5 battles that will decide EU’s ‘Made in Europe’ push

Por Aude van den Hove — Sustainability – POLITICO

BRUSSELS — The EU wants to use its vast public spending power to give European industry a boost, but lawmakers and governments will first need to bridge profound differences over what actually counts as European.

The European Parliament and member governments are hammering out their positions on the Industrial Accelerator Act, part of a drive by Brussels to turn “Made in Europe” from a slogan into an industrial strategy by using procurement and subsidies to create a guaranteed market for European-made goods.

But doing so means answering politically explosive questions about how European a product must be to qualify — and how much more governments and consumers should be prepared to pay to buy domestic. Divisions run not only between the Parliament and the Council, but also among governments and even political allies from different countries.

Unveiled by the European Commission in March, the IAA aims to steer public spending on green technology, energy-intensive industries and cars toward European companies, helping them compete with dominant Chinese exporters.

Six months on, the difficulty of translating that ambition into workable law is becoming clear. The opposing camps broadly agree on the need to strengthen Europe’s industrial base, accelerate permitting and reduce strategic dependencies — but differ sharply over how far the EU should go in favoring European production and how much flexibility governments should retain.

Here are the five issues set to dominate negotiations that will likely run into 2027:

Issue No. 1 — What counts as ‘Made in Europe’?

The definition of EU origin — the Made in Europe debate — is the most politically sensitive issue in the talks. With public procurement accounting for 15% of the bloc’s GDP — or nearly €3 trillion a year — the sums at stake are huge.

The problem is deceptively simple: How European does a product have to be to qualify? Draw the boundary tightly, and Brussels risks excluding close trading partners and disrupting supply chains; draw it too widely and the Made in Europe preference risks becoming meaningless.

The Parliament wants stricter anti-circumvention rules and is pushing for a requirement that at least 50% of a product’s value be added in the EU. It would also make it harder for products or components from third countries to qualify as equivalent to EU-origin goods. Lawmakers also aim to attach tougher conditions, including reciprocity, economic security safeguards, climate commitments, labor standards, and human rights protections.

The Council is more open to treating content from countries covered by the WTO Government Procurement Agreement or relevant free-trade agreements as equivalent to EU-origin content in certain circumstances, including some reciprocity. 

However, EU countries are still debating their position on this issue and have presented a variety of competing proposals. Ireland, which holds the rotating Council presidency, plans to make a new compromise proposal that includes Made in Europe by mid-October.

Issue No. 2 — FDI screening

The Parliament wants a broader and tougher system for screening foreign investment in strategic sectors. 

Behind the demand is a fear that the EU could spend billions building up strategic industries only for subsidized or otherwise state-backed foreign investors to acquire the companies and assets it has helped create.

Lawmakers want to lower the threshold for review from the proposed €100 million investment figure to €50 million; bring the subsidiaries of foreign investors under the scope of the rules; and reduce the control threshold that would trigger a notification.

They would also give the Commission a stronger role, including handing it the power to block investments into critical raw materials where EU funding is involved.

The Council position is narrower: It generally retains the €100 million FDI threshold and 30% control threshold foreseen in the Commission’s original proposal, while giving national authorities more room to manage the approval process. 

The two institutions disagree not only on the scope of screening, but also on the balance of power between Brussels and national capitals.

Issue No. 3 — How far procurement and subsidies should go

Both sides want public procurement and state support to create demand for European and low-carbon products, but differ over how widely the rules should apply.

This is where political ambition collides most directly with the public purse. Requiring governments to buy European can create demand for domestic manufacturers — but it can also leave taxpayers paying more where cheaper imports are available.

The Parliament wants the various requirements — green, social or Made in EU — to cover up to 90% of state aid or subsidy schemes, compared with 45% in the Council text. It also proposes stronger social and labor conditions, relocation restrictions and tougher verification and enforcement.

The Council supports broader exemptions where compliant products are either unavailable, excessively costly or technically unsuitable. Its stance reflects concerns among governments about public spending or slowing projects that depend on imported components.

Issue No. 4 — Sector-specific targets

The Parliament is generally seeking higher and more detailed European-content requirements for batteries, solar panels, wind turbines, electrolyzers, nuclear technologies and electric vehicles.

Electric cars illustrate how complicated “Made in Europe” can become in practice. A vehicle assembled in the EU can contain a battery and raw materials sourced through supply chains stretching around the world.

The Parliament would raise the required EU-origin share of non-battery vehicle components to 75% from the 70% proposed by the Commission. It would also add requirements involving battery materials, binders and strategic raw materials. The Council position, meanwhile, is less prescriptive and would allow for more gradual implementation.

The disagreement is not over whether strategic sectors should receive support, but whether the IAA should impose binding content targets that could raise costs for manufacturers and consumers.

Issue No. 5 — Scope

A wider argument is emerging over the purpose of the IAA: whether it should remain a targeted response to strategic dependencies, or become a broader vehicle for EU industrial policy.

The Parliament would expand the legislation to cover areas such as maritime manufacturing, materials recovery and certain plastic products for the construction sector. It also wants future reviews to consider sectors including fertilizers, rolling stock, robotics and aerospace.

The Council text is more focused on the sectors already identified, including energy-intensive industries, automotive, net-zero technologies and critical raw materials.

The debate reflects a broader tension over how far the EU should extend Made in Europe preferences: Once public procurement and subsidies are used to favor domestic production in some strategic sectors, other industries have a strong incentive to argue they should qualify too.

Where they do agree

There is more agreement on the basic architecture. Both the Parliament and the Council support faster and more digital permitting, single access points and coordinating authorities, as well as low-carbon criteria, industrial acceleration areas and monitoring and enforcement mechanisms. The remaining differences are mainly about deadlines, safeguards and the level of oversight rather than the underlying policy direction.

A final negotiation would turn less on whether the EU should support domestic industry than on how aggressively it should do so, what should count as European — and who should bear the cost.

But neither the Parliament nor the Council has settled its position — both aim to do so by December. That already puts Commission President Ursula von der Leyen’s ambition to wrap up the legislation this year out of reach, setting the stage for tough negotiations in 2027.

Fonte: Sustainability – POLITICO