From Carrots to Sticks: European Commission Bars Chinese Bidders from Medical Device Tenders

On 20 June 2025, the European Commission implemented measures under the International Procurement Instrument (IPI) for the first time since its introduction in 2022. The measures target medical devices from the People’s Republic of China (China). For at least the next five years, Chinese companies will be restricted from bidding on high-value tenders for medical devices such as X-ray machines, MRI scanners, and dental surgical instruments. In doing so, the Commission seeks to compel China to grant EU bidders access to its domestic procurement market for these devices. The first Commission implementing regulation imposing measures under the IPI offers an interesting insight into the tensions at the heart of this instrument. Can the EU gain access to foreign procurement markets by restricting access to its own?

Introducing: the International Procurement Instrument

The IPI is a legislative instrument that empowers the Commission to take measures against third countries that do not grant EU companies reciprocal access to their own national procurement markets. Measures can consist in obliging EU tenders to adjust scores downward to account for the lack of reciprocal access, or to even exclude tenders from the bidding procedure altogether.

The IPI aims to open up foreign procurement markets for EU companies. Until the enactment of the IPI, the EU has pursued greater access to procurement markets primarily thhrough its bilateral free trade agreement (FTA) agenda. In such agreements, the EU used the promise of greater access to its large procurement market to convince treaty partners to open up their own market. The IPI works differently: by empowering the Commission to cut access to the EU’s procurement market in the face of a lack of reciprocal access, the IPI replaces the carrot with a stick.

Will it work?

Reading the first implementing regulation adopted under the IPI, one cannot help but wondering how effective the IPI is likely to be.

To begin with, the IPI can only be used to target a small number of countries. The EU needs to make sure its actions under the IPI comply with its international obligations, both under the WTO’s Agreement on Government Procurement (GPA) and its bilateral FTAs, which often contain provisions to open up procurement markets. To avoid conflicts, the IPI will only be applied to countries that are not a party to the GPA and with whom the EU does not have an FTA that includes such provisions (recital 6). This excludes countries such as Canada, Mexico, Japan, Vietnam or Ukraine, with which the EU has an FTA, as well as countries such as countries such as the US or Australia, with which the EU currently does not have an FTA but who are party to the GPA. Moreover, the IPI cannot be used vis-à-vis countries that benefit from the EU’s Everything But Arms (EBA) initiative (recital 16), which is an EU trade scheme granting duty-free and quota-free access to all products—except arms and ammunition—from the world's least developed countries.

The extensive list of exclusions results in the IPI being applicable to a limited number of states, including countries like India, Brazil, Indonesia, Turkey, and China. However, with several of these countries the IPI is likely to face other headwinds.

Maximum pressure versus minimum self-harm

The IPI is likely to suffer from an in-built tension. For measures that restrict access to the EU’s procurement market to have teeth, the target country needs to have a meaningful stake in the EU’s own procurement market, with many exporters selling their goods or services in the EU. Absent such a stake, the EU will have limited leverage as the impact of restricting access to the EU procurement market on the target country’s economy is likely to be minimal. Absent a meaningful economic hit following adoption of the measures, opening up the domestic procurement market is not likely to be high on the target country’s policy agenda.

At the same time, the larger the share of the target country’s companies of the EU procurement market, the more pain restricting access will inflict on contracting authorities across the EU. These authorities will have to look for alternative sources of supply. These may be less attractive, be it in terms of cost (they may be more expensive) or in terms of features (they may be less advanced).

As is the case with other punitive instruments such as restrictive measures, there is always a trade-off between leverage and self-harm. Finding that sweet spot is hard: if the target country’s exports do not export much to the EU, there will be little leverage; if there are significant exports, there will be more leverage, but also more pain. It does not help, in this regard, that the pain is not likely to be felt equally across the EU, with some Member States more heavily reliant on the target country’s supplies than others, and some Member States being home to (potential) exporters who want nothing more than greater market access. As is the case with (other) trade defence instruments, the politics can be complicated.

