The end of naivety : assertiveness and new instruments in EU trade and investment policy.
Date: 2023-01-13
Institutions: European University Institute
Subjects: World Trade Organisation, common commercial policy, extra-EU trade, international trade, investment policy, trade agreement (EU), trade policy

POLICY BRIEF
The End of Naivety:  
Assertiveness and New Instruments 
in EU Trade and Investment Policy

Introduction

For decades the European Union (EU) was a pillar of free trade liber-
alisation in the world. It pursued a liberal free trade agenda predicat-
ed on achieving true freedom of movement within its internal market 
and  using  access  to  its  market  as  both  carrot  and  stick  for  the  rest 
of the world. EU commercial policy was guided by a liberal ideology 
rooted in a strong belief that the opening of markets around the world 
was  essential  for  prosperity,  democracy  and  peace  –  in  addition  to 
being a goal in itself. As one of the world’s three largest traders, the 
EU has long been a central player in the World Trade Organization 
(WTO) regime and one of its most ardent defenders. When the first 
cracks appeared in political support for globalisation in the late 1990s, 
the EU doubled down its efforts to open markets and bring emerging 
economies such as China into the multilateral fold. Indeed, exporting 
its regulatory model by building capacity and increasing membership 
of the WTO and other international organisations became one of the 
EU’s main instruments in its attempt to ‘manage’ globalisation.1 After 
the 2008 financial crisis, with the multilateral system and, more broad-
ly,  the  liberal  international  economic  order  increasingly  challenged, 
the EU continued to carry the torch of liberal globalisation and to try to 
lead by example, even in the face of growing unilateral protectionist 
actions by its largest trade partners.

In recent years, however, EU trade policy has markedly shifted. When 
former  European  Commission  President  Jean-Claude  Juncker  de-

1   Wade Jacoby and Sophie Meunier, “Europe and the Management of Glo-
balization,” Journal of European Public Policy 17, no. 3 (1 April 2010): 299-
317, https://doi.org/10.1080/13501761003662107.

Author

Sophie Meunier, Princeton University

Issue 2022/55 
November 2022

clared in 2017 that “we are not naïve free traders,”2 
it started a new era of assertiveness in EU commer-
cial policy, the objective of which was summarised 
by  the  Commission  in  2021  as  being  “open,  sus-
tainable and assertive.”3 On the one hand, the EU 
has  been  quickly  creating  a  Pandora’s  Box  of  au-
tonomous  unilateral  instruments,  including  a  for-
eign investment screening mechanism, anti-foreign 
subsidies  regulation,  an  international  procurement 
instrument  and  an  anti-coercion  instrument.  On 
the other hand, it has started using trade policy to 
achieve  strategic  autonomy  and,  more  generally, 
geopolitical  objectives.  This  obviously  accelerated 
in the wake of the Russian invasion of Ukraine.

This policy brief has two objectives. First, I explain 
these new developments in European trade and in-
vestment  policy  by  focusing  on  both  external  (no-
tably  the  Trump  presidency  and  the  evolution  of 
China  under  Xi)  and  internal  factors  (notably  new 
supranational foreign direct investment competenc-
es and a change in the balance of ideological forces 
within the post-Brexit EU). My main argument is that 
there has not been a true paradigm shift but rather 
a continuation of the same ‘free and fair trade’ EU 
objectives although by different means. 

Second,  I  discuss  the  implications  of  this  new  as-
sertive  turn  for  the  EU  in  navigating  this  shift  and 
for  its  partners  in  preventing  a  EU  turn  to  protec-
tionism  and  mercantilism,  especially  now  that  the 
war in Ukraine might necessitate more state inter-
vention in the economy. Although I argue that this 
new panoply of unilateral instruments is not by de-
sign a turn to protectionism, it could easily slip into 
one. The EU has been creating new policy instru-
ments designed to level the economic playing field 
and to address the national security implications of 
other actors’ economic interactions with Europe, in 
part by ‘commercialising’ foreign policy issues, but 
achieving  these  goals  without  resorting  to  protec-
tionism and industrial policy has proven a delicate 

balance that could easily be tilted by domestic ac-
tors with populist agendas.   

Assertiveness and the creation of 
new unilateral instruments

With  its  new  trade  strategy  released  in  February 
2021,  the  European  Commission  announced  loud 
and clearly to its trade partners and to the Europe-
an population that it was shifting gears to address 
contemporary  challenges,  such  as  post-pandemic 
economic  recovery,  climate  change  and  growing 
unilateralism.4 The new strategy was explicitly de-
signed to support the EU’s strategic autonomy and 
broader geopolitical goals while still positioning the 
EU  as  the  guardian  of  openness  and  multilateral-
ism. To achieve these objectives, the EU has been 
creating a panoply of new instruments to level the 
economic  playing  field  by  redressing  unfair  trade 
practices and to prevent its economic competitors 
from making commercial transactions with negative 
national security implications.

