Beijing Furious After Europe Uses “International Procurement Instrument” For First Time In Escalating Trade War With China

When it comes to its trade war with the US, Brussels is quick to parade just how anti-Trump it is, how unfair US trade practices are (just ignore the fact that Europe was far more protectionist for decades) and how much it loves free trade, honest. But in Europe’s growing trade war with China (you don’t really hear much about it because the media would rather public attention be soaked up by the far less important transatlantic feud, and away from the far more important Chinese trade war) thing are rapidly disintegrating. 

As Rabobank’s Michael Every points out, the “We Love Free Trade” EU just used its International Procurement Instrument for the first time to freeze Chinese medical devices out of its public procurement markets for five years unless China opens its market to EU equivalents. As Every notes, “that’s economic statecraft with muscle, underlining that there are lots of tools in the mercantilist toolkit besides tariffs.”

In response, Beijing took some time away from its constant criticism of US trade policy to also criticize as protectionist the European Union’s plan to curb Chinese medical device manufacturers’ access to public procurement contracts, and vowed to take action to protect the country’s interests, Bloomberg reports.

China urged the EU to handle any differences through dialog and cooperation to safeguard trade relations, the Commerce Ministry said in a statement on Tuesday. “China will closely monitor the EU’s follow-up actions” and will take measures to protect the rights and interests of Chinese enterprises, the ministry said.

Beijing’s comments come after EU member states overwhelmingly agreed to the curb, which would represent the first use of its International Procurement Instrument, a 2022 law that’s meant to promote reciprocity in access to public procurement markets, and represents a unique slant on how creative mercantilists can and will get when their markets are threatened. It allows the EU’s executive arm to impose various restrictions on firms seeking to participate in procurements, ranging from score adjustments in tenders to an outright ban from public contracts above €5 million ($5.7 million).

The dispute adds another irritant to relations and comes just as Beijing seeks to shore up ties with the EU, positioning itself as a more reliable partner as Donald Trump alienates the bloc over issues from tariffs to defense. In reality, when it comes to capturing market share, the only thing mercantilists are “reliable” in doing is slashing prices to boost exports. 

Chinese Commerce Minister Wang Wentao is due to meet with EU trade officials early this month in Paris, where he may address the bloc’s trade grievances including a lack of fair access to China’s own procurement market. European leaders will travel to Beijing for a summit next month with their Chinese counterparts. 

“At first glance recent EU moves relating to China seem a bit contradictory, reviving senior level interaction while taking measures against unfair imports,” said Wendy Cutler, a former senior US trade negotiator now at the Asia Society Policy Institute.

“But, in light of different types of pressures from member states, Brussels needs to navigate carefully when it comes to China,” she said. “It has no choice but to look for avenues of cooperation while sending a clear signal that the EU will stand up for European companies that are facing unfair competition.”

Only problem is that from China’s point of view, the competition is completely fair, and it will retaliate accordingly.

Indeed, a Chinese business lobby group warned earlier that EU’s plans would hurt trade ties and the China Chamber of Commerce to the EU expressed “profound disappointment” over the move, according to a statement on Monday.

“Its targeted application against Chinese enterprises sends a troubling signal—not only adding new complexity to China-EU economic and trade relations, but also contradicting the EU’s stated principles of openness, fairness, and non-discrimination in market access,” said the organization, whose members include the Bank of China, Cosco Shipping Holdings Co. and BYD Co.

“Beijing appears to be sending a warning to all advanced economies that actions against China will have consequences,” said Gerard DiPippo, associate director of the RAND China Research Center. “The odds of an EU-China rapprochement are lower than some speculated after the trade war with the US started.”

Which, of course, will be music to Trump’s ears, even if it will be difficult for the mainstream media to explain to its naive audience how the global trade war which it had repeatedly portrayed as “Trump against everyone”, was really “everyone against everyone.”

In response to a question on the EU’s move, Chinese Foreign Ministry spokesman Lin Jian on Tuesday called on the bloc to stand by its commitment to market rules. 

The EU launched an investigation into China’s procurement of medical devices last April, with the probe finding in January that Beijing discriminated against foreign firms. Consultations failed to find alternative solutions, Bloomberg previously reported.

The Chinese commerce chamber argued that market reciprocity must be based on “an accurate understanding of historical and practical realities.”

“For years, European medical device companies have enjoyed significant access to the Chinese market, playing a key role in supporting the modernization of China’s healthcare system and achieving substantial growth,” it said. “The EU’s current decision fails to acknowledge this context and undermines the spirit of balanced engagement and mutual benefit.”