Europe Unveils ACI Card, but Lengthy Procedures and Limited Sanction Targets Remain

Regulation of U.S. Big Tech and VC Investment Most Likely
Restrictions on U.S. Imports Could Impact European Consumers
ACI Investigation Alone May Take Up to Four Months
Majority Approval from EU Member States Required for Effectiveness

Reuters Yonhap News

There are concerns that the Anti-Coercion Instrument (ACI), a trade threat response measure currently under consideration by the European Union (EU) in response to U.S. President Donald Trump's tariff threats against Europe, may not be as effective as hoped. This is because, in order to minimize the impact on the European economy, the scope of sanctions must be narrow, and it will take at least several months for the ACI to actually take effect.

According to Reuters and the Financial Times (FT) on January 19 (local time), some EU member states are concerned that the ACI could negatively affect the EU economy and consumers. Considering this, it is explained that when the ACI is implemented, the targets of sanctions will likely be limited to U.S. venture capital (VC) firms or cloud computing companies.

The ACI includes roughly 10 types of measures, but the options are limited. The EU could impose licensing or quota restrictions on U.S. imports or limit the sale of American food products. Typical targets for these regulations include American whiskey, jeans, and agricultural products.

Sanctions are also possible in the services sector, where the U.S. records a trade surplus with the EU. For example, companies such as Amazon, Microsoft (MS), Netflix, and Uber could be affected. There is also an option to impose penalties if U.S. companies account for more than 50% of the total value in EU public procurement contracts.

However, there are concerns that implementing ACI measures on American food or imported products could raise perceived prices for EU citizens or negatively impact the EU economy. In practical terms, it means that it is difficult to restrict direct U.S. investment, except for cloud computing companies.

The lengthy process required for the ACI to take effect is also problematic. The ACI procedure begins when the European Commission declares an investigation into economic coercion. The investigation period can last up to four months. If the Commission determines that coercion has occurred, the EU Council decides the level and method of response, which takes an additional 8 to 10 weeks.

Even after the EU Council makes a final decision, the ACI cannot be implemented immediately. The EU must first conduct diplomatic negotiations with the targeted country. Only if negotiations fail will sanctions be imposed. For the ACI procedure to be approved, a vote among member states is required, and a majority must be in favor. In other words, it can take at least several months, and in some cases up to a year, for the ACI to take effect.