New protectionism tilts competitive balance and redefines fair competition

Editor's note: Tang Jie is a researcher at the Chinese Academy of International Trade and Economic Cooperation under the Chinese Ministry of Commerce. The article reflects the author's opinions and not necessarily the views of CGTN. 

The global trade landscape is undergoing a structural paradigm shift. Both the United States and the European Union are actively strengthening their industrial protection mechanisms to insulate strategic domestic sectors such as clean tech, semiconductors, and electric vehicles, etc., from foreign state-backed competition.

However, while their geopolitical objectives align, they differ substantially in legal foundations, institutional decision-making, and limits on governmental discretion. The US relies more heavily on executive power and broad tariff instruments, whereas the EU generally takes action through rules-based trade defense investigations, subsidy reviews, and procurement policies constrained by EU law and member-state competences.

The fundamental difference between the current state of industrial protectionism in the US and the EU lies in the vast disparity between two political systems: Unilateral executive power and technocratic rule of law.

The US primarily relies on broad, executive-led statutory authorities granted by the US Congress to the president. These tools treat trade protection less as an administrative accounting exercise and more as an extension of national security and economic statecraft.

Section 301 (Trade Act of 1974): Allows the US Trade Representative to investigate and respond to unfair or discriminatory foreign trade practices. It is the primary vehicle for sweeping, sector-wide or country-wide general tariffs. Section 232 (Trade Expansion Act of 1962): Empowers the president to adjust imports (via tariffs or quotas) if they threaten to impair national security. Therefore, it is not difficult to see that the US pathway bypasses strict multilateral strictures, deploying broad-spectrum tariffs defensively to force supply chain decoupling or friend-shoring.

The situation in the EU is slightly different. Because the EU prides itself on being the standard-bearer for the rules-based multilateral trading order, it cannot easily levy sweeping, country-wide baseline tariffs without violating World Trade Organization (WTO) commitments. Instead, it has engineered a dense, multi-layered defensive matrix that uses targeted, quasi-judicial regulations.

As the traditional toolkit, the Anti-Dumping and Anti-Subsidy and Countervailing Duties usually require rigorous, company-specific investigations by the European Commission to prove that foreign goods are priced below market value or artificially lowered by state subsidies, causing material injury to EU industry.

The Foreign Subsidies Regulation (FSR) is an innovative, aggressive expansion. Unlike traditional trade tools that only catch goods at the border, the FSR targets the internal market. It allows the Commission to investigate and block foreign state-backed companies from buying EU firms or winning massive public procurement tenders if they have received distortive foreign subsidies.

The "Made in Europe" rules and the Net-Zero Industry Act represent the EU's pivot toward active industrial policy. Instead of raw defensive tariffs, the EU integrates "non-price criteria" —  sustainability, supply chain resilience, carbon footprint — into public auctions. While technically non-discriminatory, these rules effectively filter out heavily subsidized foreign competitors in favor of domestic or localized manufacturing.

Is "fair competition" being redefined?

When the world's two most powerful consumer markets rewrite their rulebooks, the foundational concept of global "fair competition" undergoes a structural mutation. Historically, under the neoliberal consensus, "fair competition" meant a level playing field defined by market forces, comparative advantage, and minimal state intervention. The WTO framework was built to police deviations from this norm. Today, the US and EU are effectively redefining fair competition from "neutral market access" to "structural geopolitical equilibrium."

These tools and regulations can also create new forms of protectionism, especially if large markets set standards that effectively become global requirements because firms cannot afford to forgo access to those markets. In that sense, the influence of the US and the EU extends beyond their own borders. Their regulatory choices can shape how international competition is understood and practiced worldwide — not because they formally rewrite global trade law, but because access to large consumer markets often encourages firms and trading partners to adapt to those rules. This illustrates the growing interaction between market size, regulatory power, and the evolving meaning of "fair competition" in the global economy.

By deploying these massive, market-cleaving instruments, the US and the EU are asserting that market access is a privilege, not a default right. The rules are no longer being written to facilitate frictionless trade; they are being written to compel foreign nations to alter their domestic economic structures or face exclusion. In this new era, "fairness" is unilaterally defined by the markets' power to absorb global exports — leaving developing economies and middle powers with a stark choice: Adapt to the localized standards of the West, or be shut out of the world's most lucrative consumer base. Fair competition is evolving from a narrow focus on price and market access toward a broader concept that also encompasses the conditions under which firms compete.