The foreign investment screening mecha-
nism

With  the  2020  implementation  of  its  new  invest-
ment  screening  mechanism  (ISM),  the  EU  joined 
the bandwagon of countries creating or reinforcing 
investment screening – the practice by which gov-
ernments  review  inward  foreign  direct  investment 
(FDI) transactions and deny entry to, or require the 
divestment of, investments that are deemed unac-
ceptable,  usually  because  they  are  considered  to 
threaten national security.5 

After  Juncker’s  2017  speech  the  EU  formally 
launched a policy process to screen inbound FDI.6 
The  drafting  and  passing  of  the  pan-European  in-
vestment  screening  mechanism  was  surprising-
ly swift, with the final regulation adopted in March 

2   Jean-Claude Juncker, “State of the Union 2017,” European Commission, 13 September 2017, https://ec.europa.
eu/commission/priorities/state-union-speeches/state-union-2017_en.

3   European Commission, “Trade Policy Review – An Open, Sustainable and Assertive Trade Policy,” Communica-
tion, 18 February 2021, https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159438.pdf.

4   European Commission, “Trade Policy Review - An Open, Sustainable and Assertive Trade Policy,” Communica-
tion, 18 February 2021, https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159438.pdf.

5   Bauerle Danzman, Sarah, and Sophie Meunier. “Mapping the Characteristics of Foreign Investment Screening 
Mechanisms: The New PRISM Dataset.” International Studies Quarterly, forthcoming (2022).

6    Zenobia  T.  Chan  and  Sophie  Meunier,  “Behind  the  Screen:  Understanding  National  Support  for  a  Foreign  In-
vestment Screening Mechanism in the European Union,” The Review of International Organizations, 13 July 2021, 
https://doi.org/10.1007/s11558-021-09436-y.

2  

  Robert Schuman Centre | November 2022

2019.7 For the first time this regulation creates pro-
cedures for foreign investment in the Single Market 
to be reviewed by entities other than the host coun-
try and for Member States to recognise that some 
investments may be politically problematic. Howev-
er,  the  ultimate  decision  to  accept  or  reject  an  in-
vestment  lies  with  the  host  country.  This  is  by  no 
means an EU version of the Committee on Foreign 
Investment in the United States (CFIUS). The main 
feature of the EU ISM is a cooperation mechanism 
between  the  Member  States  and  the  Commission 
to exchange information and raise concerns about 
specific  transactions  that  “may  threaten  security 
or public order,” mostly concerning investments in 
critical technologies and infrastructure. Importantly, 
screening is not allowable on economic grounds.8

After over a year of its existence, the impact of the 
new EU investment screening policy can be felt in 
at  least  three  ways.  First,  the  number  of  national 
ISMs  in  Europe  has  drastically  increased:  while 
only  11  Member  States  had  investment  screening 
measures in 2017, 18 countries had adopted them 
by 2021 and another 6 plan to have them in the near 
future.9 Second, the EU has screened a fair number 
of transactions (265) with investors coming mostly 
from the US, the UK, China, Canada and the UAE 
in a variety of sectors dominated by manufacturing, 
ICT  and  financial  services.10 Third,  the  success  of 
the EU ISM has paved the way for the subsequent 
creation of other commercial instruments at the bor-
der between trade and security.

economically:  the  issue  of  subsidies  paid  by  third 
countries to foreign companies active in the single 
market.  The  EU  has  long  ensured  a  level  playing 
field internally by severely limiting state aid given by 
its Member States and externally by using so-called 
countervailing duties that seek to nullify cost advan-
tages of imports benefiting from foreign subsidies. 
However, the EU cannot address market distortions 
caused by foreign subsidies, which puts European 
companies at a competitive disadvantage at home 
and in world markets. Foreign companies can build 
market power in the EU by participating in mergers 
and  acquisitions,  bidding  in  public  procurements 
and  participating  in  other  business  transactions 
thanks to state subsidies that are not allowed in the 
EU,  thus  undermining  the  competitiveness  of  EU 
companies.11 

In May 2021, the Commission issued a legislative 
proposal  designed  to  eliminate  the  use  of  ‘unfair’ 
foreign  subsidies  that  may  result  in  market  distor-
tions. It therefore would enable companies operat-
ing  in  the  EU  “to  compete  on  the  basis  of  merit” 
regardless of their nationality.12 This proposal intro-
duces  new  instruments  and  procedures  allowing 
the  EU  to  monitor  FDI  transactions,  to  investigate 
potentially  distortive  subsidies  and  if  necessary  to 
adopt  remedial  measures.  A  political  consensus 
was reached on the proposal in June 2022 and it is 
likely to be adopted in late 2022 with implementa-
tion in 2023.

