ALDEN BIESEN, Belgium — A newly revealed draft of the European Union’s landmark Industrial Accelerator Act (IAA) advocates for a more open approach towards trade partners in public procurement while simultaneously aiming to restrict Chinese investments in key sectors, including green technology. This draft, which was disclosed on Thursday, signifies a shift in the EU’s trade policy amid growing concerns about China’s dominance in global markets.
Support for trusted trading partners
The draft IAA introduces a definition of “Made in EU” that encompasses goods from “trusted partners” such as the United Kingdom and Japan, much to their relief. This development seeks to raise the barriers against investments from China by imposing limits on foreign direct investment from countries that hold a significant share of a particular global industry. The revelation of this draft coincided with an EU leaders’ retreat at a Belgian castle, where discussions focused on strategies to combat the bloc’s industrial decline, exacerbated by China’s export supremacy and the United States’ technological leadership.
European Commission President Ursula von der Leyen is navigating a complex landscape of differing national interests, balancing France’s inclination towards protectionism with the more open approaches advocated by Germany, Italy, and Nordic nations. During the retreat, leaders downplayed any divisions, with Italian Prime Minister Giorgia Meloni expressing alignment with German Chancellor Friedrich Merz on industrial strategies. Meloni remarked,
“It is not something that we do against someone else, by excluding someone else,”
addressing any perceptions of attempts to isolate French President Emmanuel Macron.
Concerns from China and future challenges
Despite the optimism surrounding the draft, it has faced criticism from Chinese businesses. The Chinese Chamber of Commerce to the EU cautioned that the IAA’s latest version could diminish investment confidence among leading Chinese enterprises, stating that
“Beyond the political signaling, many of the proposed measures raise serious practical concerns, including the feasibility of mandatory local partnership requirements, which in many cases may simply not be commercially or technologically viable.”
This skepticism highlights the significant challenges ahead in implementing a cohesive industrial strategy across EU member states, each with its own agenda.
The draft also suggests broadening the definition of European preference in public procurement, particularly in industries tied to energy production, net-zero technologies, and automotive manufacturing. This move is intended to alleviate fears of a “Fortress Europe” scenario, wherein only EU-produced goods would be favored. The IAA aims to include content from the European Economic Area as well, which encompasses nations like Norway, Iceland, and Liechtenstein, while also considering manufacturing from trusted partners as equivalent to EU content.
Industry Commissioner Stéphane Séjourné asserted earlier on Thursday that the initiative would not preclude trade partners, reaffirming that there is substantial political and industrial backing for the Commission’s endeavors. In the United Kingdom, Finance Minister Rachel Reeves expressed support for a concept akin to “Made in Europe,” emphasizing the importance of shared values among trading nations. Japan, a key player in the automotive sector, also stands to benefit from this shift, with Honda Europe’s head of government affairs, Patrick Keating, affirming that Japan qualifies as a trusted partner.
The EU is intensifying its efforts to limit foreign direct investments from China, particularly targeting sectors where China currently holds a dominant position, such as batteries, electric vehicles, solar technologies, and the processing of essential raw materials. If the draft remains unchanged, the IAA would impose restrictions on investments from nations controlling over 40 percent of global manufacturing capacity in these industries. Legal experts have noted that these provisions reflect a direct challenge to Chinese investments, mirroring policies seen in China during the 1980s.
Moreover, the IAA would compel governments to prioritize the purchase of climate-friendly materials, although the specifics of this requirement remain vague within the draft. The act also proposes the introduction of voluntary green steel labels to promote environmentally sustainable practices.
Von der Leyen emphasized the significance of public procurement as a substantial tool for the EU, equating it to 15 percent of the bloc’s GDP. She stated,
“This is massive financial firepower controlled by European governments. But too often, we see that our public buyers have to take the subsidized foreign products instead of the high-quality European alternatives. That is homegrown value that we are leaving on the table.”