The European Commission (EC) has proposed new legislation that would introduce "Made in EU" requirements for public procurement and subsidies in key manufacturing sectors and to reduce China reliance, reported Reuters.
The proposed Industrial Accelerator Act (IAA) seeks to increase the share of manufacturing in the European Union’s economic output from 14% to 20% by 2035.
It targets industries including aluminium, cement, steel, wind turbines, electrolysers and electric vehicles, with specific low-carbon and local content requirements attached to public funds used for purchasing or subsidising these products.
The draft law responds to concerns about overreliance on imported technology and materials from non-EU countries, particularly China, which currently dominates many green technology supply chains.
The Commission stated that without intervention, the bloc risks losing domestic capacity in sectors such as steel and cement, as well as up to 600,000 jobs in the automotive industry within a decade.
Proponents argue that similar local content rules already operate in the US, China and other major economies.
The IAA will apply its rules both to EU member states and certain non-EU countries deemed “trusted partners,” with eligibility determined by existing free trade agreements or participation in the World Trade Organisation’s Government Procurement Agreement.
However, access may be restricted if partner countries do not grant reciprocal access to EU companies or maintain national preference policies.
The list of trusted partners remains under debate among member states; France supports a narrow definition limited mainly to the EU single market area, while Germany favours a broader approach. Britain’s inclusion is also contested among EU governments.
Rules under the IAA will be phased in over three years and include conditions for foreign direct investment in strategic sectors.
Investments exceeding €100m ($115.6m) from countries controlling more than 40% of global production, criteria likely to affect Chinese investors, would be subject to caps on foreign ownership, minimum requirements for local employment and provisions for technology transfer.
The aim is to prevent foreign firms from assembling products within the EU using predominantly imported components.
Industry reactions are mixed. Automotive suppliers’ associations have welcomed elements of the proposal for supporting employment but urge caution regarding partner country selection.
Car manufacturers have expressed concerns about potential impacts on cost structures and supply chains.
Some industry groups excluded from initial drafts seek inclusion under the act, while others prefer exemption.
The proposal follows months of negotiations within the Commission and between EU governments, reflecting divisions over definitions of European-made products and which nations should receive preferential treatment.
The measure now advances to negotiations between the European Parliament and member states before final approval.