Anti-foreign subsidies regulation

As part of its end to naivety and its newfound as-
sertiveness,  the  EU  is  now  trying  to  tackle  an  old 
regulatory  gap  in  order  to  level  the  playing  field 

The International Procurement Instrument

After a decade of negotiations, in March 2022 the 
European Parliament and the Council finally agreed 
to  set  up  a  new  international  procurement  instru-
ment (IPI) in order to pressure foreign countries to 

7   European Union, “Regulation of the European Parliament and of the Council Establishing a Framework for the 
Screening of Foreign Direct Investments into the Union,” February 20, 2019.

8   Anna Vlasiuk Nibe, Sophie Meunier and Christilla Roederer-Rynning, “Pre-emptive Depoliticization: The European 
Commission and the EU Investment Screening Regulation,” paper presented at the EUSA conference, Miami, May 
2022.

9   As of writing, so far only Bulgaria, Croatia and Cyprus have no plan for national ISMs. European Commission, 
“First Annual Report on the Screening of Foreign Direct Investments into the Union,” 23 November 2021, 21.

10   European Commission.

11   Robert Basedow, Sophie Meunier and Christilla Roederer-Rynning, “Fair Play? The Politics of Evaluating Foreign 
Subsidies in the European Union,” Paper Presented at the 2021 CELIS Conference, 2021.

12   European Commission, “Proposal for a Regulation of the European Parliament and the Council on Foreign Sub-
sidies Distorting the Internal Market (COM(2021) 223 Final),” 2021, https://eur-lex.europa.eu/legal-content/EN/TXT/
PDF/?uri=CELEX:52021PC0223&from=EN.

3  

  The End of Naivety: Assertiveness and New Instruments in EU Trade and Investment Policy

open their protected markets to EU operators.13 The 
IPI is designed to restore a level playing field and 
introduce  reciprocity  in  public  procurement.  It  will 
constrain and limit the conditions under which com-
panies from non-EU countries that do not offer EU 
companies  similar  access  can  bid  open  procure-
ment tenders in the EU.

The  new  instrument  instructs  the  Commission  to 
determine if third countries allow EU companies fair 
access to their public tenders. IPI measures will ap-
ply  to  tenders  worth  at  least  €15  million  for  works 
and concessions (i.e. road construction) and €5 mil-
lion for goods and services (i.e. purchases of com-
puters). If the Commission finds that a third country 
from  which  a  bid  originates  has  existing  procure-
ment barriers, IPI measures can take, for instance, 
the form of a price penalty on the bid or even the 
exclusion of bids from particular countries.

The anti-coercion instrument

The EU is currently developing an anti-coercion in-
strument  to  address  pressing  concerns  about  the 
increasingly  porous  border  between  the  economy 
and  security.  In  December  2021  the  Commission 
proposed  an  anti-coercion  regulation  that  would 
provide a tool with which to retaliate against coun-
tries  that  take  economic  action  against  a  Member 
State’s legitimate sovereign choices for political rea-
sons. The Commission could take several counter-
measures against the interfering state, including im-
posing tariffs and quotas, restricting access to EU 
capital  markets  and  public  procurement  tenders, 
and  blocking  exports.  The  proposed  regulation  is 
now going through the EU legislative process with 
a sense of urgency because of the pressure applied 
by China on Lithuania and because of the French 
government having identified this as a priority for its 
EU presidency.

Taken  together,  all  these  instruments  plus  addi-
tional ones currently being developed14 will enable 
the EU to restore some evenness to the economic 
playing field, to respond swiftly to economic actions 

encroaching on national security by foreign actors 
and to achieve some degree of strategic autonomy.

Explaining these new instruments: 
External factors

The confluence of several external factors, notably 
China under Xi’s increasing use of economic rela-
tions for geopolitical purposes and the growing pro-
tectionism  and  retreat  from  multilateralism  by  the 
US under Trump, helps explain the development of 
these new trade and investment instruments.

Unfair competition from China with a geo-
political purpose

Every single one of these instruments enabling as-
sertiveness and fair play has been created first and 
foremost in the shadow of China, with its state-im-
posed market distortions and objective of self-suf-
ficiency  by  any  means. According  to  French  trade 
minister  Franck  Riester,  “the  tougher  strategy  on 
China and other ‘disloyal’ actors was part of a ‘par-
adigm shift’ in EU trade policy, that for too long saw 
free trade and opening new markets as an end in 
itself.”15

The creation of investment screening at the EU lev-
el  and  in  many  Member  States  that  did  not  have 
ISMs  before  stems  directly  from  fears  raised  by 
increased  levels  of  FDI  from  China  in  strategic 
sectors  and  in  non-strategic  sectors  with  a  tech-
nological  edge.16 As  the  Commission  states  in  its 
year  one  ISM  report,  “The  past  years  have  seen 
a clear change in investor profiles and investment 
patterns, i.e. increasingly non-OECD investors, oc-
casionally  with  government  backing  or  direction, 
whose motivation for a particular investment might 
not  always  be  exclusively  commercial.”17  Indeed, 
after a decade of Chinese direct investment in Eu-
rope,  it  has  become  clear  that  there  is  something 
inherently  different about Chinese  FDIs compared 
to other sources of FDI. Notably, they stem from an 
emerging economy playing technological catch-up, 
a unique political system with opaque management 

