EU Launches ‘Made in EU’ Act to Counter China’s Dominance

Brussels has unveiled a landmark plan to bolster the competitiveness of European manufacturing, aiming to reduce reliance on Chinese imports and accelerate the continent’s transition to a low-carbon economy. The “Industrial Accelerator Act” (IAA), announced on Wednesday, will introduce local content requirements for public procurement and subsidies across key sectors.

A Shift in Economic Doctrine

The IAA represents a significant departure from the European Union’s traditionally open-market approach. European Commission Executive Vice-President Stéphane Séjourné described the act as “a change in doctrine” and stated that such a plan would have been “unthinkable even just a few months ago.”

Addressing Strategic Vulnerabilities

Séjourné emphasized the urgency of the situation, warning that without intervention, “100% of clean tech technology will be produced in China.” He also highlighted the potential for the complete offshoring of European cement and steel industries if action isn’t taken. The plan is partly inspired by France’s efforts to prioritize European suppliers and is a direct response to competition from Beijing, which has already displaced Europe’s once-thriving solar panel industry.

Key Provisions of the Industrial Accelerator Act

The IAA will mandate “Made in EU” and low-carbon content targets for public spending and subsidy programs in strategic sectors, including:

• Aluminium
• Cement
• Steel
• Wind turbines
• Electrolysers
• Electric vehicles

Specifically, at least 70% of the components of electric cars – excluding the battery – will necessitate to be manufactured within the EU to qualify for government procurement or public funding. Authorities will also be required to purchase more expensive, low-carbon versions of steel, aluminum, and cement.

Reciprocity and Trade Partnerships

EU officials are assessing trading partners based on reciprocity. Countries with free-trade agreements or customs unions with the EU, such as the UK, Canada, Norway, Iceland, and Turkey, could be considered domestic producers for procurement purposes. However, countries with more closed markets, like the US and India, are likely to face restrictions. Séjourné indicated a “reciprocity assessment” of EU trading partners will be conducted in the coming months.

Impact on Jobs and Manufacturing Output

The European Commission aims to increase the manufacturing sector’s contribution to the EU’s GDP from 14% to 20% by 2035. The IAA is projected to create or preserve 150,000 jobs in the clean tech and low-carbon sectors. The commission estimates a potential loss of 600,000 jobs in the automotive sector over the next five to ten years without intervention.

Concerns and Reactions

The plan has raised concerns among trading partners. The UK business secretary, Peter Kyle, has urged the EU to avoid “putting up barriers.” Some industry representatives, like the German Engineering Federation (VDMA), have cautioned that local content rules should be implemented carefully, arguing that they could distract from addressing fundamental challenges such as high administrative costs and a lack of technological leadership.

Broader EU Efforts to Limit Chinese Influence

The IAA is part of a wider effort by the EU to limit Chinese influence. The EU is also considering new instructions to impose additional security requirements on foreign companies bidding for public contracts, specifically targeting Chinese firms. This includes a potential overhaul of the EU’s budget rules, applying to its current and future €1.8 trillion long-term budget starting in 2028. Foreign firms investing in key sectors will be required to guarantee job creation for EU workers, mirroring practices in China.

the EU plans to phase out gear supplied by companies based in “high risk” countries from critical infrastructure, such as high-speed telecom networks, in a move seen as targeting Chinese companies like Huawei and ZTE.