"Made in EU" requirements: Europe is copying China ... a bit

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The European Commission is presenting its proposal for products "Made in EU" – the so-called "Industrial Accelerator Act" (IAA). It is intended to strengthen EU manufacturers and increase their market share in the long term, partly by addressing what the EU considers unfair measures in other countries. However, due to its intertwining with the Net Zero Industry Act, the mix of goals and requirements has become rather chaotic.

Lead markets with state anchor customers

At the core of the proposal presented by French Internal Market Commissioner Stéphane Séjourné are state authorities as anchor customers, who typically spend a lot of money through tenders. In the future, they are to help establish EU standards on the market for CO₂ targets and Made-in-Europe products. The IAA is primarily intended to strengthen industries that would otherwise not be able to compete on price with non-EU competitors. This also involves saving 30 million tons of CO₂.

Therefore, cement, aluminum, and steel manufacturers, whose production is currently being converted to lower CO₂ emissions but who are not price-competitive worldwide, should fall under special EU protection. This also includes nuclear power, photovoltaics, wind energy, heat pumps, batteries, and electrolyzers. The IAA is also intended to provide greater protection for the automotive industry, especially suppliers: Public authorities are to consider EU criteria for electric car components and batteries, for example.

Anyone who wants to win a public contract will then have to be able to prove that their own products meet the requirements. This could be EU parts included in solar systems or low-CO₂ materials and EU components for electric cars for a university. The exact requirements are to be regulated in appendices to the law, which can also be adapted more easily later.

"Given the unprecedented global uncertainty and unfair competition, European industry can count on the provisions of this law," says Séjourné. He wants Europe to regain larger market shares in key future industries and strategic basic industries.

Digitalization plays no role

However, they are far from being as strict as the announcements suggest. Firstly, the EU Commission's proposal has major content gaps. "Artificial intelligence and data centers play virtually no role," notes Ralf Brinkhaus, a CDU digital policy spokesperson in the Bundestag. "This means we will not remain competitive against the USA, India, and China."

Even the proposed requirements go too far for those affected: The energy transition would be slowed down and energy prices could rise, warns Ingbert Liebing, CEO of the Association of Municipal Enterprises (VKU). Unlike their private competitors, his members, as public actors, would have to meet the criteria. Liebing therefore calls for cross-sectoral Made-in-EU standards instead.

There are numerous exceptions because the EU does not want to provoke trading partners with its proposal. Anyone who adheres to standards comparable to those of the EU will be treated the same as Made-in-EU. In fact, a large part of the measures is implicitly aimed at comparable requirements in the USA and, above all, China, where such "localization requirements" have been law for many years.

Investors must comply with rules

And in a third part of the Industrial Accelerator Act, the EU Commission has also taken inspiration from other countries: the requirements for investments by non-EU foreigners in batteries, electric cars, photovoltaic technology, or critical raw materials. Anyone wishing to invest more than 100 million euros in the EU and coming from a country with more than 40 percent global market share will in the future have to meet four out of six criteria. All of which have the same goal: to keep value creation in the EU. China and the USA also have comparable requirements.

How the "Industrial Accelerator" actually progresses on its way through the EU institutions, or whether it will be put on hold for now, depends not least on the member states. They have expressed extremely divergent interests. While the government in Paris absolutely wants to sharpen the instrument, Berlin had already significantly dampened expectations in previous months – not least out of fear of reactions from Beijing and Washington. In any case, the EU Commission hopes for a swift adoption and wants to check after two years whether the instrument has proven itself or needs to be refined.

(vza)