13    https://www.europarl.europa.eu/news/pt/press-room/20220309IPR25152/international-public-procurement-in-
strument-new-tool-to-support-eu-firms

14   Such as a carbon border levy to increase the cost of imports the production of which creates many emissions.

15   “EU Ministers to Back Lithuania in China Trade Battle,” www.euractiv.com, February 14, 2022, https://www.eu-
ractiv.com/section/china/news/eu-ministers-to-back-lithuania-in-china-trade-battle/

16   Chan and Meunier, “Behind the Screen.” 

17   European Commission, “First Annual Report on the Screening of Foreign Direct Investments into the Union.”

4  

  Robert Schuman Centre | November 2022

of the economy and a non-ally in the security are-
na.18 It is notable, however, that for some Member 
States investment screening has also been driven 
by fears of Russian investment.19

Similarly, the anti-foreign subsidies regulation was 
designed  primarily  with  China  in  mind.  The  regu-
latory  gap  putting  EU  companies,  which  are  pro-
hibited from receiving state aid, at a disadvantage 
compared  to  foreign  companies  receiving  state 
subsidies  in European  and world markets has ex-
isted for decades. The rise of Chinese companies 
as  foreign  investors  and  competitors  in  procure-
ment  markets  gave  the  issue  of  distortive  foreign 
subsidies  a  sense  of  urgency. The  issue  was  first 
raised  as  a  real  problem  in  need  of  urgent  action 
in 2019 when the EU released its strategy on Chi-
na, identifying it as an “economic competitor” and a 
“systemic rival.”20

The International Procurement Instrument was also 
designed  with  China  primarily  in  the  EU’s  sights. 
“The  naïve  Europe  is  in  the  past,”  said  French 
Trade  Minister  Franck  Riester,  explaining  that  ac-
cess  to  the  European  public  procurement  market 
would  now  be  conditional  on  reciprocity.21  The 
timing of the agreement on this new instrument is 
telling.  While  the  Commission  proposed  the  IPI  a 
decade ago, it was stuck in the EU decision-mak-
ing process until 2019. Talks were revived after the 
Commission stressed the challenge posed by Chi-
na,  which  does  not  allow  Member  States  and  the 
European  Parliament  reciprocal  access  to  its  own 
public tenders.

As  for  the  anti-coercion  instrument,  not  only  was 
it designed with China in mind but the dispute be-
tween China and Lithuania, which happened as the 
instrument  was  being  proposed,  provided  a  text-
book illustration of why it was needed. After Lithu-

ania exited the 17+1 forum and allowed Taiwan to 
open  an  office  in  Vilnius  in  2021,  China  retaliated 
harshly  with  a  variety  of  coercive  economic  mea-
sures in an attempt to force a change in Lithuania’s 
position,  including  by  blocking  all  trade  with  Lith-
uania and all trade in products containing compo-
nents made in Lithuania.22 The EU launched a case 
against China at the WTO, but it is also speeding 
up negotiations on the anti-coercion instrument that 
would  enable  it  to  react  faster  in  the  future.  Pro-
posed before the Russian invasion of Ukraine, the 
anti-coercion  instrument  was  also  aimed  partly  at 
Russia  as  a  deterrent  against  punishing  countries 
for  political  dissent  and  speaking  out  against  hu-
man rights violations.

The US retreat from the liberal international 
economic order

The shift in EU trade policy towards assertiveness 
was also prompted by the unilateral and protection-
ist turn in US trade policy under the Trump admin-
istration, which did not hesitate to weaponise trade 
instruments  and  purposely  weaken  rules-based 
multilateralism as part of its ‘America first’ vision.

Certainly, the weakening of US support for the lib-
eral international economic order started before the 
Trump administration. The EU has been a pillar of 
the WTO regime and ranks among the main users 
of the WTO’s dispute settlement system. Between 
1995 and 2021, of the more than 600 formal dispute 
settlement procedures initiated at the WTO, the EU 
participated  as  either  defendant  or  complainant  in 
one third of the cases.23 By contrast, starting in the 
early 2000s, the US started moving away from mul-
tilateralism and embarked on an ambitious agenda 
of  ‘competitive  liberalisation’  to  conclude  bilateral 
and  regional  agreements  with  as  many  countries 

18   Sophie Meunier, “Beware of Chinese Bearing Gifts: Why China’s Direct Investment Poses Political Problems in 
Europe and the United States,” in China’s Investment Three-Prong Strategy: Bilateral, Regional, and Global Tracks, 
Julien Chaisse (ed.) (Oxford University Press, 2019).

19   Sarah Bauerle Danzman and Sophie Meunier, “Naive no More: Foreign Direct Investment Screening in the Eu-
ropean Union,” 2022 (under review).

