The European Parliament adopted by 578 votes to 24, with 19 abstentions, a legislative resolution on the proposal for a regulation of the European Parliament and of the Council on the protection of the Union and its Member States from economic coercion by third countries.

The European Parliament's position adopted at first reading under the ordinary legislative procedure amends the Commission proposal as follows:

Subject-matter

This Regulation establishes:

- a framework for the Union to respond to economic coercion with the objective of deterring economic coercion or obtaining the cessation of economic coercion, whilst enabling the Union, as a last resort, to counteract economic coercion through Union response measures;

- a framework for the Union to seek reparation for the injury to the Union, where appropriate.

Economic coercion

For the purposes of this Regulation, economic coercion exists where a third country applies or threatens to apply a third-country measure affecting trade or investment in order to prevent or obtain the cessation, modification or adoption of a particular act by the Union or a Member State, thereby interfering in the legitimate sovereign choices of the Union or a Member State .

In determining whether the conditions are met, the Commission and the Council should take into account the following:

(a) the intensity, severity, frequency, duration, breadth and magnitude of the third-country measure, including its impact on trade or investment relations with the Union, and the pressure arising from it on the Union or a Member State;

(b) whether the third country is engaging in a pattern of interference seeking to prevent or obtain particular acts from the Union, a Member State or another third country;

(c) the extent to which the third-country measure encroaches upon an area of the Union’s or a Member State’s sovereignty.

Examination of third-country measures

The Commission may, on its own initiative or at a justified request, examine any third-country measure. In principle, the examination will last no longer than four months . The Commission will make available to the public a secure tool to facilitate the transmission of information to the Commission.

If the Commission concludes that the third-country measure fulfils the conditions set out in the Regulation, it will present to the Council a proposal for an implementing act determining that the third-country measure constitutes coercion. The proposal must provide for an indicative period allowing the Commission to assess whether the conditions are met. This period must not exceed six months, unless a longer period is justified.

In its proposal for an implementing act or in a subsequent proposal for a Council implementing act, the Commission will propose, where appropriate, that the Council determine that the third country is liable to make good the damage caused to the Union.

Prior to presenting its proposal for an implementing act, the Commission should, without prejudice to any dialogue with the third country concerned, invite the third country concerned to submit its observations within a reasonable period of time . It should also inform the European Parliament of the conclusions of its examination.

The Council will have eight to ten weeks to decide -by a qualified majority- whether coercion exists.

Engagement with the third country

Following the adoption of an implementing act, the Commission should provide adequate opportunity for consultations with the third country with a view to obtaining the cessation of the economic coercion and reparation of the injury to the Union.

In the course of such consultations, the Commission may explore options with the third country, including the following: (a) direct negotiations; (b) submitting the matter to international adjudication; (c) mediation, conciliation or good offices by a third party to assist the Union and the third country in their efforts.

Union response measures

Members enhanced the deterrent aspect of the instrument by including all means at the EU's disposal to react, including:

- introducing or increasing restrictions on the import or export of goods , including, where appropriate, goods subject to export controls;

- the exclusion from public contracts of goods, services or suppliers of goods or services from the third country concerned, or the exclusion from public contracts of tenders whose total value represents more than 50% of goods or services originating in the third country concerned;

- introducing measures affecting the access of foreign direct investment to the Union , which may amount, where necessary, to the non-fulfilment of applicable international obligations;

- increasing restrictions on the possibility to place on the Union market goods falling under the Union sanitary and phytosanitary legal acts .

The EU may seek compensation from the third country responsible for the coercion. The Commission will also be able to apply measures to impose these remedies.

The Commission will evaluate the EU's response measures within six months of their cessation.

Single point of contact

The Commission will provide a single point of contact within the Commission for the application of this Regulation and its coordination with any relevant Union legal acts and for gathering information and providing cost and data analyses with a view to determining the nature of the economic coercion.

Information to Parliament

The Commission will keep the European Parliament and the Council informed, regularly and in a timely manner, of relevant developments in the application of this Regulation throughout the examination of third-country measures, including the start thereof, the engagement with the third country and the international cooperation, and during the period in which Union response measures are in force. The European Parliament may express its views via any appropriate means.

The Committee on International Trade adopted the report by Bernd LANGE (S&D, DE) on the proposal for a regulation of the European Parliament and of the Council on the protection of the Union and its Member States from economic coercion by third countries.

The committee responsible recommended that the European Parliament's position adopted at first reading under the ordinary legislative procedure should amend the proposal as follows:

Subject matter

Members proposed that the Regulation should lay down rules and procedures in order to ensure the effective protection of the interests of the Union and its Member States where a third country seeks, through any form of action, failure to act or threat thereof affecting trade or investment, to coerce the Union or a Member State into adopting or refraining from adopting a particular act, including a particular policy choice, legal act or a stance with regard to a policy choice. It should also provide a framework for the Union to respond in such situations with the objective of deterring , or obtaining the cessation of such actions and, where appropriate, repairing the injury caused , thereby permitting the Union to counteract such actions. Any action taken under this Regulation should be consistent with the Union’s obligations under international

law.

Scope

Members proposed that the Regulation should apply only in the event of economic coercion where a third country applies or threatens to apply measures affecting trade or investment.

