Welcome to the first edition of Trade Views, SEC Newgate EU’s guide to the maze of EU trade policy. No matter whether you are a business, a journalist or an Embassy: if you have an interest in value chains, negotiations, services or data flows, we’ve got your back. Here is our birds-eye view on what or whom to watch out for, brought to you every 2 weeks. Enjoy your flight. 

In this edition: Parliament has a position on the Anti-Coercion Instrument, the shiniest addition to the European Commission’s defence toolbox; a new dispute electrifying transatlantic relations; and EU Member States pushing ahead with sustainability in trade deals, while DG TRADE leads talks with Indo-Pacific partners.

One big thing.

Thou shalt not coerce me

The Parliament has agreed a position and is ready to negotiate on the Anti-Coercion Instrument (ACI). The regulation may allow the Commission to impose trade restrictions on any third country guilty of economic bullying of the EU or a Member State. The interesting bit is that the Commission could end up sanctioning countries or companies, de facto bypassing the (in)famous unanimity rules of the EU Council. A revolution in EU decision-making? That is the idea: facilitate a swift and unilateral EU response in a world of trade tensions and tantrums. 

The take – Are you or your supply chain in a country that has ongoing trade issues with the EU or has made any threats aimed at influencing Brussels? You had better watch out: the instrument was conceived to target the likes of China (but let’s not forget the US or the UK in case of potential trade bad blood).

The issue – What does coercing or threatening to do so mean? When a country uses trade or investment acts to influence EU policy. This would allow the EU to react swiftly with trade restrictions. How so? The dispute between China and Lithuania in January, which gave the final push towards the birth of the ACI.

Next – The ball is in the EU Council’s court. Pro-trade Member States (yes, the Nordics) fear that the ACI may be a carte blanche for the Commission, or even lead to escalations. More protectionist… [cough] pardon, caring countries (you know who) think the EU should have a tool to compete with the big players. When a (tough) deal is found, (tougher) trilogues for compromise will start.

Second in line.

Member States agree on greening trade

On 17 October, the EU Council issued conclusions backing the Commission’s plan to strengthen the implementation of sustainability requirements in trade with Trade and Sustainable Development (TSD) chapters. These rules will affect all new agreements and ongoing negotiations “as appropriate”. They will even allow one party in an agreement to sanction the other in case of breaches to the Paris agreement or main climate and labour conventions. All good? Not really. The European Parliament likes the idea so much that it wants TSD rules to apply to all existing FTAs. And the Council apparently agrees. What to expect if the proposal passes? First target, the New Zealand deal! This might be a warning for the current talks with Latin America or Australia, too.

October is a great season for an Indo-Pacific tour

Busy month for DG TRADE negotiators: the EU met with India for a second round of FTA talks and a 13th round with Australia, and also launched negotiations with Japan to include data flows in the economic partnership. Further signs of EU engagement with the Indo-Pacific? This could mean business opportunities across the region, but several obstacles remain for each deal: environmental standards with Canberra, high tariffs for the Indian market with New Delhi, and EU demands on data standards with Tokyo.

EU-US relations electrified

A new trade dispute is dividing Brussels and Washington. In August, the US approved a   welfare and climate package providing tax credits for purchases of electric vehicles, but only if their batteries are manufactured in North America. The Commission objects, especially as it is trying to stimulate EU production of EVs, and even threatened to take the case to the WTO (or what is left of it), if a solution is not found. To that end (among others) Dombrovkis was in Washington on 12-14 October. Moral? Trade controversies are always just around the corner, even in the current transatlantic good mood.

On the radar.

24-25 Oct – INTA meeting: forced labour main course of the menu.

30-31 Oct – Informal meeting of trade ministers, focus on geopolitics and transatlantic digital trade 

Until 30 Nov – The Commission is accepting feedback on its proposal to ban products made with forced labour.

What we’re reading.

In Italy, the centre-right coalition has been trying to form a government. For more on the impact of the Italian elections on the EU, check out our note!

Speaking of car-related trade disputes, French President Emmanuel Macron has his very own ideas on the industry, as well as the transatlantic relations…

A bit on internal trade too? This ECIPE article explains what the EU must do to get a fully integrated internal market

Bruegel explores the origins of “decoupling”, i.e. the reduction of economic interdependence between the West and China.

DG TRADE’s boss Sabine Weyand was interviewed on everything from the EU strategic limits to the bloc’s (more or less free) trade agenda.

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