20    European  Commission,  “EU-China  Strategic  Outlook:  Commission  and  HR/VP  Contribution  to  the  European 
Council (21-22 March 2019),” 12 March 2019, https://ec.europa.eu/commission/publications/eu-china-strategic-out-
look-commission-contribution-european-council-21-22-march-2019_en

21    János Ammann,  “With  China  in  Mind,  EU Agrees  on  Rules  to  Force  Open  Tenders,”  www.euractiv.com,  15 
March  2022,  https://www.euractiv.com/section/economy-jobs/news/with-china-in-mind-eu-agrees-on-rules-to-force-
open-tenders/

22   Gideon Rachman, “China and Russia Test the Limits of EU Power,” Financial Times, 17 January 2022, https://
www.ft.com/content/a9dfbaef-e913-460a-8e0a-2b702efa7edb

23   Christian Freudlsperger  and Sophie Meunier, “The EU and the WTO,” in  The Elgar Companion  to the WTO, 
forthcoming.

5  

  The End of Naivety: Assertiveness and New Instruments in EU Trade and Investment Policy

as possible. Under the Obama administration, the 
US  criticised  the  judicial  activism  in  the  WTO  and 
continued the policy of negotiating trade and invest-
ment agreements outside  the multilateral system, 
including  with  the  EU  through  the  Transatlantic 
Trade and Investment Partnership (TTIP).

The  Trump  administration’s  unilateral  turn  greatly 
magnified  these  challenges  to  the  liberal  interna-
tional economic order. Trump’s mercantilist rhetoric 
and  deep  suspicions  about  multilateralism  turned 
into  actual  policies,  including  withdrawing  the  US 
from the Trans-Pacific Partnership (TPP) on his first 
day  in  office,  starting  “trade  wars”  with  China  and 
also  the  EU,  and  directly  attacking  the  WTO  sys-
tem, notably by incapacitating the Appellate Body. 
But  the  EU  has  not  given  up  on  the  multilateral 
process.  Instead,  it  is  currently  pursuing  a  multi-
pronged reform agenda to resuscitate it, which in-
volves  reforming  the Appellate  Body,  adapting  the 
WTO agenda to respond to new technological and 
environmental challenges, and breaking down ne-
gotiations into smaller pieces.24

The COVID pandemic further accelerated the EU’s 
drive to create a multiplicity of new assertive trade 
and  investment  instruments  in  a  world  where  US 
support and cooperation could no longer be taken 
for granted. Indeed, even though the EU’s anti-for-
eign subsidies proposal was already in the works, it 
was the rumoured acquisition of a German vaccine 
company with funds from the US government that 
put the issue in the news in 2020.25 

One exception is investment screening, which has 
not been created in reaction to changes in US pol-
icy. Even though the US has been the top origin of 
investor transactions reviewed by the new EU ISM, 
American officials have worked quite closely to help 

EU  investment  screening  get  started,  share  best 
practices and encourage the EU to go even further.

Explaining these new instruments: 
Internal factors

The  assertive  turn  in  EU  trade  policy  has  also  re-
sulted  from  internal  factors,  including  the  transfer 
of FDI policy competence resulting from the Lisbon 
Treaty and Brexit.26 

Transfer of investment competence 

Several of the new assertive instruments could not 
have existed in previous decades simply because 
the EU was not in charge of foreign investment is-
sues.  This  changed  with  the  2009  Lisbon  Treaty, 
which  formally  transferred  FDI  competence  to  the 
EU level by including “foreign direct investment” in 
Article  207  dealing  with  common  commercial  pol-
icy.  However,  since  the  competence  transfer  had 
not  been  debated  beforehand  and  since  the  legal 
wording  was  so  vague,  an  inter-institutional  fight 
over  the  exact  nature  of  the  competence  transfer 
erupted in the years following the implementation of 
the Treaty.27 The issue was finally settled between 
2017 and 2019 after a series of European Court of 
Justice cases.28 This competence transfer explains, 
for instance, the timing of the new European invest-
ment screening mechanism.

Brexit

Brexit also played a role in the paradigm shift in EU 
trade  policy.  First,  the  2016  Brexit  vote,  which  re-
flected growing populism and put economic nation-
alism at the centre of the debate, led the EU to refo-
cus its commercial policy on more purely economic 
objectives  –  namely  jobs  and  growth  –  instead  of 

24   On the links between the collapse of the multilateral process and the rise of EU unilateral instruments, see Ferdi 
De Ville, “The European Union’s unilateral turn in trade policy,” paper presented at the 2022 ECPR conference, May 
2022.

25    “Germany  Confirms  That  Trump  Tried  to  Buy  Firm  Working  on  Coronavirus  Vaccine,”  POLITICO,  15  March 
2020,  https://www.politico.eu/article/germany-confirms-that-donald-trump-tried-to-buy-firm-working-on-coronavirus-
vaccine/.

