

 
obligations (most notably the WTO). The choice of the appropriate countermeasure would 
in  any  event  be  made  in  individual  circumstances  while  duly  considering  all  relevant 
circumstances, including international legality and the likely reactions and consequences.97  

Last  but  not  least,  the  preferred  option  respects  the  principle  of  proportionality.  The 
envisaged  instrument  would  be  a  comprehensive  framework  for  action  against  economic 
coercion.  Its structures imply restraint in action in order first to try resolve issues without 
resorting to countermeasures (deterrence effect, de-escalation phase). The instrument would 
explicitly  prioritise  a  non-interventionist  approach  (first  resort  measures  versus  last  resort 
measures).  However,  where  the  need  arises,  the  EU  would  be  able  to  act.  The  selection 
criteria explicitly include a requirement that countermeasures must be commensurate to the 
harm  that  they  counteract  in  individual  cases.  The  selection  criteria  further  prescribe  that 
collateral damage and administrative burden be as small as possible. Therefore, not only the 
instrument itself, but also measures adopted under the instrument would be proportionate. 

10.  HOW WILL THE ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

The Commission services will monitor the functioning of the instrument. They will collect 
data on coercive measures identified as well as on anti-coercion measures considered and 
adopted. Data will notably be collected on: 

  The number of coercive measures identified per year, as well as their magnitude; 

  The number and type of actions of first resort and their outcome, in particular if they 

resulted in discontinuation of the coercive measure or any other change; 

  The  number  and  type  of  countermeasures  adopted  by  the  EU,  their  duration  and 

impact, and in particular if they stopped the coercive measure. 

Monitoring will also be applied to the operation of the various procedural and substantive 
conditions  for  the  application  of  the  instrument,  both  as  regard  first  resort  and  last  resort 
measures, with a view to their subsequent assessment. The legislative text will set out such 
precise conditions, as explained above. 

The impact of the existence of the instrument per se will be more difficult to measure, as 
the  counterfactual  (i.e.  the  situation  that  would  have  prevailed  in  the  absence  of  the 
instrument)  will  be  difficult  to  establish.  However,  the  Commission  services  will  try  to 
continue to engage with stakeholders to monitor their experiences and views regarding the 
impact of the instrument. 

The  legislative  proposal  should  provide  for  a  review,  within  a  reasonable  time,  on  the 
functioning  and  application  of  the  instrument,  with  reporting  obligations  to  the  European 
Parliament and the Council. 

97  Cf. supra footnote 81 and accompanying text regarding also the reaction of the other country involved and 

the extent to which the EU should take this into account from the outset. 

61 

 
                                                           
Annex 1: Procedural information 

1.  LEAD DG, DECIDE PLANNING/CWP REFERENCES 

Directorate General for Trade (DG Trade), PLAN/2020/9688 – TRADE 

CWP 2021, Annex 

2.  ORGANISATION AND TIMING 

Interservice (steering)  group (ISG)  chaired by SG supported the impact  assessment work. 
The  ISG  comprised  representatives  at  the  level  of  a  Director  and/or  Head  of  Unit  of  the 
following services (in addition to SG and TRADE): 

-  Legal Service of the Commission; 

-  FISMA, EEAS, DEFIS, INTPA; 

-  GROW, AGRI, ENER, MARE, TAXUD, ENV, CLIMA, CNECT; 

- 

- 

JUST, NEAR, JRC, EMPL, RTD, ECFIN, HOME, BUDG98; and 

IDEA. 

In total, five meetings were held, as follows: 

-  17 February 2021 meeting devoted to an initial introduction of the initiative and the 

inception impact assessment, which was published the same day; 

-  15 March 2021 meeting devoted to the consultation strategy and the questionnaire 

for the public consultation; 

-  11 July 2021 meeting devoted to stock-taking of the consultation work by that time; 
-  13  July  2021  meeting  consulting  the  DGs  on  the  draft  impact  assessment  report 

(with a later revised version circulated on 26 July 2021); 

-  19  October  2021  meeting  devoted  to  the  preparation  of  the  draft  legislative 

proposal; 

Relevant  documents  were  distributed  in  advance  of  each  meeting  by  SG  and/or  DG 
TRADE as applicable. SG prepared and circulated the meeting minutes to the participating 
DGs.  

3.  CONSULTATION OF THE RSB 

On 11 June  2021, an upstream  meeting  with  RSB took  place. On  30 July  2021, the draft 
impact  assessment report  was submitted to RSB for scrutiny. On 22 September 2021,  the 
meeting on the draft report took place. The main recommendations received from the RSB 
were assessed and the report modified accordingly (as indicated in the table below). 

RSB main recommendations 
Clarify relation with international law 

Modification of the report 
Section  3.1  now  contains  the  following  additional 

98  HOME and BUDG invited subsequently. 

62 

 
 