In determining whether the relevant conditions are met, the Commission should take into account the following:

- the intensity, severity, frequency, duration, breadth and magnitude of the third country’s measure or failure to act or threat thereof as well as the pressure arising from it; the Commission should assess whether such measures are part of a broader pattern of behaviour;

- the extent to which the third-country measure or failure to act or threat thereof encroaches upon an area of the Union’s or Member States’ sovereignty;

- whether the third country is acting based on a concern that is recognised as legitimate by international law and conventions.

Examination of third-country measures

Members proposed that the Commission should carry out the examination based on substantiated information collected on its own initiative or received from any reliable source, notably economic operators or trade unions. The European Parliament and a Member State may also provide such substantiated information to the Commission. The Commission should ensure the protection of confidential information which may include concealing the identity of the supplier of the information. The Commission should set up publicly available secure tools with a view to facilitating the submission of relevant and substantiated information from external sources.

EU response measures

Where necessary, a swift and effective EU response will make this instrument credible: EU countermeasures should be proportionate and swift, when urgent, and should aim not only at the cessation of the coercion but, whenever possible, also at addressing the injury caused by coercion.

Members called for a commitment to a negotiated solution with third countries without unduly delaying the implementation of the instrument.

The Chief Trade Enforcement Officer

The Chief Trade Enforcement Officer (CTEO) should be responsible for the implementation of this Regulation and its coordination with other tools related to anti-coercion such as the Blocking Statute. For the purposes of this Regulation, the CTEO should:

- gather information and provide cost and data analyses with a view to determining the nature of economic coercion measures;

- act, in full compliance with the principle of confidentiality, as the main contact point for EU businesses and private sector stakeholders affected by economic coercion measures, including with regard to assistance to be provided in the context of ongoing economic coercion.

Reporting and Review

The Commission should:

- evaluate any EU response measure six months after its termination, taking into account stakeholder input, and information provided by the European Parliament and the Council, and any other relevant information;

- publish every year an evaluation report in which it examines the effectiveness and operation of the Union response measure, and draw possible conclusions for future measures;

- review, no later than three years after its entry into force of this Regulation and at the latest every four years thereafter, this Regulation and its implementation, in particular, in ensuring complementarity with the review of the Blocking Statute.

Lastly, the European Parliament , which exercises democratic scrutiny over this instrument, should be kept informed together with the Council at all relevant stages, from the initial examination to the ongoing monitoring of EU measures.

PURPOSE: to present a new tool to counteract third countries’ economic coercion of the Union or a Member State.

PROPOSED ACT: Regulation of the European Parliament and of the Council.

ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with the Council.

BACKGROUND: economic coercion refers to a situation where a third country is seeking to pressure the Union or a Member State into making a particular choice by applying, or threatening to apply, measures affecting trade or investment. Such practices unduly interfere with the legitimate policymaking space of the EU and its Member States and undermine the EU's open strategic autonomy.

Moreover, the modern interconnected world economy creates an increased risk of, and opportunity for, economic coercion, as it provides countries with enhanced, including hybrid, means to deploy such coercion. Currently, the EU does not have a legislative framework for acting against economic coercion. Therefore, it is essential that the Union possess an appropriate instrument to deter and counteract economic coercion by third countries to safeguard its rights and interests and those of its Member States.

CONTENT: with a view to protecting the interests of the EU and its Member States by enabling the Union to respond to economic coercion, the proposal lays down rules and to respond in such situations with the objective to deter, or have the third country desist from such actions, whilst permitting the Union, in the last resort, to counteract such actions.

With this new instrument, the EU will be able to respond to cases of economic coercion in a structured and uniform manner. A dedicated legislative framework ensures predictability and transparency; it underlines the EU's adherence to a rules-based approach, also internationally. The EU will engage directly with the country concerned to stop the economic intimidation. If the economic intimidation does not stop immediately, the new instrument will allow the EU to react swiftly and effectively, providing a tailor-made and proportional response for each situation from imposing tariffs and restricting imports from the country in question, to restrictions on services or investment or steps to limit the country's access to the EU's internal market.

Scope

The proposed Regulation applies where a third country:

- interferes in the legitimate sovereign choices of the Union or a Member State by seeking to prevent or obtain the cessation, modification or adoption of a particular act by the Union or a Member State

- by applying or threatening to apply measures affecting trade or investment.

In determining whether the above conditions are met, the following shall be taken into account:

- the intensity, severity, frequency, duration, breadth and magnitude of the third country’s measure and the pressure arising from it;

- whether the third country is engaging in a pattern of interference seeking to obtain from the Union or from Member States or other countries particular acts;

- the extent to which the third-country measure encroaches upon an area of the Union’s or Member States’ sovereignty;

- whether the third country is acting based on a legitimate concern that is internationally recognised;

- whether and in what manner the third country, before the imposition of its measures, has made serious attempts, in good faith, to settle the matter by way of international coordination or adjudication, either bilaterally or within an international forum.

Engagement with the third country concerned

The proposal suggests that the Commission should be open to engage on behalf of the Union with the third country concerned, to explore options with a view to obtaining the cessation of the economic coercion. Such options may include:

- direct negotiations;

- mediation, conciliation or good offices to assist the Union and the third country concerned in these efforts;

- submitting the matter to international adjudication.

The Commission should seek to obtain the cessation of the economic coercion by also raising the matter in any relevant international forum.

Lastly, the Annexes to the proposal include the possible Union response measures and the rules of origins and nationality for goods, services, investments and intellectual property rightholders.