26   Sophie Meunier and Kalypso Nicolaidis, “The European Union as a Trade Power,” in International Relations of 
the European Union, 2022.

27   Meunier, Sophie. “Integration by Stealth: How the European Union Gained Competence over Foreign Direct In-
vestment.” Journal of Common Market Studies, 2017. http://onlinelibrary.wiley.com/doi/10.1111/jcms.12528/abstract. 
Basedow,  Johann  Robert.  The  EU  in  the  Global  Investment  Regime:  Commission  Entrepreneurship,  Incremental 
Institutional Change and Business Lethargy. Routledge, 2018. https://www.routledge.com/The-EU-in-the-Global-In-
vestment-Regime-Commission-Entrepreneurship-Incremental/Basedow/p/book/9780367890575.

28   Opinion 2/15 on the EU-Singapore free trade agreement rendered in 2017 and Opinion 1/17 on the Comprehen-
sive Economic and Trade Agreement (CETA) between the EU and Canada rendered in 2019.

6  

  Robert Schuman Centre | November 2022

normative  power  and  guardianship  of  multilateral-
ism. Becoming more assertive on the global stage 
and  acting  to  establish  an  economic  level  playing 
field  were  seen  as  ways  to  respond  to  discontent 
with the distributional impacts of globalisation. Like 
the  British  who  voted  for  Brexit,  the  EU  has  been 
“taking back control.”

Second, Brexit transformed the ideological balance 
of power among the Member States. They had long 
been  split  in  two  factions:  liberal  free-traders  op-
posed  to  any  policy  introducing  market  distortions 
(anchored  by  the  UK,  Denmark,  Sweden  and  the 
Netherlands) and the more Colbertist countries be-
lieving  that  some  dose  of  reciprocity,  dirigism  and 
even  protectionism  is  sometimes  necessary  (an-
chored by France and some southern States). The 
UK’s  departure  from  the  EU  tilted  this  balance  of 
power and gave greater voice to the critics of free 
trade at all costs. Moreover, this ideological rebal-
ancing  coincided  with  an  ideological  shift  in  Ger-
man  industry,  which  was  traditionally  opposed  to 
defensive and aggressive measures, as a result of 
the  perception  of  unfair  competition  and  pressure 
from Chinese manufacturers.

Paradigm shift or simple change in 
methods? 

The EU’s ‘end of naivety’ means that while it con-
tinues to preserve openness policymakers are less 
hesitant to take some unilateral actions when trade 
is not fair or when partners use trade for non-trade 
purposes.  I  argue  that  this  is  not  a  true  paradigm 
shift  but  rather  a  continuation  of  the  same  EU 
‘free  and  fair  trade’  objectives  although  by  differ-
ent means. However, reaching these goals without 
resorting to protectionism and industrial policy has 
proven a delicate balance that could be easily tilted. 

Same objectives; different means

The overall objective of EU trade policy is still the 
same as it has been for over sixty years: to ensure 
free and fair trade. This, I argue, has not changed. 
But  since  other  actors,  chief  among  them  China 
and  to  a  lesser  extent  the  US,  have  altered  both 
their objectives and their methods, and as the mul-
tilateral  trade  system  has  collapsed  to  all  intents 
and purposes, the EU had to adapt and create new 
policy instruments to adjust the means with which 
it  can  achieve  its  old  objective.  These  new  policy 
instruments  are  designed  to  level  the  economic 

playing  field  and  to  address  the  national  security 
implications  of  other  actors’  economic  interactions 
with Europe. 

In particular, the EU had to change its instruments 
to  ensure  an  open  and  rule-based  trading  system 
in  order  to  adjust  to  a  trade  world  where  multilat-
eralism is no longer an effective forum to address 
issues and disputes. As Bernd Lange, chairman of 
the European Parliament’s trade committee (INTA) 
puts it, “Ten years ago, our principal approach was 
to open markets, trying to reduce tariffs and non-tar-
iff barriers, thinking that everybody respects global 
rules, be it WTO rules or bilateral ones. This is not 
the case anymore. We see trade used as a weap-
on, which is what China is doing against Lithuania. 
We see trade used as a managed tool, like in the 
US, and we see a lot of protective measures, partic-
ularly regarding the pandemic. […] We need more 
defensive instruments to protect our economic and 
political interests. […] Sometimes you have to put 
a gun on the table, even when you know that you 
might not use it.”29

Regarding  the  level  playing  field,  not  all  the  new 
EU assertive trade instruments are created equal. 
Some are clearly economic in nature and designed 
to establish a level playing field to ensure fair com-
petition. This  is  the  case  of  the  proposed  anti-for-
eign subsidies regulation and the newly agreed In-
ternational Procurement Instrument. Others are of 
a  more  political  nature  and  deal  with  the  security 
implications of economic relations. That is the case 
of the new investment screening mechanism and of 
the proposed anti-coercion instrument.

