Building Walls and Barriers, "Made in Europe" Unlikely to "Accelerate" (Global Hotspots)

Source: People’s Daily Overseas Edition

The European Commission recently announced the legislative proposal for the “Industrial Accelerator Act,” which imposes mandatory technology transfer, foreign ownership limits, local product content, and local employment requirements on foreign investments in four key sectors: batteries, electric vehicles, photovoltaics, and critical raw materials. These restrictions apply only to investors from third countries whose global capacity in these sectors exceeds 40%, and the proposal explicitly prioritizes “EU manufacturing” in public procurement.

Since its inception, the bill has sparked controversy within the EU and internationally due to its protectionist nature. Analysts believe that, under the guise of developing EU industries and promoting green transformation, the bill erects barriers and promotes protectionism, which is counterproductive and risks undermining rules, fair competition, and global supply chain stability.

Protectionist Tendencies

A press release from the European Commission states that the “Industrial Accelerator Act” aims to increase manufacturing’s share of the EU’s GDP to 20% by 2035.

Sun Yanhong, director of the European Economic Research Office at the Chinese Academy of Social Sciences, told our reporter that the EU first proposed a “re-industrialization” strategy in 2012, with a goal to raise manufacturing’s share of GDP to 20% by 2020. However, due to shocks from the Eurozone crisis, Brexit, COVID-19, and the Ukraine crisis, the manufacturing share has actually declined.

The sluggish recovery of manufacturing has become a major challenge for EU economic growth. Data shows that in 2024, manufacturing accounts for 14.3% of EU GDP. Recent statistics from Eurostat indicate that after a 0.6% decline in December last year, industrial output in the Eurozone fell by 1.5% in January 2024, the lowest since December 2023. Major economies like Germany, Italy, and Spain all saw declines in industrial output compared to the previous month.

Bert Colijn, chief economist at ING, said that industrial output in the Eurozone in January reached its lowest level since late 2023. Rising energy prices due to Middle Eastern conflicts and increased supply chain disruptions pose new risks to industrial production, especially in energy-intensive sectors.

The “Industrial Accelerator Act” states that manufacturing is the largest source of employment and value-added contribution in the EU. However, EU industry is losing its competitive edge.

Sun Yanhong analyzed that the EU’s proposal to revisit the 20% GDP share target for manufacturing reflects a dual goal of enhancing competitiveness and safeguarding economic security. However, the main provisions of the bill essentially push for industrial revitalization and re-industrialization through government intervention and protectionist policies.

The bill stipulates that public procurement and subsidies in green and low-carbon sectors within the EU and member states must prioritize “EU-made” or products from “trusted partners,” with specific “EU origin” requirements, reaching up to 70%.

It also imposes additional conditions on major investments over €100 million in strategic sectors: if a single third country’s global capacity in electric vehicles, batteries, solar energy, or critical raw materials exceeds 40%, the project must involve technology and knowledge transfer, comply with local requirements, and ensure that at least 50% of employees are EU nationals. Analysts generally see China as a major competitor in these fields.

Unlikely to Achieve Expected Goals

The protectionist tendencies of the “Industrial Accelerator Act” have faced widespread criticism. DPA reports that many non-EU automotive manufacturers and international industry associations have voiced opposition. Originally, the bill was expected to boost EU investment attractiveness and innovation, but the European Commission introduced complex market access requirements instead. A representative from the German automotive industry association said that protectionist measures, including localization requirements, could provoke strong opposition from other countries. Some foreign media also pointed out that the bill is heavily protectionist, undermining decades of free trade and economic principles in the EU.

A spokesperson for China’s Ministry of Commerce recently stated that the bill’s measures constitute serious investment barriers and systemic discrimination, potentially violating the Most Favored Nation principle, and increasing uncertainty for Chinese companies investing in the EU.

From an international trade rules perspective, Sun Yanhong noted that the bill is highly controversial: first, prioritizing “EU-made” products may discriminate against imports, which WTO has previously ruled as violating the national treatment principle; second, restricting public subsidies to “EU-made” could constitute prohibited “import substitution subsidies” under WTO rules. If strictly enforced, the EU risks WTO disputes with trading partners.

Furthermore, given the structural obstacles to EU industrial development, the bill is unlikely to meet its goals.

Sun Yanhong pointed out that the recent intensification of deindustrialization, weakening industrial competitiveness, stems from insufficient investment and innovation in manufacturing, compounded by deep-seated issues such as market fragmentation, lagging venture capital, heavy administrative burdens, underdeveloped green and digital infrastructure, high energy costs, and a significant skills gap. These problems hinder the EU’s ability to foster an innovation ecosystem conducive to green, low-carbon, and digital industries.

“While the bill’s focus on government procurement and subsidies may temporarily support domestic industries, it cannot resolve structural contradictions or cultivate a vibrant innovation ecosystem,” she said. Overreliance on protectionism will likely increase supply chain costs, weaken corporate innovation, and deepen internal market divisions due to member states prioritizing domestic procurement, ultimately harming the EU’s industrial competitiveness and economic security.

Impact on Global Green Supply Chains

Since its proposal, the “Industrial Accelerator Act” has also sparked significant debate within the EU. Originally scheduled for last year, its implementation has been delayed multiple times due to disagreements among member states. The next step involves submitting the bill for review and negotiation by the European Parliament and the Council.

Le Figaro reports that the bill, aimed at supporting “EU manufacturing,” has recently triggered fierce debates among member states and within the European Commission. A large European auto parts supplier was quoted as saying that “EU manufacturing” now includes many products from countries with trade agreements with the EU, such as Morocco, Turkey, India, and Mercosur, making the notion of “protecting European industry” less meaningful. Reuters noted that differences among EU member states regarding what constitutes “EU manufacturing” could complicate the bill’s passage.

Sun Yanhong believes that, given the clear divisions among member states and industry stakeholders, the final legislative text may be softened or adjusted to balance interests—such as lowering “EU origin” percentage requirements or narrowing the scope. However, considering the EU’s economic influence and its role in the global green supply chain, even a moderate version of the bill could significantly impact global industrial and supply chains.

The bill establishes an exclusive “trusted partner” system, whereby products from third countries that have free trade agreements with the EU or are signatories to the Government Procurement Agreement can be considered “equivalent to EU origin” if they meet certain conditions. Analysts point out that, since the bill is not yet enacted, China is unlikely to be included in the so-called “trusted partner” list due to its strategic importance.

The China Chamber of Commerce to the EU recently issued a statement emphasizing that China’s advantages in clean energy, electric vehicles, and batteries result from long-term market competition and innovation, not unfair practices. The restrictive clauses in the bill could hinder the EU’s own decarbonization efforts and cause Europe to lose valuable partners and cost advantages.

Sun Yanhong argued that this arrangement will accelerate the “campization” of the global green supply chain. Based on recent EU policies toward China aimed at “de-risking,” the actual effects have been limited. Relying on administrative intervention and protectionism to sever economic ties with China is contrary to market principles, either raising costs for European companies or causing supply shortages, ultimately undermining the EU’s goals of enhancing industrial competitiveness and economic security. Therefore, adjustments or reversals in the implementation of the bill are possible.

(Reporter: Li Jiabao)

People’s Daily Overseas Edition (March 24, 2026, Page 10)