                                                           
requires 

clarifications: 
1/  Coercive  measures  against  the  EU  and  Member 
States  can  be  considered  a  breach  of  customary 
international  law,  which  is  a  matter  of  a  case-
specific analysis in individual cases; 
2/  The  EU  lacks  the  legal  means  to  address  the 
problem of coercion effectively and timely; The EU 
has not counteracted coercion so far; 
3/  Contrary  to  other  jurisdictions,  which  may  take 
anti-coercion measures rapidly and without the need 
for  a  framework  legislation  put  in  place  first,  the 
the 
principle  of  conferred  powers 
establishment of a legal basis in the EU legal order 
for the EU to act in specific cases such as coercion; 
4/ Other countries’ standpoint is supplemented with 
additional clarifications in these regards. 
Section 3 now contains additional references, e.g. to 
the following: 
1/ ECFR policy brief  “Measured response: How to 
design  a  European  instrument  against  economic 
coercion” and other contributions by academia; 
2/ Results of the open public consultation; 
1/ Sections 3 and 6 (baseline; design parameter (A)) 
now  contain  further  explanations,  in  particular  on 
the Blocking Statute; 
2/  Annex  5  has  been  introduced  to  illustrate  that 
none  of  the  existing  instrument  is  suitable  or 
suitable to address the issue of coercion; 
Highlighted  throughout  the  report,  in  particular  in 
sections 3, 4 and 6. 
1/ Section 6.2 (design parameter (C)), now contains 
dedicated  paragraphs  on  conditions  and  criteria  as 
well as on respective evidence base, for each of the 
two steps. A flowchart now illustrates the process. 
2/  Section  9  on  the  preferred  option  contains 
references to the process. 
3/  Section  10  also  clarifies  the  monitoring  as 
regards these conditions and criteria. 
Further  references  to  evidence  have  been  added  in 
sections 6 and 7. 
Section  8.3.2 
elaborated 
contains  now 
argumentation  as  regards  the  likely  differences 
between policy packages.. 
Section  4  now  contains  a  further  precision  as 
regards legal basis. 

an 

Present  more 
significance and rise of the problem 

systematically 

evidence 

on 

Clarify the articulation with existing instruments 

Highlight the gap the instrument is designed to fill 

Clarify  the  conditions  and  criteria  for  launching  a 
case and for adoption of measures 

Accompany  policy  options  with  the  best  possible 
evidence of their effectiveness and efficiency 
Comparison  of  options  to  take  into  account  better 
the likely differences in costs between the options 

More  precision  on  the  required  legal  basis  for  the 
actions taken 

4.  EVIDENCE, SOURCES AND QUALITY 

The  report  uses  several  sources  of  information.  First,  it  relies  on  input  from  stakeholders 
received  during  the  consultation  period  (public  consultation  and  targeted  consultation 
activities)  as  described  in  Annex  2  to  this  report.  The  input  encompasses  opinions, 
expertise, data. The detailed results of the open public consultation are available here, while 
a summary factual report is available here. 

Second, it relies on input and research on the subject from academia and think tanks, to list 
a few: 

ECFR  policy  brief  “Measured  response:  How  to  design  a  European  instrument  against 
economic  coercion”  of  June  2021  based  on  the  work  of  ECFR’s  Task  Force  for 

63 

 
 
Strengthening  Europe  against  Economic  coercion  that  brings  together  officials  from  six 
Member State governments (the Czech Republic, France, Germany, the Netherlands, Spain, 
and  Sweden)  and  private  sectors  (although  the  report  does  not  necessarily  represent  their 
views). ECFR has been very active on the issue of economic coercion. 

ECFR  policy  brief  “Defending  Europe’s  economic  sovereignty:  New  ways  to  resist 
economic coercion” of October 2020 presented eleven policy options for the EU to tackle 
economic coercion; a type of an anti-coercion instrument is among these, but also a reform 
of  the  Blocking  Statute,  creation  of  European  export  bank,  building  digital  currency, 
creation of EU resilience office and EU resilience fund, etc. 

ECFR policy brief “Redefining Europe’s economic sovereignty” of June 2019 discusses an 
agenda to strengthen the economic sovereignty. 

Darren Lim and Victor Ferguson, ‘Informal economic sanctions: the political economy of 
Chinese coercion during the THAAD dispute’, Review of International Political Economy, 
advanced online publication;  

Victor  Ferguson  and  Darren  Lim,  ‘Economic  power  and  vulnerability  in  Sino-Australian 
relations’, in  Linda Jaivin, Jane Golley, and Sharon Strange  (eds), China  Story Yearbook 
2020: Crisis (Canberra: ANU Press, 2021). 

Ketian Vivian  Zhang, ‘Chinese non-military coercion—Tactics and rationale’, 22 January 
2019. 

Huong Le Thu, ‘China's dual strategy of coercion and inducement towards ASEAN’, The 
Pacific Review, 32:1, 20-36 (2019).  

Peter  Krause  and  Timothy  Crawford,  ‘Coercion  –  The  Power  to  Hurt  in  International 
Politics’ (Oxford University Press, 2018). 

Ravindran,  Madhu  Sudan,  ‘China’s  Potential  for  Economic  Coercion  in  the  South  China 
Sea Disputes: A Comparative Study of the Philippines and Vietnam’, in: Journal of Current 
Southeast Asian Affairs, 31, 3, 105-132 (2012).  

Christina Lai, ‘Acting one way and talking another: China's coercive economic diplomacy 
in East Asia and beyond’, The Pacific Review, 31:2, 169-187 (2018). 

Scott  L.  Kastner,  and  Margaret  M.  Pearson,  ‘Exploring  the  Parameters  of  China’s 
Economic Influence’, St Comp Int Dev 56, 18–44 (2021). 

Peter  Harrell,  Elizabeth  Rosenberg,  and  Edoardo  Saravalle,  ‘China's  Use  of  Coercive 
Economic Measures’, Report of 11 June 2018 by the Center for a New American Security. 

