INCEPTION IMPACT ASSESSMENT

Inception Impact Assessments aim to inform citizens and stakeholders about the Commission's plans in order to allow them to provide feedback on the intended initiative and to participate effectively in future consultation activities. Citizens and stakeholders are in particular invited to provide views on the Commission's understanding of the problem and possible solutions and to make available any relevant information that they may have, including on possible impacts of the different options.

Title of the initiative

Instrument to deter and counteract coercive actions by third countries

Lead DG (responsible unit)

DG TRADE (F2/F3)

Likely Type of initiative

Legislative initiative – Regulation

Indicative Planning

Q4 2021

Additional Information

-

The Inception Impact Assessment is provided for information purposes only. It does not prejudge the final decision of the Commission on whether this initiative will be pursued or on its final content. All elements of the initiative described by the Inception impact assessment, including its timing, are subject to change.

A. Context, Problem definition and Subsidiarity Check

Context

In recent years, there has been an increase in the practices of countries outside the EU seeking to coerce the governments of EU countries to take, or not take, particular policy measures, by using measures that restrict trade or investment for instance.

In the legislative process to amend Regulation 654/2014 1 , the European Parliament and EU governments raised concerns about these practices, as directed at the EU or its member countries. This led to a political agreement on a joint declaration by the Parliament, Council and Commission to create a instrument to deter and counteract coercion 2 . The declaration was published in the EU Official Journal at the time the legislative amendment was adopted and published 3 .

This initiative was announced by the Commission’s President in her Letter of Intent to the President of the Parliament and President in office of the Council of 16 September 2020. It is also in the Commission Work Programme 2021.

The initiative is distinct from initiatives announced in the Communication “The European economic and financial system: fostering openness, strength and resilience” 4 . In that document, the Commission announced its work on additional policy options to further deter and counteract the unlawful extra-territorial application of unilateral sanctions by non-EU countries to EU economic operators (including possibly by amending Regulation (EC) No 2271/96, the ‘Blocking Statute’).

Problem the initiative aims to tackle

The initiative aims to address practices by non-EU countries 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 – for example extra, discriminatory import duties, intentional delays, or refusing authorisations needed to do business.

The coercion may or may not be based on existing legislation, and can affect any field in which the EU or its member countries are active. It may sometimes also be in breach of international public law and thus can give rise to a right to take countermeasures.

Coercive practices of this type seem to be on the rise in recent years. They are driven by countries outside the EU, in an increasingly politicised economic environment, seeking to interfere with policy choices made or intended by other countries. Such practices unduly interfere with the freedom of the EU and its member countries to take, or not take, particular policy measures.

If not addressed, these practices could continue to compromise the economic and geopolitical interests of the EU and its members, and undermine the EU’s open strategic autonomy.

Extra-territorial sanctions can also be applied with coercive effect, in breach of international law (or may be otherwise unlawful under international law). Such actions can affect the ability of the EU or its member countries to make policy, and/or the ability of non-government actors like private companies to do business.

There is a potential partial overlap between problems identified by this initiative and problems which have led to the Commission’s planned work on responses to extra-territorial sanctions (as set out in the Communication “The European economic and financial system: fostering openness, strength and resilience” 5 ). 

The Commission will pursue both initiatives and ensure they are consistent with one another. Any information obtained in the consultations for each initiative that is relevant to the other will be shared.

Basis for EU intervention (legal basis and subsidiarity check)

The legal basis for this initiative is Article 207 of the Treaty on the Functioning of the EU.

The initiative falls under EU trade policy. This is a policy for which the EU has exclusive competence to act, so the principle of subsidiarity does not apply.

EU action will be in addition to existing EU instruments and other possible future initiatives countering the extra-territorial application of measures by countries outside the EU, such as the Blocking Statute.

B. Objectives and Policy options

The objective of the initiative is to tackle coercive practices by non-EU countries in 2 concrete ways:

a)deterring them from using coercion or the threat of coercion against the EU or a member country;

b)minimizing the negative effects of any coercion that has taken place, by swiftly enacting trade, investment or other policy measures against the country responsible.

Ultimately, the goal is to reinforce the EU’s open strategic autonomy and effectively protect the interests of the EU and its member countries, where they are endangered by such practices. To that end, the initiative aims to create a mechanism that will enable action in line with international public law.

The existing EU legislative framework does not provide for a single or comprehensive legal instrument with such an effect. Existing possibilities to address coercive practices include standard diplomatic means and the possibility, under certain conditions, for the European Parliament and the Council of the EU to act on the basis of Article 207 of the Treaty on the Functioning of the EU.

This is considered inadequate to address the problem in a comprehensive and satisfactory manner. In particular, there is no possibility for taking prompt, coordinated trade, investment or other policy measures (this would significantly increase the deterrent effect).

To complement the existing legislative framework and the current policy options, the initiative will consider the following policy measures in designing a regulation (by the European Parliament and the Council) to empower the Commission – in specific situations where economic coercion is involved – to intervene in the form of trade, investment or other policy measures against the country responsible.