The case of the medical device procurement market

The above tension is visible in the measures the Commission adopted against China concerning medical devices. The Commission does not provide figures, but it is fair to assume there is a is a fairly large Chinese domestic procurement market in the medical devices sector. EU companies have a very hard time entering that market due to buy local requirements, and even obligations to share technologies with local players. On the EU side, there is also a large domestic procurement market. Chinese companies have easier access to the EU market compared to their EU counterparts in China.

Yet, as things stand today, the Chinese share of the EU medical devices procurement market is comparatively small. In its regulation, the Commission mentioned that in 2023 Chinese companies exported medical devices worth 3 to 4,5 billion euros to the EU in the framework of procurement procedures. Since the measures adopted by the Commission cover only high-value tenders worth over 5 million euros, the value of the Chinese imports that will be affected by the measures is smaller still: around 1 to 1,2 billion euros annually (recital 49).

These are small potatoes compared to the total size of the medical device industry in China. According to Statista, a data aggregator, China’s medical devices market is likely to amount to a total revenue of nearly 40 billion US dollars in 2025, or about 35 billion euros. At the same time, the EU’s own industry seems fairly large (and much larger than that of China), employing around 700 000 people across the EU, as per the implementing regulation. EU industry already exports a lot (about 69 billion euros worth in 2023), and has surplus production capacity enabling it to produce and export more moving forward. This would suggest that opening the Chinese procurement market to EU companies could expose local players to serious EU competition.

Given this landscape, it seems unlikely that the Chinese government will open its medical devices procurement market to EU companies. (In fact, had it been willing to do so, it would have done so during consultations the Commission organized during its investigation.) Opening up its domestic market would allow China to protect 1 to 1,2 billion euros of annual exports. And even if the measures turn out having a chilling effect on Chinese companies bidding for other, lower-value tenders, the total harm to China’s exports would not amount to more than 6,1 billion euros, which is the current total value of Chinese exports of medical devices to the EU. At the same time, opening China’s domestic procurement market would potentially lead to significant economic harm for local companies, possibly amounting to more than the abovementioned 1 to 1,2 billion euros.

The calculus seems straightforward: China will not open its much larger domestic procurement market to save a small volume of exports to the EU. And even if Chinese medical device producers have ambitious plans to increase their market share in the EU in the years ahead, it still seems doubtful that China’s government would be willing to grant greater market access to EU companies if this risks leading to a loss of market share for domestic companies.

The thing about sticks

These speculations, while of course not scientific, do point to a weakness of the IPI, which has to do with its choice for sticks over carrots: it is difficult to use sticks if the stick you are carrying is not very big. And in this case, the stick is indeed not very big: it is worth slightly over 1 billion euros (i.e. the value of current Chinese exports in the context of tenders).

Moving forward, the Commission could of course wield a larger stick, e.g. by targeting Chinese participation in infrastructure projects in the EU, such as wind turbines, rail, telecommunications. However, excluding Chinese companies from tenders in these sectors would harm the EU side much more than banning Chinese products for which there are ample (including EU-sourced) alternatives. Projects would become (even) more expensive and perhaps impossible to realize, putting additional strain on the already tight budgets of contracting authorities, and putting in jeopardy policy objectives such as the green or digital transitions. In these contexts, the assessment of whether it is in the Union interest to adopt measures is likely to turn out differently, and not necessarily in favour of taking measures.

This leaves the Commission in a pickle: where measures are possible, they are not likely to be effective because the target country can handle the pain; where measures may be more effective, they risk hurting the EU more than it itself is willing or able to handle. Where this leaves the IPI, we will have to see. Yesterday’s measures were, after all, the first ever adopted. Regardless, the reflections offered here do point to the advantages of using carrots rather than sticks. Trading partners are not always easy to pressure into doing things, especially if they are as large as China. Pressure tactics moreover destroy goodwill, making it harder to make mutually beneficial agreements in the future.

Comments or questions? Email me at t.e.verellen@uu.nl.