Trade wars: what are the EU's trade defence instruments?  

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The EU can resort to a slew of measures to protect itself against unfair trade practices, from appealing to the WTO to full-out trade war.

MEPs have criticised tariffs on steel and aluminum announced by the US ©AP Images/European Union-EP  

The EU uses its trade policy to make the most of globalisation and its economy thrives because of free trade. However, sometimes it can be undermined by countries imposing unfair tariffs on its products or selling their goods at abnormally low prices.

There is also the risk of conflicts over trade escalating into a trade war, which is when both parties keep on increasing tariffs or create other barriers, which can make products more expensive and complicate things for companies. The EU can use a variety of trade defence instruments in these situations. Read on to find out how and to discover examples of recent trade conflicts.

Read explanations about the EU’s trade policy

 

Calling in arbitration - the role of the WTO

 

The EU and its member states are among the 164 members of the World Trade Organization (WTO), which exists to guarantee a rule-based international trading system. It has the power to rule on trade disputes and enforce decisions. In the past this has helped to prevent trade disputes escalating.

 

On the basis of pre-defined rules, any WTO member can lodge a complaint over breaches of WTO rules and seek reparations.

 

Since the WTO’s creation in 1995, the EU has been involved in 201 cases: 110 as a complainant and 91 as a respondent.

Tackling unfairly cheap imports


Being a member of the WTO does not stop the EU from  drawing up legislation to counter products that have dumped for abnormally low prices in Europe, harming local producers. This could be because of a lack of competition in the country where the product was made, heavy state interference in the production process or even because the company in question disregarded international labour and environmental standards.

Read more about dumping, its definition and effects

The EU can respond by imposing anti-dumping duties as a trade defence instrument. In 2017 MEPs voted in favour of updating the rules that regulate when and how those duties can be imposed. MEPs approved additional rules allowing the EU to impose higher tariffs on dumped or subsidised imports in May 2018.

Read more about the EU’s anti-dumping policy

Countering distorting foreign subsidies

On 8 November 2022, Parliament approved rules to counteract market-distorting foreign subsidies to companies operating in the EU. These subsidies can create an uneven playing field and make it more difficult for European companies to compete. MEPs want the European Commission to have the power to investigate and counteract these foreign subsidies granted to companies set to acquire EU businesses or take part in EU public procurement.


Going bananas: examples of trade conflicts


The US and the EU have clashed over trade on various occasions, for example over duties on bananas, which made it easier for some countries in Africa, Caribbean and the Pacific to export to the EU at the expense of Latin American countries.

In 2018, the US imposed additional import duties on steel and aluminium imports, which MEPs called unacceptable and incompatible with WTO rules. In addition they were concerned about US customs duties on Spanish olives, which the country imposed that same year.

The EU has also been at odds with the US and Canada over beef treated with hormones, which it considered a potential health hazard. This was only resolved in 2012 when the EU agreed to increase imports of hormone-free beef from the two countries.