In a significant shift in economic policy, the European Commission has unveiled the “Buy EU” plan aimed at bolstering domestic low-carbon industries and positioning Europe to better compete with China. This initiative, encapsulated in the proposed Industrial Accelerator Act, mandates that public spending prioritise EU-made goods and low-carbon content. The plan, which reflects a dramatic change in Brussels’ approach to economic strategy, could potentially extend to countries like the UK, provided there is mutual market access.
A Shift in Economic Strategy
At a press conference in Brussels, Stéphane Séjourné, the European Commission’s vice president overseeing industry, characterised the Industrial Accelerator Act as a “change in doctrine” that would have seemed improbable just a few months ago. This new policy framework comes in response to rising energy prices exacerbated by global conflicts, particularly in the Middle East, which have highlighted the necessity for a robust European industrial base to secure strategic autonomy and facilitate a successful climate transition.
“This act is not just a response to competition; it is essential for Europe’s future,” Séjourné emphasised, underscoring the urgency of revitalising the continent’s industrial sectors. The plan is also inspired by earlier proposals from the French government, aiming to reclaim Europe’s lost ground in industries such as solar technology, where competition from China has led to significant market share erosion.
Procurement Rules and Economic Relationships
The proposed regulations stipulate that public authorities must adhere to specific “Made in the EU” content requirements when allocating public funds. For instance, electric vehicles purchased with public money must contain at least 70% EU-made components, excluding batteries. This approach could also apply to essential materials like low-carbon steel and aluminium, which would need to be sourced locally, driving up demand for domestic manufacturing.
Moreover, foreign companies looking to invest in key sectors must commit to creating jobs within the EU. As part of the requirements, a foreign firm investing €100 million or more in clean technology would need to ensure that at least half of the jobs go to EU citizens, alongside meeting conditions related to ownership and innovation. This is a strategic move to level the playing field in an increasingly competitive global market.
Potential Impact on Trade Relationships
The ambitious proposal has raised concerns among key trading partners, including the UK, Japan, and Turkey. UK Business Secretary Peter Kyle recently urged the EU to avoid erecting trade barriers during his visit to Brussels. The draft regulation suggests that countries with free trade agreements or customs unions with the EU, such as Norway, Iceland, and Turkey, may be regarded as local producers. This could also extend to 21 other countries that are signatories to the World Trade Organization’s government procurement agreement, positioning the UK and Canada as potential beneficiaries.
While the plan has garnered support from some quarters, such as Green MEP Bas Eickhout, who advocates for a more robust industrial strategy, it has also drawn scepticism. Thilo Brodtmann, CEO of the German Engineering Federation (VDMA), cautioned that overly stringent local content rules could detract from addressing more pressing challenges, including high administrative costs and the need for technological innovation.
Aiming for Economic Revival
The overarching goal of the Industrial Accelerator Act is to reverse the decline in Europe’s manufacturing sector, targeting an increase in manufacturing’s contribution to the continent’s GDP from 14.3% in 2024 to 20% by 2035. With current statistics revealing that approximately 50% of the batteries and a staggering 94% of solar photovoltaic modules used in the EU are imported from China, the urgency for a strategic overhaul is palpable.
By fostering a more self-sufficient industrial ecosystem, the European Commission hopes to create and retain about 150,000 jobs in the clean technology and low-carbon sectors. This move reflects a broader recognition that Europe must adapt its economic policies to ensure resilience in the face of global challenges.
Why it Matters
The “Buy EU” initiative represents a pivotal moment in European economic policy, signalling a shift towards protectionism in an era dominated by global competition. As the EU seeks to reclaim its industrial strength and safeguard jobs, this plan could reshape trade dynamics not only within Europe but also with key international partners. The outcome will hinge on the balance between fostering domestic industries and maintaining open trade relations, a tightrope that could determine Europe’s economic future in the coming years.