James Reilly, ‘China’s Economic Statecraft: Turning Wealth Into Power’, November 2013, 
Analysis by the Lowy Institute for International Policy. 

limits  of  China’s  economic  coercion:  Luke  Patey 

The 
(macdonaldlaurier.ca), 26 April 2021. 

for 

Inside  Policy 

Third,  the  report  benefits  from  input  by  academic  and  policy  experts.  Several  meetings 
(March-May  2021)  were  held  with  Australian  National  University,  School  of  Regulation 
and Global Governance (REGNET), in relation to their research programme on Navigating 

64 

 
the  Emerging  Geoeconomic  Order  led  by  Prof.  Anthea  Roberts  and  including  Dr.  Darren 
Lim, Dr. Benjamin Herscovitch, Victor Ferguson and Dr. Dirk van der Kley.  

Furthermore, three dedicated exchanges of views took place with the following academics: 

First session (May 2021) 
1.  Dr. Dawid Walentek 

2.  Drs. Felipe Rodriguez 

Silvestre 

3.  Univ. Prof. ret. Dr. Gerhard 

Hafner 

4.  Prof. Gerald Schneider 

5.  Prof. Henri Culot 

6.  Dr. Julia Grauvogel 
7.  Ass. Prof. Ketian Vivian 

Zhang 

8.  Dr. Luke Patey 
9.  Prof. Dr. Tom Ruys 

Second session (June 2021) 
1.  Prof. Andrew Lang 

Affiliation 
University of Warsaw, Department of Political Science and 
International Studies, Poland 
Department of European, Public and International Law, 
Universiteit Gent, Belgium 
Institute of European, International and Comparative Law, 
University of Vienna, Austria 
Department of Politics and Public Administration, 
Universitat Konstanz, Germany 
Faculty of Law and Criminology, Universite Catolique de 
Louvain, Belgium 
German Institute for Global and Area Studies, Germany 
Schar School of Policy and Government, George Mason 
University, United States 
Danish Institute for International Studies, Denmark 
Department of European, Public and International Law, 
Universiteit Gent, Belgium 

Edinburgh Law School, University of Edinburgh, United 
Kingdom 

2.  Prof. Antonios Tzanakopoulos  Faculty of Law, University of Oxford, United Kingdom 
3.  Prof. Antonino Alì 

4.  Dr. Christian von Soest 

5.  Prof. Dr. Julian Hinz 

National and European Security Law - EU Sanctions and 
Judicial Review, Faculty of Law - School of International 
Studies, University of Trento 
German Institute for Global and Area Studies (GIGA), 
Hamburg, Germany  
Bielefeld University and Kiel Institute for the World 
Economy, Germany 

7.  Dr. Lorand Bartels 

8.  Dr. Patrick M. Weber 

6.  Ass. Prof. Kerim Can Kavakli  Department of Social and Political Sciences, Bocconi 
University, Italy 
University of Cambridge and Counsel, Freshfields, United 
Kingdom 
Department of Politics and Public Administration, 
Universitat Konstanz 
(focused on the draft legislative proposal) 
Edinburgh Law School, University of Edinburgh, United 
Kingdom 

Third session (September 2021) 
1.  Prof. Andrew Lang 

2.  Prof. Antonios Tzanakopoulos  Faculty of Law, University of Oxford, United Kingdom 
3.  Dr. Dawid Walentek 

4.  Prof. Gerald Schneider 

5.  Dr. Lorand Bartels 

6.  Dr. Patrick M. Weber 

University of Warsaw, Department of Political Science and 
International Studies, Poland 
Department of Politics and Public Administration, 
Universitat Konstanz, Germany 
University of Cambridge and Counsel, Freshfields, United 
Kingdom 
Department of Politics and Public Administration, 
Universitat Konstanz 

65 

 
 
7.  Drs. Felipe Rodriguez 

Silvestre 

8.  Prof. Dr. Tom Ruys 

Department of European, Public and International Law, 
Universiteit Gent, Belgium 
Department of European, Public and International Law, 
Universiteit Gent, Belgium 

9.  Ass. Prof. Kerim Can Kavakli  Department of Social and Political Sciences, Bocconi 
University, Italy 

Finally,  the  report  is  based  on  internal  knowledge  and  expertise  within  DG  TRADE  and 
also within other services (FISMA, GROW, RTD, HOME, CNECT, ENER, BUDG, Legal 
Service and others). 

66 

 
 
 
 
Annex 2: Stakeholder consultation – synopsis report 

Introduction 

The  stakeholder  consultation  comprised  a  variety  of  activities  aimed  to  provide  sufficient 
opportunities for all relevant stakeholders and citizens to participate and make their views 
known.  The  consultation  activities  were  carried  out  throughout  March-June  2021  and  in 
line  with  the  announced  Consultation  strategy  of  19  March  2021,  available  on  DG  Trade 
webpage for the initiative. They included the following: 

- 
Inception impact assessment for feedback from 17 February to 17 March 2021; 
-  Online  stakeholder  meeting  for  the  launch  of  the  public  consultation  (16  April 

2021); 

-  Targeted consultations with specific groups throughout March-June 2021; 
-  Open public consultation on EUSurvey on all EU official languages for 12 weeks, 

from 23 March to 15 June 2021; 

-  Ad hoc submissions March-June 2021 (some in July 2021); 

The relevant stakeholders are identified as follows: 

-  EU  businesses  (including  SMEs)  and  their  associations,  trade  unions,  including 
those active outside the EU, as well as EU Member States’ public authorities. This 
category is considered to have a high interest and stake in the initiative. 
institutions, 

tanks,  consultancies  and  non-
governmental  organisations  and  platforms,  in  particular  as  regards  identifying  and 
studying  the  problem  of  coercion.  This  category  is  considered  to  have  a  high  to 
moderate interest and stake in the initiative. 

-  Research  and  academic 

think 

-  Finally,  non-EU  governments  and  non-EU  businesses,  as  well  as  international 
institutions  and  bodies.  This  category  is  considered  to  have  a  high  to  moderate 
interest and stake. 

