The European Union will very soon have a revamped ‘enforcement regulation’, a hitherto hardly known legal instrument that allows the bloc to retaliate against countries contravening international trade norms and not cooperating in legal disputes and thus protect itself against ‘appeals into the void’ at the World Trade Organization.
The measure was proposed by the European Commission in late 2019 as a consequence of the demise of the World Trade Organization’s Appellate Body.
The EU wants to deter countries with which it is engaged in a legal dispute at the WTO to bloc legal proceedings and be able to retaliate after a first panel ruling if there is no prospect of an appeal via the Appellate Body or an alternative mechanism such as the MPIA or other ad hoc appeals panel.
The EU originally simply wanted to amend a few paragraphs in the legislation to take into account the Appellate Body situation per se and leave the rest of the law untouched. Among the provisions in the regulation is one that states that the EU may lift trade preferences granted country in the area of goods and public procurement.
Services, intellectual property rights
During initial conversations with member states last winter, France among others had asked to expand the scope of the potential sanctions to new areas such as services, but failed – or more precisely only obtained a revision clause.
When the draft regulation was sent to the European Parliament, the issue came back to haunt the Commission with even greater vehemence.
Most mainstream political groups endorsed the idea of expanding the scope of sectors and instruments to be used for retaliation purposes.
In a report put together by French MEP Marie-Pierre Vedrenne, the European Parliament further asked that the EU be allowed to retaliate in situations where it feels threatened by a trading partner’s coercive trade policy – such as Section 301 tariffs recently leveraged by the United States. The parliamentarians also called for a mechanism to better enforce environmental and labour rules in bilateral free trade agreements.
An unusually swift trilogue process ensued. So what’s the concrete outcome?
The revamped enforcement regulation will primarily do what it says: allow the EU to retaliate in the absence of an appeals perspective at the WTO.
The EU will also now be allowed to repeal trade preferences in the area of services and intellectual property. The latter includes only IP regulations that are covered at EU-level. Intellectual property rules where member states have the last say might see an expansion at a later stage, as the new regulation will include a one-year rendez-vous clause.
MEPs also obtained the promise of a new ‘anti-coercion’ instrument – a new piece of legislation that would allow the EU to act in the face of trade threats from countries wishing to stop the EU from legislating areas it deems important – think a Section 301 tariff threat over EU or member state plans to introduce digital taxes.
The proposal was made by the commission as it become clear the parliament would take a strong stand on this issue. This will be a separate piece of legislation, promised for next year, and will be backed by an inter-institutional joint statement. Today’s deal was thus mainly a signalling exercise on this matter.
The European Parliament also obtained the promise that the Commission will give equal weight to enforcing labour and environment provisions as commercial clauses in its trade agreements going forward.
“The Parliament succeeded in convincing member states of the necessity of enlarging the scope of this regulation,” said the international trade committee’s chief Bernd Lange.
Marie Pierre Vedrenne told Borderlex: “There is now a common inter-institutional message on the importance of the enforcement issue and a message to some EU trading partners.”
All in all the MEP’s victory is mainly of a political nature, reinforcing broad policy trends already perceptible at the EU level.
The enforcement regulation itself that triggered the whole conversation will be amended in a targeted way and can now be enacted swiftly.
