For decades, international trade law was premised on the expectation of regulatory convergence. However, the shifting dynamics of European Union (EU)–China relations reveal a contrasting reality: the strategic instrumentalization of domestic legal orders to construct new regulatory barriers to trade. This article introduces the concept of ‘Managed Legal Incompatibility’ to analyse this shift. By examining the structural asymmetry between the EU’s rights-based constitutionalism – manifested in the new Corporate Sustainability Due Diligence Directive (CSDDD) and the Forced Labour Regulation – and China’s production-oriented, state-centric legal order, it argues that trade is no longer about managing openness, but about to conditional inclusion. The article demonstrates how the collision of these systems generates a ‘compliance paradox’ for firms, necessitating the bifurcation of supply chains and marking a transition from liberal market integration to functionally re-bordered exchange.
Journal of World Trade