The European Commission has proposed a “Buy EU” plan to boost domestic low-carbon industries and help the continent compete against China.
The commission published a draft regulation – called the Industrial Accelerator Act – on Wednesday, setting demands for EU-made and low-carbon content on bodies spending public money. The rules mark a major shift in economic thinking from Brussels, long a bastion of open markets.
But after internal disputes, EU officials left the door open to including countries with close economic ties to the bloc, such as the UK, if there is reciprocal market access.
Stéphane Séjourné, the European Commission vice president in charge of industry, described the act as “a change in doctrine” that would have been “unthinkable even just a few months ago”.
Alluding to the turmoil in the Middle East that has sent energy prices soaring, Séjourné, a former French foreign minister, said events in Iran underscored the need for a plan to shore up European industry. “Without a strong industrial base, without a European social model, we won’t have any climate transition and we won’t have strategic autonomy,” he said.
Inspired by French government ideas, the plan is a response to intense competition from Beijing that has seen Europe lose its once thriving solar panel industry to China. Séjourné said: “If we do nothing then it’s quite clear that very soon 100% of tech technology will be produced in China.”
EU officials suggested the UK and Japan could be counted as domestic producers when it comes to procurement of electric vehicles, because their markets are open.
In contrast, countries with more closed markets such as the US and India would be likely to face restrictions. Séjourné declined to specify “who’s in, who’s out”, while promising a “reciprocity assessment” of the EU’s trading partners in the coming months.
It was quite possible, he added, that European cement and steel industries would be “offshored completely” in the next few years without action.
EU officials said that today about 50% batteries and 94% of solar photovoltaic modules and cells used in the EU are imported from China.
The plan seeks to reverse Europe’s industrial decline, setting a target that manufacturing will represent 20% of Europe’s GDP by 2035, up from 14.3% in 2024.
To reach this goal, local and national authorities would be required to meet “Made in the EU” content targets when spending public money or designing subsidy programmes for goods in “strategic sectors” including green tech and cars. For instance, at least 70% of components of electric cars – excluding the battery – would need to be made in the EU, when bought by governments or benefiting from public funds.
Authorities would also face requirements to buy more expensive low-carbon steel, aluminium and cement.
Foreign firms investing in the EU in key sectors will also have to guarantee to create jobs in the bloc – an attempt to mirror Chinese requirements. For example, a foreign firm making an investment of €100m or more in clean tech would have to ensure at least 50% of jobs go to EU workers, as well as meeting other conditions on ownership, innovation and research.
The commission believes the plan could create and preserve 150,000 jobs in the clean tech and low carbon sectors.
The plans have sparked alarm among trading partners, including the UK, Japan and Turkey. The UK business secretary, Peter Kyle, urged the EU to stop “putting up barriers” during a visit to Brussels last week.
The draft regulation states that countries with an agreement creating a free-trade area or customs union with the EU would be considered as local. That implies countries in the European Economic Area, such as Norway and Iceland, and also Turkey, which has a customs union with the EU.
The same openness could apply to 21 countries that have signed a WTO agreement on government procurement, including the UK and Canada.
The plans were broadly welcomed by the co-leader of Green MEPs, Bas Eickhout. “Europe needs to leave behind a bit the naivety that we had,” he told reporters ahead of the final publication. “There is no global open market. Look at the US, look at China, look at all the big players; they are all doing industrial policies. It’s about time Europe starts doing that as well, and in a way the Industrial Accelerator Act is a first careful step.”
The German Engineering Federation, the VDMA, which represents 3,000 small and medium-sized companies, warned that local content rules should be designed with great restraint. “The focus on local content distracts from Europe’s real challenges – such as high administrative costs, a weakened internal market and Europe’s lack of technological leadership,” Thilo Brodtmann, the chief executive of the VDMA, said.