Since  the  EU  started  creating  these  new  unilater-
al instruments, China has doubled down on its de 
facto  withdrawal  from  multilateral  policies  govern-
ing  trade  and  on  its  strong  state-directed  industri-
al  policy,  leading  to  a  world  in  which  trade  is  less 
fair and less free. We can therefore expect the EU 
to continue churning out new policy instruments to 
confront China’s challenge to economic openness.

Regarding  the  United  States,  even  though  the 
Biden Administration has overall been a much clos-
er partner of the EU in a variety of policy areas than 
the  Trump Administration  was,  some  recently  en-
acted  domestic  policies  suggest  that  Americans, 
whether Democrats or Republicans,  may be mov-
ing away from the so-called ‘Washington Consen-
sus’ on economic liberalism and towards industrial 
policy, regardless of the consequences for the rest 

29   Allenbach-Ammann,  János.  “Bringing  a  Gun  to Trade  Negotiations.”  www.euractiv.com,  2  June  2022.  https://
www.euractiv.com/section/economy-jobs/news/bringing-a-gun-to-trade-negotiations/.

7  

  The End of Naivety: Assertiveness and New Instruments in EU Trade and Investment Policy

of the world.30 In particular, the Inflation Reduction 
Act  (IRA)  includes  several  provisions  that  benefit 
the production of electric vehicles in the US, which 
the  EU  sees  as  discriminatory.31 The  Commission 
plans  to  use  the  collaborative  transatlantic  forum 
provided  by  the  Trade  and  Technology  Council  to 
solve  some  of  the  potential  disputes  arising  from 
the IRA, but it also needs tools to address some of 
them unilaterally.

The fine line between assertiveness and 
protectionism

Although this new panoply of unilateral instruments 
is not by design a turn to protectionism, it could eas-
ily slip into one. Achieving the goals of levelling the 
economic playing field and addressing the national 
security  implications  of  other  actors’  economic  in-
teractions with Europe without resorting to protec-
tionism and industrial policy has proven a delicate 
balance  that  could  be  easily  tilted  for  a  variety  of 
reasons, including the ones below. 

First, technological innovations have blurred the line 
between  the  economy  and  security. Technological 
advances, from the ubiquity of mobile apps to the 
internet  of  things,  have  created  new  risks  related 
to  intelligence  gathering,  misinformation  and  even 
control  of  critical  infrastructure. As  a  result,  it  has 
become easier to see economic exchange through 
a  national  security  lens.  Investment  screening  in 
Europe,  which  is  designed  specifically  to  scruti-
nise the potential security implications of economic 
transactions, is not an economic instrument per se, 
as FDI in the EU is not screened on the basis of an 
economic  cost/benefit  analysis.  However,  it  could 
potentially  be  used  for  economic  purposes  by  na-
tional and EU actors with a very expansive defini-
tion of security.

Second, state intervention in the economy is grow-
ing in the EU, as a result in part of the vulnerabilities 
in supply chains revealed by the pandemic, tit-for-
tat retaliation against third countries’ use of indus-

trial  policy  and  a  war  economy  on  the  European 
continent following the Russian invasion of Ukraine. 
Evidence of this includes the recent relaxing of EU 
state aid rules, the EU’s own CHIPS Act, which will 
enable Europe to nurture its semiconductor indus-
try,  and  the  recent  creation  of  the  Single  Market 
Emergency Instrument, which provides the EU ex-
ecutive with powers to manage some elements of 
the  economy  in  times  of  crisis.32 This  rise  of  state 
interventionism in order to achieve more European 
self-sufficiency could easily bleed into trade policy.

Third, new geopolitical rivalries are mobilising eco-
nomic instruments, not only by using traditional tools 
of  economic  statecraft  such  as  sanctions  but  also 
by  ‘weaponising’  economic  interdependence.33  In 
response, the EU has called for increasing “strate-
gic autonomy” through more economic self-reliance 
and has been developing its own policy instrument 
to  counter  the  political  coercion  exerted  by  some 
foreign actors on EU Member States, chief among 
which are China and Russia. However, the propos-
al for an anti-coercion instrument (not yet adopted 
at the time of writing) is also seen by some Member 
States as a potential protectionist measure. Indeed, 
it  will  be  easy  to  subsume  a  variety  of  economic 
interactions under the ‘security’ and ‘political coer-
cion’  banners  and  use  these  banners  as  excuses 
for protection.