The regulation would:

1)specify the situations (“triggers” – economic coercion or other activities inconsistent with international law) in which action would be taken. These triggers would be the same for all third countries.

2)include possible countermeasures: trade, investment or other measures in the remit of the EU, which would be adopted in compliance with international public law.

3)be applied by the Commission through either implementing or delegating acts.

4)include specific forms of stakeholder consultation and participation in applying it.

C. Preliminary Assessment of Expected Impacts

Likely economic impacts

Likely economic impacts include protecting the economic interests of the EU and/or individual member countries, and EU businesses, including small/medium-sized firms, and reinforcing the EU’s open strategic autonomy.

Ultimately, the initiative should help build a more stable environment for using regulatory powers, one that stimulates growth, trade and investment.

There could be negative impacts on EU businesses and consumers if they are affected by specific trade or investment policy countermeasures taken as remedies, in the event of application of the instrument under consideration. These impacts should be kept to a minimum.  

Likely social impacts

Ultimately, the initiative should help build a more stable environment for using regulatory powers, one that strengthens the EU's social dimension and promotes decent work abroad.

Likely environmental impacts

Ultimately, the initiative should help build a more stable environment for using regulatory powers, one that protects the environment in the EU and abroad.

Likely impacts on fundamental rights

Ultimately, the initiative should help build a more stable environment for using regulatory powers, one that promotes fundamental rights in the EU and abroad.

Likely impacts on simplification and/or administrative burden

Public administrations could be involved in applying specific countermeasures, when required under the proposed regulation, depending on the nature of the coercive measures in question and how and who they are taken by.

In general, the countermeasures would fall under EU trade policy (though potentially also under other policy fields where the EU has powers to act) and the proposed regulation would be directly applicable in all EU countries.

Thus, the only action likely to be required at national level – if any – would be administration and application (e.g. national customs services enforcing EU legislation).

D. Evidence Base, Data collection and Better Regulation Instruments

Impact assessment

The preparation of this initiative will be supported by this impact assessment, which will inform the Commission's decision. The impact assessment process will take place in the first half of 2021.

Evidence base and data collection [max 10 lines]

Currently the evidence base for this initiative is incomplete. The Commission will seek to complete it – specifically as regards the definition of the problem (types of coercive practice, their scope, drivers, consequences, etc.) and the possible triggers for countermeasures.

Current information sources include:

·the Joint Declaration by the Parliament, Council and Commission 6 [hyperlink], which points to the existence of the coercive practices in question, and to the concerns of the Parliament and EU governments about them.

·an October 2020 policy brief from the European Council on Foreign Relations (‘Defending Europe’s economic sovereignty: new ways to resist economic coercion’) 7 , which describes certain forms of coercion and their impact.

·(on countermeasures) EU’s experience with adopting trade and investment measures, for example under Regulation 654/2014. The Commission will build on this existing knowledge, to assess a wider array of possible countermeasures and their impacts.

To collect further information, the Commission intends to invite input from citizens and stakeholders through various consultation activities, including with EU governments.

Consultation of citizens and stakeholders

Information gathered

The consultation will aim primarily to gather information and views on existing and potential coercive practices by countries outside the EU and their impact on the economic and geopolitical interests of the EU and its member countries.

It will also gather views on the possible policy options and their various impacts.

The collected input will enable the Commission to ensure whatever action it takes is consistent with other Commission initiatives.

It could also feed into, and benefit from, parallel consultations that the Commission may carry out on policy options aimed specifically at countering the extra-territorial application of sanctions to EU businesses/operators by non-EU countries.

Main stakeholders consulted

·EU businesses and their associations, representations and unions, including those active outside the EU, as well as EU countries’ public authorities. 

·Research and academic institutions, think tanks, consultancies and non-governmental organisations and platforms could also contribute, in particular as regards identifying and studying the problem.

·Finally, non-EU governments and businesses, as well as international institutions and bodies, might have an interest in providing input.

Consultation

The main activity will be a public online questionnaire-based consultation for a 12-week period, starting in Q1 2021. Available in all official EU languages (also for response), it will be hosted on the Commission's central public consultations page. A stakeholder conference may accompany the online consultation.

The Directorate General for Trade also intends to carry out targeted consultation activities to identify any particular concerns about coercive practices. This includes dedicated bilateral meetings with European business associations and think tanks, business associations active in countries where coercive practices are likely to arise, and with the authorities in EU countries.

These activities may be complemented by dedicated events/debates in the Council and the European Parliament.

The Directorate General for Trade will also conduct targeted outreach through its existing networks, to ensure wide participation, including from small/medium-sized firms and citizens.

A synopsis report summarising the results of the consultation activities will be published on the dedicated webpage once the consultation is closed.

Will an Implementation plan be established?

No implementation plan is required for this initiative.

The initiative does not involve any transposition of legislation by EU Member States because the proposed act would be directly and generally applicable in all member countries.

Any possible specific need could be assessed by the Commission, based on experience in applying the regulation in specific cases. Furthermore, it is not feasible to prepare an advance implementation plan for the myriad possible measures that the regulation might provide for.