EU trade policy round-up: anti-coercion instrument agreed, Mercosur updates and Australia-EU talks

Mon 12 Jun 2023
Posted by: Phillip Adnett
Trade News

EU flags billowing in front of glass building

In our latest round-up of EU trade policy developments, the IOE&IT Daily Update looks at the EU’s ongoing negotiations with Latin America and the Caribbean, a new anti-coercion instrument and the ongoing saga of Australian-EU trade talks.

Mercosur priority

French trade minister Oliver Becht has tempered expectations of an EU-Mercosur deal being agreed soon, advocating for balance over speed.

Mercosur is a common market consisting of Argentina, Brazil, Paraguay, Uruguay and Venezuela, with Bolivia currently in the process of joining. Venezuela’s membership has been suspended since 2017.

An EU-Mercosur trade pact was agreed in principle in 2019 but is awaiting ratification from both EU and Mercosur member states.

Becht told Politico that he would not rush any final agreement, saying that: “We have to stop thinking that Mercosur [will be concluded] under the Spanish presidency or never.”

Spain is due to take up presidency of the Council of the EU – a position typically responsible for driving forward the Council's policy agenda – at the beginning of July.

The European Commission (EC) is prioritising the long-delayed trade deal with the South American bloc to reduce “excessive dependency” on third countries, notably China and the US, according to Reuters.

Brussels is looking to sign agreements to help with the EU’s Critical Raw Materials strategy, including materials for energy resources. The deal could also lead to a massive increase in South American beef imports into the EU, which has also upset farmers in France and Ireland. 

Latin America & Caribbean push

The EU has set out a new agenda for relations with Latin America and the Caribbean ahead of an upcoming meeting of EU officials and representatives from the Community of Latin American and Caribbean States in Brussels on 17 and 18 July.

A joint communication aims to recalibrate and renew bi-regional relations” with proposals including strengthening the common trade agenda to “diversify sources of raw materials and make global supply chains more resilient to benefit both regions”.

Existing trade agreements have seen the two-way trade in goods increase by 40% from 2018 to 2022 to €369bn.

Ralph Gonsalves, prime minister of St Vincent and the Grenadines, wrote in the St Vincent Times that, in spite of previously unequal relationship between Europe and the Caribbean, today’s “urgent challenges” facing the world “compel us to focus on an agreed bundle of matters to make a difference for the better, for all of our respective peoples.”

Anti-coercion policy

The EU has agreed an Anti-Coercion Instrument (ACI) to enable it to respond to economic pressure from third countries.

It allows the bloc to implement countermeasures – like import tariffs, trade restrictions, or public procurement measures – against countries that try to coerce EU member states or institutions, reports Euractiv.

Such countermeasures are an alternative to the slow and unreliable World Trade Organization (WTO) arbitration process, it claims.

The instrument was proposed in December 2021 after a year of confrontations between the EU and China, which included Beijing sanctioning EU lawmakers and academics for their criticism of Uyghur persecution.

According to Politico, the move can be viewed as the EU moving away from its decade-old liberal free trading policy toward more defensive economic positions.

EU-China sanctions

The EU could agree sanctions on Chinese firms accused of channelling banned European goods to the Russian military, reports the South China Morning Post.

Eight companies in China and Hong Kong are reportedly on a draft list of those accused of reselling European chips and microelectronics that can be used in weaponry.

The sanctions are part of a broader 11th package of EU sanctions since the invasion of Ukraine, which are still being discussed.

According to Bloomberg, China is putting pressure on the EU to scrap proposed trade restrictions and has warned Brussels that it will retaliate.

EU-Australia

The long awaited Australia-EU trade deal is facing a significant delay with ABC reporting that talks remain deadlocked over protection for European goods as hopes for a mid-year deal fade fast.

Australia won’t sign off on an agreement until the bloc becomes more open to Australian farm products.

“We’re going to be a renewable superpower,” Don Farrell told the FT ahead of talks with Brussels, “the Europeans have to play ball.”

Australian demands include better access for Australian beef, lamb and wine, as well as reduced protection for Australian produced versions of products such as parmesan and prosecco.

Farrell said he was willing to walk away if negotiations prove fruitless, with Canberra pursuing both a deepening of its recent trade deal with India and noting a thawing of trade tensions with China.