Fourth,  whether  the  three  previous  developments 
turn into protectionism depends on which actors are 
in  power  in  Europe.  The  democratic  rise  of  popu-
list  policymakers  in  the  domestic  politics  of  many 
Member States, including most recently Italy, sug-
gests that the new assertiveness instruments could 
indeed  be  captured  for  protectionist  purposes.  In-
deed,  the  European  Commission  is  setting  the 
agenda in trade and investment matters, but a coa-
lition of far-right populist leaders in several Member 
States at the Council and of Members of the Euro-
pean Parliament could lead to a real paradigm shift 
in EU trade policy – whether on negotiating and rat-
ifying  trade  agreements,  screening  foreign  invest-

30   United States Trade Representative. “Remarks by Ambassador Katherine Tai at the Roosevelt Institute’s Pro-
gressive Industrial Policy Conference.” Accessed 11 October 2022. http://ustr.gov/about-us/policy-offices/press-of-
fice/speeches-and-remarks/2022/october/remarks-ambassador-katherine-tai-roosevelt-institutes-progressive-indus-
trial-policy-conference.

31   Fleming, Sam. “EU Urges US to Rethink Tax Breaks in Landmark Green Legislation.” Financial Times, 9 October 
2022.

32   European Commission. “Single Market Emergency Instrument (SMEI).” 2022. https://ec.europa.eu/commission/
presscorner/detail/en/IP_22_5443.

33   Drezner, Daniel, Henry Farrell and Abraham Newman. “The Uses and Abuses of Weaponized Interdependence.” 
Brookings  (blog),  26  May  2020.  https://www.brookings.edu/book/the-uses-and-abuses-of-weaponized-interdepen-
dence/.

8  

  Robert Schuman Centre | November 2022

power.  As  Reinhard  Bütikofer,  an  influential  MEP 
very  involved  in  trade  issues,  puts  it,  “The  inter-
connection between trade and foreign policy all of 
a sudden allows us to use trade policy for a more 
effective pursuit of foreign policy.”35

ment for economic purposes or relaxing sanctions 
and export controls on certain countries.

Conclusion

The  recent  emergence  of  all  these  new  unilateral 
trade instruments in rapid succession does not yet 
signal a paradigm shift. The EU is still trying to pro-
mote economic openness, notably by acting as the 
last safeguard of multilateralism, but it has been de-
signing and enacting new policy tools to force the 
compliance of partners who do not honour their in-
ternational commitments and to ensure that it is not 
naively  taken advantage  of  by other countries. By 
its very nature and its long insistence on multilater-
alism, the EU may seem poorly equipped to thrive 
in the new world of tit-for-tat threats, divide-and-rule 
attempts and plain coercion. Yet it has finally joined, 
albeit  reluctantly,  the  bandwagon  of  major  powers 
which weaponise market access in order to pursue 
strategic autonomy.34

So far, assertiveness has been the dominant char-
acteristic of the new “open, sustainable and asser-
tive”  trade  policy  of  the  EU.  In  the  current  tense 
geopolitical  environment  in  which  economic  inter-
dependence  can  be  weaponised,  as  is  evidenced 
by  the  Russian  war  in  Ukraine,  assertiveness  has 
been seen as more pressing than openness. This 
assertiveness  has  resulted  in  new  commercial  in-
struments  designed  to  ensure  fairer  international 
competitiveness for European economic actors and 
to help the EU in its quest to achieve strategic au-
tonomy. 

In the process, the EU has included several issues 
that  have  traditionally  been  in  the  domains  of  for-
eign policy and security, such as how to deal with 
coercion, in trade policy. I call this ‘commercialisa-
tion of foreign policy.’ Decisions on foreign policy is-
sues are usually made by consensus, which makes 
it difficult to reach a decision to forcefully sanction 
or  engage  with  third  countries  such  as  China  and 
Russia which can easily coerce one of the individu-
al Member States. By moving some of these issues 
under the trade policy umbrella, however, decisions 
become subject to qualified majority voting and the 
Commission has a louder voice and guiding hand in 
determining policy. 

This  institutional  development  may  have  implica-
tions  for  the  EU’s  ability  to  exercise  geopolitical 

34    Meunier,  Sophie  and  Kalypso  Nicolaidis.  “The  Geopoliticization  of  European  Trade  and  Investment  Policy.” 
JCMS: Journal of Common Market Studies 57, no. S1 (2019): 103-13. https://doi.org/10.1111/jcms.12932.

35   Rachman, Gideon. “China and Russia Test the Limits of EU Power.” Financial Times, 17 January 2022.

9  

  The End of Naivety: Assertiveness and New Instruments in EU Trade and Investment Policy

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  RSC | Policy Brief | Issue 2022/55 | November 2022

doi:10.2870/786453
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Co-funded by the Erasmus+ Programme of the European UnionRobert Schuman Centre for Advanced StudiesThe Robert Schuman Centre for Advanced Studies (RSCAS), created in 1992 and directed by Professor Erik Jones, aims to develop inter-disciplinary and comparative research on the major issues facing the process of European in-tegration, European societies and Europe’s place in 21st century global politics. The Centre is home to a large post-doctoral programme and hosts major re-search programmes, projects and data sets, in addition to a range of working groups and ad hoc initiatives. The research agenda is organised around a set of core themes and is continuously evolving, reflecting the changing agenda of European integration, the expanding membership of the European Union, de-velopments in Europe’s neighbourhood and the wider world.