The activities and their outcome are presented below. 

Feedback on the inception impact assessment 

The inception impact assessment (here) outlined the political and legal context, the problem 
the  initiative  aims  to  tackle,  the  pursued  general  and  specific  objectives,  the  baseline 
scenario and contemplated policy intervention as well as potential impact and consultation 
activities  foreseen.  The  Commission  received  22  submissions  (available  here)  from 
Business associations (10), Company/Business organisations (5), Public authorities (3), EU 
citizens  (2),  non-EU  citizens  (1)  and  Academic/Research  Institutions  (1),  from  the 
following countries: Belgium (6), Sweden (3), France (3), Poland (2, Germany (2), Estonia 
(1) Denmark (1), United States (1), Russia (1), Japan (1) and Iran (1). 

The  Commission  took  account  of  the  feedback  in  the  finalisation  of  the  consultation 
strategy  and  of  the  questionnaire  for  the  public  consultation  as  well  as  in  the  subsequent 
assessment  reflected  in  this  report.  The  input  was  a  useful  early  guidance  for  the 
Commission in its preparatory work. The feedback confirmed the general approach of the 
impact assessment report in terms of the elements that should be considered as part of the 
available policy options and their impacts. Most of the respondents also participated in the 
public  consultation  and/or  other  consultation  activities  with  confirmed  and/or  evolved 
views.  

67 

 
Stakeholders  and  citizens  raised  relevant  issues  for  consideration  with  regard  to  the  main 
elements  of  the  impact  assessment.  Businesses  and  their  associations  were  predominantly 
supportive  of  the  initiative  in  that  coercive  measures  are  of  a  concern  for  EU  interests 
(reporting on some practices) and should be countered, the triggers for the legal instrument 
should  be  broad  (a  number  of  suggestions  were  made),  to  include  for  example  informal 
coercion,  and  possibly  extra-territorial  sanctions  by  non-EU  countries.  At  the  same  time, 
they  point  to  the  need  to  avoid  or  minimize  collateral  damage  to  businesses  when 
countering  the  coercion,  impact  to  stakeholders  to  be  duly  accounted  for,  and  for  proper 
consultation  with  stakeholders  prior  to  adoption  of  countermeasures.  A  few  stakeholders, 
across the groups, were cautious in their support, while some explicitly recognised that the 
coercion  is  an  existing  issue.  More  specifically,  they  suggested  a  thorough  assessment  of 
the  need  for  an  instrument  and  its  impact,  especially  any  detrimental  impact  on 
international relations, on EU Member States and other stakeholders, as well as a prominent 
role  for  EU  Member  States  in  the  operation  of  such  an  instrument.  That  group  also 
prioritises  building  cooperation  among  international  partners  and  integration  with  those 
facing the problem. Additionally, across the groups, a few raised the issue of compatibility 
of  an  instrument  for  countering  coercion  with  the  WTO  Agreement  and  of  a  legal  basis 
under  the  EU  Treaties.  Finally,  several,  across  the  groups,  referred  to  the  need  for 
coherence with the parallel Commission’s initiative on the reform of the Blocking Statute. 

Stakeholder meeting 

A  stakeholder  meeting  accompanied  the  launch  of  the  public  consultation.  The  meeting 
assisted stakeholders and citizens in participating in the public consultation, and offered a 
first  exchange  of  views.  The  Commission  used  the  feedback  as  a  basis  for  further 
discussions  with  specific  stakeholders  and  took  it  into  account  in  the  subsequent  work. 
Accordingly, the feedback guided the Commission in every aspect of the impact assessment 
work, in particular as regards the development of available policy options and their likely 
impact. 

More than 120 participants registered for the meeting, representing the following groups: 

-  Business associations and companies: predominantly operating within the EU, and 

in the UK, China, US; 

-  EU Member States’ public authorities: Belgium, Italy, Estonia, Germany, Denmark, 

Czech Republic, Ireland, Hungary, Spain, Lithuania, Austria; 
-  Non-EU public authorities: Brazil, New Zealand, Japan, Taiwan; 
-  EU institutions: European Parliament, EESC; 
-  Academic/research institutions: Belgium, Italy, Finland, US, Turkey; 
-  NGOs: Belgium; 
-  EU citizens in France, Germany, Lithuania; 
- 

Journalists and law practitioners within the EU. 

Intervening  participants  spoke  generally  in  favour  of  an  anti-coercion  instrument  and  the 
need  to  preserve  the  open  strategic  autonomy  and  policymaking  space  of  the  EU  and 
Member  States.  Some  expressed  the  view  that  the  instrument  should  be  adaptable  to  the 
geopolitical challenges in the next 20 years and not merely focused on the next few years. 

As regards possible triggers for the instrument, the need for a response to extra-territorial 
sanctions of third countries was a recurring theme with most speakers suggesting coverage 
within  the  instrument.  Participants  also  emphasized  that  informal  coercion  exists  and 
should be addressed. Excessive and burdensome export controls was also raised as a form 

68 

 
of coercion  to  be  considered.  It was  further suggested that triggers must  be high and that 
there should be a reaction only if vital interests are at stake. Some argued for a wider scope. 

As regards possible responses and their likely impact as well modalities of use, participants 
spoke  about  the  need  for  predictability  and  legal  certainty,  proportionality,  fairness,  the 
temporary nature of measures and effectiveness. At the same time, some expressed caution 
about  causing  harm  and  targeting  industries  with  a  big  trade  surplus.  It  was  noted  that 
account must be taken of global supply chains. 

