EU’s New Industrial Law Sparks Backlash from China Over Discrimination Concerns

The European Union’s push to bolster its domestic industries through a new legislative proposal has drawn sharp criticism from China, which has warned of potential countermeasures if the plan moves forward. The dispute centers on the EU’s “Made in Europe” initiative, designed to prioritize locally produced goods in public procurement and strategic sectors, a move Beijing argues discriminates against foreign companies, including Chinese firms operating within the bloc.

EU’s “Made in Europe” Plan Under Scrutiny

The European Commission unveiled the “Clean Industrial Deal” earlier this year, a cornerstone of its broader industrial policy aimed at enhancing the competitiveness and resilience of EU-based manufacturers. The proposal includes measures to allocate €100 billion ($105 billion) to support clean manufacturing within the bloc, with a focus on sustainability and “Made in Europe” criteria for public and private procurement contracts. According to the Commission, the plan is intended to reduce reliance on external suppliers and strengthen the EU’s strategic autonomy in key industries such as clean technology, medical devices, and digital infrastructure.

However, the China Chamber of Commerce to the EU (CCCEU) has raised concerns that the policy could violate World Trade Organization (WTO) principles, specifically the most-favored-nation and national treatment obligations. In a statement to the Global Times, the CCCEU argued that the “Europe First” approach in public procurement may disadvantage foreign competitors, including Chinese enterprises that have played a “significant role” in the EU’s strategic sectors. The chamber warned that protectionist measures could place Chinese companies at a competitive disadvantage and risk breaching international trade rules.

China Threatens Countermeasures

China’s government has responded to the EU’s proposal with formal criticism, framing it as a protectionist move that could disrupt global supply chains. On Monday, Chinese officials warned that they would take “countermeasures” if the “Made in Europe” plan is adopted in its current form. While Beijing has not specified what those measures might entail, the threat underscores the escalating tensions between the two economic powers over trade and industrial policy.

The EU’s initiative comes amid broader efforts to reduce dependence on Chinese manufacturing, particularly in sectors deemed critical to national security and economic stability. Earlier this year, the bloc introduced restrictions on public procurement contracts for medical devices valued above €5 million, effectively barring Chinese companies from bidding on such projects. These steps align with the EU’s broader strategy to phase out “high-risk” technologies from foreign suppliers, a policy that has already drawn backlash from Chinese tech firms like Huawei.

WTO Compliance and Global Trade Implications

The CCCEU’s concerns about WTO compliance highlight the legal and diplomatic challenges posed by the EU’s industrial policy. The WTO’s Agreement on Government Procurement (GPA) requires signatories to treat foreign and domestic suppliers equally in public procurement, provided they are party to the agreement. While the EU is a signatory, the “Made in Europe” criteria could be interpreted as a deviation from these principles, potentially opening the door to formal disputes.

Analysts note that the EU’s approach reflects a growing trend among Western economies to prioritize domestic production in response to geopolitical uncertainties and supply chain vulnerabilities exposed by the COVID-19 pandemic and the war in Ukraine. However, critics argue that such policies risk fragmenting global trade and could provoke retaliatory measures from trading partners, particularly China, which remains a major supplier of critical components and raw materials to Europe.

Next Steps and Potential Outcomes

The European Commission has defended the “Clean Industrial Deal” as a necessary step to ensure the EU’s long-term competitiveness and reduce strategic dependencies. Commission President Ursula von der Leyen has emphasized that the plan is not intended to exclude foreign businesses but to create a level playing field for European industries. However, the proposal must still be approved by the European Parliament and member states, a process that could see further amendments or delays.

For now, the standoff between the EU and China remains unresolved. Beijing has called for “constructive dialogue” to address its concerns, while EU officials have signaled a willingness to engage in discussions—provided the bloc’s core objectives are not compromised. The outcome of these negotiations could set a precedent for future trade policies, with implications for global supply chains and economic relations between Europe, and Asia.

As the debate unfolds, the focus will likely shift to how the EU balances its industrial ambitions with its commitments to open and fair trade. For Chinese businesses operating in Europe, the stakes are high: exclusion from public procurement contracts and strategic sectors could force a reevaluation of their investment strategies in the region. Meanwhile, the EU faces the challenge of implementing its vision without triggering a broader trade conflict that could harm its own economic interests.