While president Trump took military force over Greenland off the table (for now at least) during his Davos speech, this makes a bruising diplomatic showdown virtually assured. And ahead of whatever trade escalation the Trump admin may announce next, EU leaders toughened their position and want the European Commission to ready its most powerful trade weapon against the US if Donald Trump doesn’t walk back his Greenland threats.
According to Politico, which cites five diplomats with knowledge of the situation, Germany joined France in saying it will ask the Commission to explore unleashing the Anti-Coercion Instrument (ACI) at the emergency EU leaders’ summit in Brussels on Thursday evening. Berlin’s move brings the EU closer to a more forceful response, with Trump’s escalating rhetoric about the Danish territory and its supporters having prompted key capitals to harden their stance on how Europe should react.
“The resolve has been there for a few days,” one of the diplomats said. “We have felt it in our bilateral talks … there is very broad support that the EU must prepare for all scenarios, and that also includes that all instruments are on the table.”
Politico also writes that what governments request of the Commission meeting on Thursday would be decided largely by what the U.S. president says in his Davos address on Wednesday; and as reported earlier Trump maintained maximum pressure to force Europe to yield control of the territory to the US. Trump’s speech came as several European leaders had been trying to arrange meetings with the president on the Davos sidelines to talk him down from imposing the tariffs.
Aside from the anti-coercion tool, or “trade bazooka,” leaders have also discussed using an earlier retaliation package that would impose tariffs on €93 billion worth of U.S. exports. Two of the EU diplomats indicated that it is possible to impose the tariffs first, while the Commission goes through the more cumbersome process of launching the powerful trade weapon.
So what exactly is the ACI? Europe’s “trade bazooka” has a 10-point list of possible measures on goods and services. They include:
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Curbs on imports or exports of goods such as through quotas or licenses.
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Restrictions to public tenders in the bloc, worth some 2 trillion euros ($2.3 trillion) per year. Here the EU has two options: Bids, such as for construction or defence procurement, could be excluded if U.S. goods or services make up more than 50% of the potential contract. Alternatively, a penalty score adjustment could be attached to U.S. bids.
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Measures impacting services in which the US has a trade surplus with the EU, including from digital service providers Amazon, Microsoft, Netflix or Uber.
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Curbs on foreign direct investment from the United States, which is the world’s biggest investor in the EU.
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Restrictions on protection of intellectual property rights, on access to financial services markets and on the ability to sell chemicals or food in the EU.
The EU is supposed to select measures that are likely to be most effective to stop the coercive behaviour of a third country and potentially to repair injury.
How does the EU invoke the ACI
The ACI was proposed in 2021 as a response to criticism within the bloc that the first Trump administration and China had used trade as a political tool. European law gives the European Commission up to four months to examine possible cases of coercion. If it finds a foreign country’s measures constitute coercion, it puts this to EU members, which have another eight to 10 weeks to confirm the finding.
Confirmation requires a qualified majority of EU members, a higher hurdle to clear than that for applying retaliatory tariffs.
The Commission would normally then negotiate with the foreign country in a bid to stop the coercion. If that fails, it can implement ACI measures, again subject to a vote by EU members. These should enter into force within three months.
Since the ACI is European, the whole process takes an eternity to implement, and could take anywhere from a few months to a year to complete. By then, whatever plans Trump has vis-a-vis Greenland would be largely consummated.
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