As  regards  decision-making  under  the  instrument,  some  raised  the  issue  of  managing 
Member  States  solidarity  and  the  question  of  an  EU  interest  test.  Effective  stakeholder 
involvement  was  regarded  as  essential  and  suggestions  for  public  and  private  hearings  as 
well  as  longer  consultation  periods  were  made.  The  importance  of  the  speed  of  action  to 
ensure the effectiveness of the instrument was also highlighted. 

Additionally,  participants  regarded  the  question  of  WTO  and  public  international  law 
compatibility of the instrument as essential. Others put forward the idea of a data collection 
and  coordination  body  within  the  institutions  to  ensure  a  coordinated  response  through 
various  available  instruments  to  the  horizontal  nature  of  coercive  and  extraterritorial 
measures that can take place in many fields like export control, data, digital, etc. 

Targeted consultations 

The Commission carried out a number of targeted consultations with the aim to deepen the 
discussions with specific stakeholders on specialised subjects in relation to the problem of 
coercion and the possible solutions. This was an opportunity for the respective stakeholders 
to provide their expertise but equally to seek clarification from the Commission with a view 
to  shaping  their  positions.  Meetings  were  held  in  closed  sessions  due  to  the  level  of 
technical  detail as  well as  to  allow for  an  open exchange of views on  a sensitive subject. 
Certain stakeholders preferred an oral exchange and were reluctant to provide written input 
for fear of adverse consequences for their interests abroad. In the majority of cases, views 
were shared informally, while the formal views followed through the public consultation or 
formal  ad  hoc  submissions.  Yet,  the  informal  views  shared  in  this  context  were  valuable 
and effective guidance on elements for consideration in the impact assessment. In addition 
to the meetings planned and initiated by the Commission, many stakeholders came forward 
and requested meetings or invited the Commission team to participate in events organised 
by their organisations on the subject. 

Activities took place with each of the identified groups of stakeholders. The majority of the 
activities (10) were with businesses and their associations (across Europe but mostly based 
in  Germany,  France  and  Belgium),  and  those  active  abroad  (China,  Russia).  Events  were 
organised  with  EU  Member  States  (all)  or  with  their  participation,  including  individual 
meetings with Member States on their request, academia (three dedicated discussions with 
academics-experts  in  the  field,  a  list  available  in  Annex  1)  and  think  tanks  and  the  like 
(ECFR,  Cercle  Europe,  Justice  et  Droits,  Fondation  pour  le  droit  continental),  non-EU 
countries’ public  authorities (Australia, Canada,  New  Zealand, Japan, Singapore, the UK, 
the  US).  The  CTEO  spoke  on  the  subject  at  the  International  Trade  Committee  (INTA) 
April 2021 meeting at the Parliament. 

EU business associations and those active abroad focused on the scope of the triggers with 
the tendency to argue for a broader scope, including informal coercion, coercion at private 
operators,  extra-territorial  sanctions.  They  were  also  mindful  of  the  possible  collateral 
damage of EU countermeasures, inflicted on them, as well as the risk of escalation though 

69 

 
retaliation.  There is  a strong interest  for this  group to  be properly involved and consulted 
prior to any use the instrument. Ideas as regards the creation of a coordination or resilience 
body or office were floated. The impact assessment report treats all these topics. 

Particularly  useful  were  the  exchanges  with  academia  and  think  tanks  as  regards  the 
definition  of  the  problem  of  economic  coercion,  drivers  and  evolution  of  the  economic 
coercion,  and  possible  solutions.  The  input  received,  also  in  the  form  of  literature  and 
articles on the subject, fed substantively into the impact assessment. References to the work 
relied on are contained in the report. 

The meetings with the EU Member States and political parties in INTA helped indicate the 
preliminary views about coercive practices and likely impact of a policy intervention. The 
main topics raised in INTA at that stage concerned the scope of triggers and the necessity to 
address  informal  coercion  and  for  the  instrument  to  be  comprehensive  and  ambitious  in 
general,  including  coverage  of  extra-territorial  sanctions.  There  were  calls  on  the 
Commission to speed up the preparation of the legislative proposal, sooner than end-2021. 
Member  States  welcomed  the  ongoing  work  on  an  impact  assessment,  regarding  it  as 
essential,  and  the  preliminary  views  ranged  from  support  to  calls  for  caution  about  the 
potential instrument. 

Third  countries’  reactions  were  careful  at  that  stage,  tending  to  inquire  for  details  rather 
than to share a position. The main topics of interest were types of actions to be qualified as 
coercive, referring to the extra-territorial sanctions as well, the possible solutions, relations 
with WTO and international law, and decision-making under the instrument. 

Public consultation 

48  contributions  were  submitted  via  EUSurvey,  including  12  position  papers,  while  12 
additional  contributions  were  made  outside.  The  majority  were  business  associations, 
representing  hundreds  of  companies  and  industries  at  national  or  EU  level.  16  countries 
were  represented.  The  detailed  results  of  the  open  public  consultation,  including  a  list  of 
respondents, are available here, while a summary factual report is available here. 

