The longstanding economic and political ties between the European Union (EU) and the United States (US) are under growing strain.

Recently, France has called on the EU to consider using significant legal measures against the US for the first time. These potential actions include restrictions on trade, services, intellectual property (IP) rights, foreign direct investment (FDI), and access to government procurement. Such measures would represent a major shift in EU-US relations and could have broad implications for both economies, as well as global trade dynamics.

This article examines the legal frameworks and potential measures the EU could use against the US, focusing on the impact these actions may have on the US, Europe, and the broader global economic landscape.

Background: The EU and the US—A Complex Relationship

The EU and the US have historically shared a robust economic relationship, characterized by trade, investment, and political cooperation. As two of the world’s largest and most influential economies, they have long been intertwined through strong trade ties and multilateral agreements. Over time, they have maintained a mutual interest in fostering stability and free markets.

However, recent years have seen an erosion of that cooperative relationship. Disagreements over trade policies, market access, and regulatory practices have surfaced, with the US pursuing increasingly protectionist policies under certain political administrations. Meanwhile, the EU, particularly France, has voiced concerns over the US’s approach to international trade agreements and its impact on European industries.

France’s call for the EU to take more assertive action against the US comes as a response to what it perceives as unfair trade practices that hurt European interests. These disputes are setting the stage for significant changes in the EU-US trade dynamic.

Legal Framework: Measures the EU Could Take Against the US

The EU has a range of legal tools available that could be utilized to respond to what it views as unjust trade practices by the US. These tools aim to safeguard European economic interests and restore balance in trade relations. Some of the measures the EU could pursue include:

1. Trade Restrictions

One of the most straightforward measures the EU could take is to impose restrictions on US goods and services. This could include the introduction of tariffs or quotas on American exports, which would limit the ability of US products to enter European markets. Such measures are often implemented when there are concerns about unfair trade practices such as dumping (selling goods below market value) or the misuse of subsidies that distort competition.

For example, the EU could target key US industries like technology, agriculture, or energy with higher tariffs, making US goods less competitive in the European market. This would have a direct impact on American companies, increasing their costs and potentially reducing their market share in Europe.

2. Restrictions on Services

The EU could also restrict US access to the European services market. Services trade is a critical component of global economies, and restrictions on services would target sectors where the US holds a competitive edge, such as finance, technology, and digital services. A targeted approach could involve limiting the operations of US tech giants like Google, Amazon, and Microsoft within the EU.

These restrictions could be especially impactful for the US tech industry, which relies heavily on access to European markets. European policymakers may consider such measures to curb the dominance of US firms in these key sectors, ensuring more room for European competition.

3. Intellectual Property (IP) Rights

Another avenue for the EU to address US trade practices is through the enforcement of intellectual property rights. The US has long been a global leader in IP, and disputes often arise over the protection of innovations. If the EU believes the US is undermining European intellectual property, it could respond by limiting the ability of US firms to enforce patents, trademarks, or copyrights within the EU.

This action would pose a major challenge to US companies that depend on the ability to protect their innovations in global markets. By imposing stricter IP regulations, the EU could send a strong message about the importance of fair competition and the protection of intellectual property.

4. Foreign Direct Investment (FDI) Restrictions

The EU could also place restrictions on US foreign direct investment (FDI) in sensitive sectors within Europe. These sectors might include technology, defense, or energy, where national security and economic sovereignty are primary concerns. EU regulations could screen or limit US investment in strategic European industries, reducing the economic influence of US companies in critical areas.

This could have broad consequences for US companies seeking to invest in Europe, especially those that rely on European markets for growth and expansion. Conversely, it could encourage European firms to pursue alternative investment opportunities outside of the US.

5. Access to Government Procurement

The EU could restrict US companies’ access to government procurement contracts across Europe. These contracts often involve high-value projects in sectors such as defense, infrastructure, and technology. Limiting US firms from bidding on these contracts would have significant financial implications for American companies, particularly in industries like defense contracting and public infrastructure development.

Such a measure would hurt the US economy by reducing its firms’ ability to secure lucrative government contracts, while also serving as a lever to pressure the US government to reconsider trade practices that the EU finds problematic.

Impact on the United States

If the EU moves forward with these measures, the impact on the US economy would be substantial. Some of the key consequences for the US include:

1. Disruption of Trade Flows

The imposition of trade restrictions could create disruptions in the flow of goods and services between the US and the EU. US exporters would face higher tariffs and limited access to one of the world’s largest markets. Key industries such as agriculture, automotive, and manufacturing could experience reduced sales, as European buyers seek alternatives from non-US sources.

2. Challenges for US Service Providers

Many US companies in the service sector—particularly tech firms, financial institutions, and entertainment companies—could face significant challenges in maintaining their business operations in Europe. Restrictions on services trade would make it more difficult for these companies to access European markets, potentially reducing their revenues and growth opportunities.

3. Geopolitical Consequences

The EU’s actions could lead to a broader geopolitical fallout, particularly if other countries or regions, such as Asia or Latin America, view the US’s behavior as increasingly aggressive or protectionist. Other global powers may choose to distance themselves from the US in favor of stronger ties with the EU, further isolating the US on the world stage.

Impact on Europe

For the EU, using these legal tools could provide an opportunity to protect European industries and restore a sense of fairness in trade relations with the US. However, there are also potential drawbacks:

1. Economic Disruptions in Europe

The imposition of restrictions could disrupt European industries that rely on trade with the US. Companies in sectors such as automotive, pharmaceuticals, and luxury goods could see their market access to the US diminish. European companies that depend on the US as a key export market would face increased costs and reduced competitiveness.

2. Internal Divisions Within the EU

The decision to take stronger action against the US could create divisions within the EU. Countries with stronger economic ties to the US, like Germany, the UK, and the Netherlands, might resist measures that could harm their own industries. Conversely, countries such as France may push for more assertive actions. Such disagreements could complicate the EU’s decision-making process and undermine efforts to present a united front.

Global Implications

The EU’s decision to implement these measures against the US would have wide-ranging effects on global trade. Some of the key global implications include:

• Global Trade Tensions: Escalating tensions between the EU and the US could lead to broader trade conflicts, with other countries becoming embroiled in the dispute. This could disrupt global trade flows and raise uncertainty in international markets.
• Shifting Trade Alliances: As the US and EU become more entrenched in their trade disputes, other countries may seek to forge new alliances. This could lead to a realignment of global trade patterns, as countries look for alternatives to trade with the US or the EU.
• Calls for Reform of Trade Rules: The increasing friction between two of the world’s largest economies could prompt calls for reform of global trade institutions, such as the World Trade Organization (WTO). The global community may seek new frameworks to address the challenges posed by protectionism and trade disputes.

Conclusion: Protecting Economic Interests and Outcomes

France’s call for the EU to take action against the US represents a significant shift in EU-US relations. With the potential for measures such as trade restrictions, IP enforcement, and investment limits, the legal and economic consequences of such actions could reverberate globally. While these measures could help safeguard European interests, they also carry the risk of disrupting trade and investment flows between the two largest economies in the world. As tensions between the US and the EU rise, both sides will need to navigate the complex legal, economic, and geopolitical challenges that lie ahead, shaping the future of global trade.