EU’s trade weapons

The EU has been augmenting its trade defense mechanisms over the years, and recent actions demonstrate a willingness to employ these tools more effectively. These measures include the International Procurement Instrument, utilized for the first time in a recent medical technology case against China.

“For a long time, we talked about the European Commission having this toolbox. But we questioned the ability of the European Commission to use this toolbox effectively. Now we see that actually the European Commission is able and willing to use it,” said Francesca Ghiretti, a senior geoeconomics analyst at the Adarga Research Institute.

Europe’s tougher stance on China not only signals solidarity with the United States, but it also invites potential retaliation and trade tensions with Beijing. However, EU officials assert the necessity of addressing evidence-based trade concerns and avoiding an all-out trade war.

Despite the potential risks of retaliation, the EU appears committed to leveraging its trade instruments under WTO rules. This approach underscores Europe’s determination to safeguard its economic interests and reduce dependencies on autocratic regimes like China, particularly in light of recent geopolitical developments such as the Russian invasion of Ukraine.

How Beijing will react?

Europe’s tougher stance on China presents both opportunities and risks. While it signals solidarity with the U.S., it also invites potential retaliation from Beijing.

According to U.S. Trade Representative Katherine Tai, the U.S. is closely monitoring the EU’s new approach towards China, particularly regarding investigations into medical devices.

Apart from subsidy investigations, the EU is under pressure to challenge China’s Belt and Road projects more assertively. Internal documents suggest a renewed focus on strategic interests in Africa and Central Asia.

In the clothing sector, Brussels is preparing to address the impact of the Chinese app Shein, considering designating it as a “very large online platform” under the bloc’s content moderation law.

However, the looming question is how Beijing will respond to Europe’s actions. Historically, China has retaliated by leveraging its economic power, playing EU countries against each other.

Despite potential risks, the EU is urged to act decisively to avoid an all-out trade war. Anders Ahnlid from Sweden’s national trade board emphasizes the need to act based on evidence.

While the EU braces for potential retaliation, European Commission President Ursula von der Leyen faces pressure to maintain a firm stance amid upcoming elections.

Following the Russian invasion of Ukraine, Europe recalibrated its dependence on autocratic regimes like China. NATO Secretary-General Jens Stoltenberg warns against repeating past mistakes of dependency on autocracies for resources and technology.

Despite concerns, former EU diplomat Gunnar Wiegand urges Europe not to be deterred, emphasizing the importance of using WTO-compatible instruments to address trade disputes.

While some EU member states may have reservations due to economic ties with China, there is a growing consensus within Europe regarding the need for a more assertive stance towards Beijing. As Europe navigates this evolving dynamic, the EU’s willingness to utilize its trade arsenal signals a renewed commitment to protecting its industries and interests in the face of global economic challenges.