A  few  points  emerged  as  consensual  among  all  groups  and  they  form  the  basis  of  the 
preferred option. First, economic coercion is increasingly posing a problem for the EU and 
Member  States  such  that  it  needs  an  appropriate  solution.  Stakeholders  put  forward  a 
number of examples of coercive measures taking place from multiple sources (but mainly 
China, Russia, Turkey, US). Second, where the solution lies in the creation of a new legal 
instrument, the deterrence function of the instrument must be predominant and a priority for 
the  design.  Third,  where  coercion  does  happen,  countermeasures  should  be  taken  only  as 
last  resort  and  only  after  efforts  are  being  made  encourage  the  discontinuation  of  the 
coercion. Fourth, the collateral costs of countermeasures must be factored in in the selection 
of  the  EU’s  action  in  concrete  cases.  Finally,  most  often  stakeholders  urged  that  the  EU 
consider  the  risk  of  conflict  escalation  and  the  consequences  for  the  international 
cooperation, multilateralism and the rules-based order. The report addresses these issues in 
detail. 

The public consultation shows some differences as regards more detailed design issues and 
between the groups (rather than major differences within the groups). Typically, business 
associations  and  companies,  which  came  forward  in  large  numbers,  including  those 
representing  SMEs,  were  in  favour  of  an  EU  intervention  in  the  form  of  a  new  legal 
instrument.  They  recognise  its  benefits  and  argue  that  even  if  costs  are  unavoidable,  the 
cost of the coercion is higher than the cost of inaction. They generally act on their economic 

70 

 
interest of seeking protection from coercive measures (and/or their effects) and accordingly 
not  to  be  harmed  even  more,  through  potential  EU  countermeasures  or  third  countries’ 
further measures in escalation. Because of this interest, they most often argued (also in line 
with  views  expressed  during  targeted  consultations)  that  the  instrument  should  cover  not 
only informal, silent coercion, but also extra-territorial sanctions and any coercion against 
private actions, and that the range of available countermeasure must be sufficiently broad to 
allow  for  calibration  in  concrete  cases,  and  to  support  the  deterrence  value  of  the 
instrument.  These  options  and  reported  potential  impact  are  taken  up  in  the  impact 
assessment.  That  group  also  expressed  an  interest  in  the  financial  compensation  option, 
which  was  not  retained  in  the  preferred  option.  The  views  on  the  subject  are  mixed. 
Roughly  half  of  the  respondents  across  the  groups  favour  it  (mostly  businesses),  and  the 
other  half  either  disagreed  or  showed  no  interest.  Businesses  in  favour  also  pointed  to 
potential  issues  such  as  complexity  of  determining  the  compensation,  budgetary 
implications and appropriateness for this instrument. 

Generally, the few  EU  Member States that  came forward did  not  share the same line of 
argumentation.  Some  Member  States  approach  the  possible  EU  intervention  with  more 
caution  (referring  to  concerns  of  interaction  with  the  WTO  and  international  law,  alleged 
risks for the multilateral trading system and not  convinced about the  absolute need for an 
instrument  but  are  willing  to  engage)  and  some  that  expressed  solid  support  (while 
recognising  the  risks  and  suggesting  ways  to  manage  them).  However,  the  public 
consultation is not capable of revealing the whole picture. Member States have a further say 
during the legislative process. Nevertheless, their reactions at this stage is a valuable input 
together with the rest of the input and are taken into account.  

A  few  business  associations  and  public  authorities  raise  the  idea  of  the  resilience  office. 
The report refers to these views and explains why the option is not retained at this stage.  

Ad hoc submissions 

Additionally,  the  Commission  provided  for  a  direct  contact  for  this  initiative  (via  a 
functional  email  address),  which  was  an  additional  opportunity  for  citizens  and 
stakeholders  to  make  their  views  known  in  a  non-structured  or  informal  fashion  or  to 
request  meetings  on  the  matter.  The  Commission  received  12  ad  hoc  submissions  from 
Business associations and organisations (7) and Member States’ public authorities (4), from 
the  following  countries:  Austria  (1),  Belgium  (5),  Denmark  (1),  France  (2),  Germany  (2) 
and  Sweden  (1).  The  input  received  is  integrated  and  presented  within  with  the  public 
consultation results in the preceding section. 

Conclusion 

The  consultations  covered  all  main  components  of  the  impact  assessment  and  beyond. 
Stakeholders’ input received through the different activities guided the Commission in the 
assessment  work,  and  the  preferred  option  reflects  the  majority’s  views.  The  input 
contributed subsequently to the shaping and design of the proposed legal instrument. It has 
been described throughout the report and annexes how the concrete elements of stakeholder 
feedback were used.  

71 

 
Annex 3: Who is affected and how?  

1.  PRACTICAL IMPLICATIONS OF THE INITIATIVE 

Stakeholder 

Practical implications: 
Existence of the instrument 

Public 
authorities 
(EU institutions; 
Member States) 

Setting  up  of  the  decision-making  process 
under  the  instrument;  e.g.  a  committee  or 
expert group of Member States; 

EU businesses, 
including those 
operating abroad 

No direct implications. No action required.  

Economic  operators  would  have 
the 
opportunity  to  submit  to  the  Commission 
any data or information they have as regards 
coercive measures by non-EU countries. 

Consumers 

No direct implications. No action required. 

Non-EU 
countries 

In general, they are the addressees of the 
deterrence effect of the preferred option and 
it is expected that they would be encouraged 
to refrain from coercion towards the EU and 
its Member States as a result. 

