With MEPs having completed their legislative work, trade policy is even more in the EU executive’s hands. China remains at the centre of EU leaders’ attention. Amidst Chinese President Xi’s European tour, new trade disputes have risen.  

As this is our last newsletter before the EU elections, we briefly take stock of what worked and did not work in this Commission’s trade policy. See you in the next edition and the next EU mandate! 

One Big Thing.

Medical devices: not a “tender” trade dispute with China 🩺

As all eyes were on the more grandiose Anti-Coercion Instrument and Foreign Subsidies Regulation, the International Procurement Instrument (IPI) risked slipping under the radar. Luckily, the European Commission has now shown the (so far) more neglected of its new autonomous tools. Taking effect in 2022, the regulation aims at ensuring reciprocity in global procurement markets. If a foreign country discriminates against EU tenders, the Commission can retaliate against that country’s companies when it applies to tenders in the EU.  

Unsurprisingly, China has been the IPI’s first target. The Commission opened an investigation into Beijing’s procurement of medical devices, saying they discriminate against European suppliers. DG TRADE will now open a dialogue with the Chinese authorities. The investigation and consultations are to be concluded within 9 months. In case of unsatisfactory dialogue, the Commission can adopt an “IPI measure,” meaning a penalisation for Chinese bidders in EU procurement.   

This poses as an interesting intersection between trade policy and healthcare, which plays a significant role in the EU’s strategic autonomy. The IPI action can also be linked to EU’s efforts to level the big Chinese trade surplus by pushing for more market access, as Chinese exports of medical devices have doubled in the last 8 years. Certainly, this serves as further proof that bilateral economic relations are on a tightrope. The Chinese Chamber of Commerce stressed that their companies are now less willing to bid in EU public tenders, after the  Commission’s recent Foreign Subsidies investigations into green tech procurement. 

Second in line.

Trade defense detective drama continues 🕵

The EU and China are on the war path again, after both rolled out fresh batches of trade defence investigations against each other. Following the EU’s April probe into medical devices, the Commission announced an anti-dumping investigation into tinplate steel and wood flooring imports. As the US also doubled down with new tariffs on Chinese EVs, clean energy tech and chips, China responded with an investigation of its own. Targeting the EU, the US, Japan and Taiwan, Beijing will be looking into POM copolymers, which it imports to produce electronics, automotive and medical equipment. 

This tit-for-tat comes on top of the ongoing EU investigation into Chinese EVs, with a recently issued warning by the Commission that Chinese carmakers are insufficiently cooperating with the probe, risking even higher penalties. As the EU’s decision on provisional duties is expected in early July, China’s recent retaliation doesn’t seem to be a heavy hitter. The limited scope of the probe showcases the narrow range of manoeuvres Beijing can afford when facing Brussels and Washington.​ 

Ensuring a legacy on chips’ supplies 🌐

The EU is turning up the heat on the semiconductor industry, probing how dependent it is on Chinese-made legacy chips. These chips are less sophisticated than the ones that, for example, power AI platforms or smartphones, but still crucial for cars, household appliances and medical devices. With concerns over China’s heavy subsidies and market dominance, currently close to a third of global capacity, the Commission will run targeted surveys, eyeing preliminary results by summer’s end.  

The US and EU are already in sync: at the latest Trade and Technology Council, both sides agreed to start sharing market data and intelligence. If they assess risks to their legacy chips’ supply chains, they could coordinate on new actions against China, possibly in the form of export controls or incentives for domestic production. 

One trade deal enters into force – many others can’t say the same 🇳🇿

Sealed in 2022, the EU-New Zealand FTA entered into force on May 1st. EU and New Zealand companies will now be able to export tariff-free and have more access each other’s service market and public procurement. EU farmers will also start benefiting from trademark protection over several iconic products. Policymakers and officials praised the deal for its record-high sustainability standards and their enforceability.  

There is no better moment to take stock of what didn’t work out in President von der Leyen Commission’s trade policy. Across these 5 years of legislature, only two other deals with Chile and Kenya have been finalised, while more negotiations failed. With Mercosur and Australia, notably, the fracture between EU farmers’ requests of protection and EU exporters’ goal to open new markets proved unsolvable. Negotiations with less free-trade loving countries, like India and Indonesia, had only limited progress. Still, one can argue, the EU has been more of a trade promoter than the US, with open trade featuring very low on both President Trump and Biden’s agendas. 

While familiar challenges remain, the new Commission means new opportunities to try limiting the push for agri-food imports and strong social and environmental provisions. Another question is whether the next Commission will continue the practice of the so-called “mini deals”, aimed at facilitating cooperation in specific areas like critical minerals, energy, of digital, rather than tariff liberalisation. What’s sure is that this mandate gave policymakers plenty of lessons. As trade becomes increasingly intertwined with security and sustainability, no smooth sailing is on the horizon. 

Over on X: How to make trade sexier, according to Brussels bubble reporters. 

On our radar.  

29 May | Women in Trade Network and BSA | The Software Alliance will bring together three female experts in trade to unpack the current landscape of digital trade agreements and data flows between the EU and the rest of the world. Register here

29 May | South China Post’s Finbarr Bermingham will talk EU-China relations in an IIEA discussion

30 May | At the next Foreign Affairs Council, ministers will chat all things trade and competitiveness, including the future of EU trade policy, EU-Africa trade relations and the follow up to the 13th WTO Ministerial Conference. 

5 June | We will be hosting an online event with SEC Newgate Australia and the European Australian Business Council on the EU elections, featuring Luisa Santos (BusinessEurope), Phil Hogan (ex-Trade Commissioner) and Stefan Grobe (Euronews) as speakers. To register, please email CJohnson@eabc.com.au  

13 June | Stakeholders will have a chance to unpack EU-Ukraine trade during the upcoming 7th EU-Ukraine Civil Society Forum

13-15 June | G7 members will hold their usual discussions, while enjoying the weather in Apulia. 

What we’re reading.  

Our latest #BrusselsCalling media debate set out to explore the challenges third countries face when doing business in Europe. Our recap captures four key takeaways from the debate, moderated by the Ambassador of Canada to the EU, Dr. Ailish Campbell. 

Now that we have a trade defence toolbox, the next Commission needs to develop an appropriate doctrine of use. This was Sabine Weyand’s key message, top official at DG TRADE, at an ECIPE event. Navigating relations with the US and China and managing the global trade network are set to be the main trade challenges for the next Commission. Flexibility and open-mindedness will be central ingredients for the latter task, Weyand says. 

You must have heard about President Biden’s new anti-China duties, which would dwarf the ones of President Trump’s years. The consequences for the EU still need to be seen, but in the meantime, EURACTIV exposes the (unsurprisingly very different) reactions from Germany and France

Some optimism from WTO’s latest forecasts. Trade flows are expected to gradually recover in 2024 and 2025. However, geopolitical tensions still loom. Regional conflicts and US-China spats can drive prices up and trade down.   

Still have questions? Drop a message.   

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