Brussels is pushing for a significant shift in the production landscape, aiming for a minimum of 70% of critical goods to be 'made in Europe'. This ambitious policy, set to impact sectors like cars and clean technologies, is designed to reduce the bloc's reliance on China and bolster domestic industries. However, it comes with potential drawbacks, including increased costs for EU companies and the possibility of pricing some products out of the market.
The proposed 'made in Europe' targets, as outlined by French commissioner Stéphane Séjourné, are part of a broader strategy to prioritize local production. This move is a response to the challenges faced by European industries, which have struggled to compete with cheap imports from Asia. The policy could potentially cost EU companies over €10 billion annually, as they are encouraged to invest in more expensive European components.
The scope of this legislation draws inspiration from China's 'Made in China 2025' and 'China Standards 2035' policies, which mandated foreign companies to form joint ventures with Chinese businesses to access the Chinese market. The EU aims to strike a balance between protecting its industries and maintaining its commitment to openness, a principle deeply rooted in European values.
Initially skeptical countries like Germany are now considering the benefits of 'buy-European' rules, especially in sectors like the car industry and clean technologies, such as solar panels. The discussion revolves around setting local content thresholds of up to 70%, but the actual targets will vary based on the criticality and dependency of each sector.
For instance, in the automotive sector, government incentives will be granted only to vehicles meeting specific benchmarks. Similarly, batteries will need to contain a certain percentage of European-made components. This measure will apply exclusively to the use of public funds, including procurement contracts and state-backed loans and grants, with an additional focus on the EU's production capacity for each component.
The proposed law, named the Industrial Accelerator Act, is not without its challenges. There are ongoing discussions and potential changes or delays, as the European Commission grapples with internal divisions over certain clauses. The French commissioner advocates for a definition of 'European' limited to the EU, while the commission's trade directorate expresses skepticism about local content thresholds, which are being pushed by Séjourné's industrial policy department.
Despite these complexities, the policy has sparked important conversations about the future of European manufacturing. It raises questions about the balance between protectionism and free trade, and the potential impact on global supply chains. As the discussions continue, the EU must carefully consider the implications for both its industries and its international trade relationships.