2.  SUMMARY OF COSTS AND BENEFITS 

decision-making 

Practical implications: 
Instances of use of the instrument 
where coercion occurs 
The  European  Commission  would  be 
the  most  affected  as  it  will  carry  out 
procedure. 
the 
Depending on the final determination 
on  the  use  of  implementing  and 
delegated  acts,  Member  States,  the 
Council and the European Parliament 
would be affected as well. 
The  Commission  would  engage  with 
the  third  country  concerned  in  the 
application of this instrument. 
The Commission  would organise  and 
conduct 
with 
stakeholders  in  the  application  of  the 
instrument. 
The  imposition  of  countermeasures 
under the instrument would affect EU 
economic 
the 
countermeasure  is  related  to  their 
activities. 

operators  where 

consultations 

Economic operators would have the 
opportunity to provide input as 
regards the economic interests 
potentially affected by planned EU 
countermeasures, but also economic 
interests affected by the concrete 
coercive measures. 
Indirect effects might be possible in 
the use of certain countermeasures, 
such as trade-restrictive measures. 
The non-EU countries or their 
economic operators or citizens may 
be affected by the concrete EU 
response. 

Specific  cists  are  linked  to  the  use  of  the  instrument  in  specific,  future  cases  and  for  the 
reasons stated in the report it is not feasible to estimate them at the design phase.  

I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

Amount 

Comments 

EU authorities are able to adopt 
policies, which were at the origin of 
the coercion, without being subject to 
external pressure 

Direct benefits 

By deterring third country coercion or deterring threats of using coercive 
measures 

72 

 
 
 
 
 
More predictable environment in the 
sphere of trade policy; including: 

(i) lower transaction costs for EU 
exporters, which is of particular 
importance for SMEs 

(ii) lower host country compliance 
costs for EU investors 

(iii) lower costs for EU importers and 
predictable supply 

If coercion would take the form of host country import restrictions 

If coercion would take the form of restrictions in the market of the 
coercing country  

If imports of inputs for their economic activity would be restricted 

Continued and stable employment 

In sectors that would be targeted by coercive country 

Indirect benefits 

Lower or stable prices for EU 
consumers 

Costs are specified based on the assumption that the instrument is able to deter coercion 
and therefore is used less than once a year. This is classified as “one-off” in the table below. 

Policy 
package 2 

Direct costs 

Indirect costs 

II. Overview of costs – Preferred option 

Citizens/Consumers  

Businesses 

Administrations 

One-off 

Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

Higher costs of 
products if there is 
pass-through 
effect  

Third country: 
may take place if a 
specific group of 
funding or persons 
is affected by 
countermeasures  

Higher costs of 
imported products; 
depressed market 
access; restricted 
operations of EU 
investors abroad 
(depending on 
countermeasures) 

Third country: may 
take place if a specific 
group of funding or 
persons is affected by 
countermeasures 

Administrative 
costs of 
assessing the 
damage to the 
EU economic 
operators and 
designing 
countermeasures 

Third country: 
may take place 
if a specific 
group of funding 
or persons is 
affected by 
countermeasures 

73 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 4: Analytical methods 

Analytical methods foreseen at this stage: 

Formal coercion 

In cases of formal coercion, economic impacts can be assessed with the use of an in-house 
partial equilibrium (PE) model. The model allows quantifying those impacts and revealing 
possible  trade  diversion  effects  and  has  been  used  extensively,  for  instance  to  assess 
impacts of the adoption of countermeasures in the WTO context.  

The PE model is an adaption and extension of the basic four equations, perfect competition 
framework  of  Balistreri  and  Rutherford  (2013)99.  On  the  basis  of  the  elasticities  of  the 
products  considered  and  of  the  quantification  of  the  trade  cost  increase  brought  by  the 
introduction of a barrier, the model calculates the reduction in trade generated by the price 
increase for analysed subset of goods and for specified trade partners.  

It has been used at DG TRADE for numerous analyses of trade policies usually focussed on 
a subset of goods, such as trade defence and dispute settlement cases but also of initiatives 
such as FTAs. The model being partial means that no macroeconomic effects, i.e. on GDP, 
factor markets, aggregate price level,  etc. are produced and their possible interaction with 
what  happens  in  single  product  markets  are  not  available.  Furthermore,  no  cross-price 
effects  are  taken  into  account.  The  model  is  specified  with  trade  and  tariff  data  only, 
meaning  that  domestic  effects  can  only  be  analysed  implicitly.  Despite  being  partial,  the 
model closes the world market for each product under analysis by including a rest-of-the-
world aggregate and therefore allows to draw conclusions on possible trade diversion.  

The model is run in GAMS. 

Informal coercion 

If  it  is  possible  to  quantify  a  given  trade  barrier,  the  analysis  of  economic  impacts  of 
informal coercion could be done with the use of the PE model described above. 

However,  when  it  is  not  possible  to  quantify  a  change  in  trade  barriers,  the  analysis  of 
impacts would need to more be qualitative. It can follow the structure currently applied in 
Market  Access  Cases  Workflow  (MACFLOW)  repository.  MACFLOW  was  created  to 
ensure  the  transparent  workflow  of  enforcement  activities  –  from  the  collection  of 
information,  analysis  and  prioritisation,  to  removal  actions.  It  provides  structure  for 
encoding  trade  barriers  enacted  by  third  countries,  which  in  turn  allows  prioritising  and 
managing  irritants  while  developing  synergies  between  desks,  delegations  and  sectorial  / 
thematic units.  

Necessity for tailor-made approach 

99  Balistreri,  E.  and  Rutherford,  T.  (2013):  Computing  general  equilibrium  theories  of  monopolistic 
competition and heterogeneous firms. In Dixon, P.B. and Jorgenson, D.W. (ed.): Handbook of Computable 
General Equilibrium Modeling. Chapter 23, pp. 1513–1570. Oxford (UK), Elsevier. 

74 

 
                                                           
In any given case, it may be necessary to develop in-house, tailor-made, unique analytical 
approach, incorporating some other tools of economic analysis, depending on the case (e.g. 
econometrics).  

