Hope for the best, prepare for the worst: how the European Union can address China's economic coercion

The European Union's anti-coercion instrument is in the works. Its aim is to deter and counter trade weapons harnessed by China, the United States, and other outside powers with the threat of retaliation through tariffs, customs duties, and other measures. But once the instrument is formally operational, the EU and its Member States will still have difficult choices to make in face of future coercive behavior.

Even if Brussels holds onto control and establishes an ambitious schedule in responding to coercion, it will still take time to assess and react. If deterrence fails and diplomacy falls short, by the time the EU prepares its retaliation, severe damage could already be done to European targets. In contrast, if Member States maintain control, the process could become even more convoluted. Those European capitals calling for restraint today might change their views on retaliation and compensation if they themselves become future targets.

In a new analysis for the Institut Montaigne, DIIS senior researcher Luke Patey finds that although the anti-coercion instrument may prove useful, the EU and its Member States will need to consider complementary measures to soften damage inflicted by outside pressure. To this aim, it is instructive to assess what lessons the EU can learn from how others have handled coercion. China's recent trade pressure on Canada, Australia, and other countries can help the EU understand the challenges that lie ahead and help strengthen its response. Such cases suggest the need to develop shock absorbers, methods of evasion, and countermeasures against a combination of economic and political coercion.