75 

 
Annex 5: Overview of certain existing instruments and their relation to coercion 

Instrument 

Scope of application 
and objectives 

Action under the 
instrument 

Relation to coercion 

Applies where a third 
country does not give 
EU companies access to 
procurement 

Regulation on the 
access of third-country 
economic operators, 
goods and services to 
the Union’s 
procurement market 
and procedures 
supporting 
negotiations on access 
of Union economic 
operators, goods and 
services to the 
procurement markets 
of third countries 

(currently in the 
legislative process) 

Regulation (EU) No 
654/2014 concerning 
the exercise of the 
Union's rights for the 
application and 
enforcement of 
international trade 
rules 

Regulation (EU) 
2019/452 establishing a 
framework for the 
screening of foreign 
direct investments into 
the Union 

Applies where dispute 
settlement procedures 
have been completed (or 
if they are blocked) to 
enforce the EU’s 
international rights 
under WTO Agreement 
or other EU trade 
agreements 

Applies where foreign 
direct investment into 
the Union is likely to 
affect security or public 
order  

1/ Investigation of the 
third country’s measures 
and respective 
consultations with the 
third country on the 
matter; 

2/ Imposition of 
measures to limit the 
access of economic 
operators  

to the Union 
procurement or 
concessions market  

in the area of non-
covered procurement; 

Various types of 
countermeasures in 
goods, services, 
intellectual property 
rights and public 
procurement 

1/ Screening 
mechanisms involving 
assessment and 
investigation 

2/ Possibly prohibition 
of foreign direct 
investments to be 
determined by the 
Member States (not the 
EU) 

Does not specifically 
relate to coercion; 

If a third country uses 
measures that fall within 
the scope of the 
instrument but with a 
coercive objective 
towards the EU or 
Member States, then the 
instrument remains 
available to address the 
situation as it falls 
within its scope. 

This does not change the 
proposition that the 
instrument is neither 
suitable, nor capable to 
respond to the coercive 
objective. 

The situations falling 
within the scope of the 
instrument are 
unconnected to coercion. 

The instrument is neither 
suitable, nor capable to 
respond to the coercive 
objective. 

Does not specifically 
relate to coercion; 

If a third country uses 
measures that fall within 
the scope of the 
instrument but with a 
coercive objective 
towards the EU or 
Member States, then the 
instrument remains 
available to address the 
situation as it falls 
within its scope. 

This does not change the 

 
 
 
Regulation on foreign 
subsidies distorting the 
internal market  

(currently in the 
legislative process) 

Applies where foreign 
subsidies may cause 
distortions in the internal 
market, in particular 
with regard to 
concentrations and 
public procurement 
procedures 

1/ Investigation 

2/ Redress and 
commitments that 
include divestment and 
the reduction of market 
presence 

Regulation (EU) 
2016/1037 on 
protection against 
subsidised imports 
from countries not 
members of the 
European Union 

Applies in case of 
subsidies for the 
manufacture, 
production, export or 
transport of any product 
whose release for free 
circulation in the Union 
causes injury 

Regulation (EU) 
2015/478 on common 
rules for imports; 

Regulation (EU) 
2015/755 on common 
rules for imports from 
certain third countries 

Applies where a product 
originating in a third 
country is imported in 
such greatly increased 
quantities as to cause or 
threaten to cause serious 
injury to Union industry 

1/ Investigation 

2/ Countervailing 
customs duties on the 
supplying country 
and/or individual 
exporters and producers 
to offset the 
countervailable subsidy 
or injury 

3/Possibility for 
undertakings 

1/ Investigation; 

2/ Safeguard customs 
duties to offset injury 

Regulation (EC) No 
2271/96 protecting 
against the effects of 
the extra-territorial 
application of 
legislation adopted by 
a third country, and 
actions based thereon 
or resulting therefrom 

Applies where extra-
territorial application of 
a legislation adopted by 
a third country affects 
the interest of designated 
persons within the 
Union engaging in 
international trade 
and/or capital movement 
or other commercial 
activities 

Nullifying the effect of 
foreign court rulings 
based on the foreign 
laws listed in the Annex 
and allowing EU 
operators to recover in 
court damages caused by 
the extra-territorial 
application of the 
specified foreign laws 

proposition that the 
instrument is neither 
suitable, nor capable to 
respond to the coercive 
objective. 

The situations falling 
within the scope of the 
instrument are 
unconnected to coercion. 

The instrument is neither 
suitable, nor capable to 
respond to the coercive 
objective. 

The situations falling 
within the scope of the 
instrument are 
unconnected to coercion. 

The instrument is neither 
suitable, nor capable to 
respond to the coercive 
objective. 

The situations falling 
within the scope of the 
instruments are 
unconnected to coercion. 

The instruments are 
neither suitable, nor 
capable to respond to the 
coercive objective. 

Does not specifically 
relate to coercion; 

If a third country uses 
measures that fall within 
the scope of the 
instrument but with a 
coercive objective 
towards the EU or 
Member States, then the 
instrument remains 
available to address the 
situation as it falls 
within its scope. 

 
 
 
 
This does not change the 
proposition that the 
instrument is neither 
suitable, nor capable to 
respond to the coercive 
objective. 

Treaty-made dispute 
settlement system 

Does not apply to 
coercion. 

Coercion in breach of 
customary international 
law does not feature 
among the possible 
claims that can be 
submitted to these 
dispute settlement 
systems. 

WTO dispute 
settlement system and 
the bilateral dispute 
settlement systems 

Available to address 
breaches under the 
respective international 
agreements.  

In the WTO’s case, also 
other cases of 
nullification or 
impairment of benefits 
can be addressed