Center-right revolt threatens to unravel EU’s flagship industry law

Por Francesca Micheletti, Max Griera, Gerardo Fortuna, Mathieu Pollet — Sustainability – POLITICO

BRUSSELS — A rebellion by center-right lawmakers has exposed deep divisions over a flagship EU industry bill, threatening to derail negotiations over how far Europe should go to protect its manufacturers from foreign competition.

The attempt by three European People’s Party lawmakers to torpedo the Industrial Accelerator Act quickly gained support last week within European Commission President Ursula von der Leyen’s political family.

The challenge is unlikely to attract enough support to kill the legislation outright. But it lays bare rifts over the bill’s central “Made in Europe” provisions that threaten to paralyze negotiations in the European Parliament and among EU governments, raising the prospect of indefinite delays or a compromise that waters down the bill beyond recognition.

The proposal, championed by Industry Commissioner Stéphane Séjourné, would steer public procurement and subsidies toward European manufacturers in sectors including renewable energy, steel and automobiles. But it has sparked clashes over which countries should qualify for preferential treatment.

Séjourné challenged the critics on Friday, accusing them of undermining the very industrial strategy they have demanded from Brussels. “I would just say please be coherent,” he told reporters. “You can’t ask for a text to be scrapped and then at the same time say that it’s not moving fast enough.”

The German-Swedish trio from the center-right EPP — Christian Ehler, Angelika Niebler and Jörgen Warborn — submitted their amendment to reject the Commission’s Industrial Accelerator Act proposal last Tuesday. Another 20 EPP lawmakers, the largest group in the Parliament, signed on.

They warned that a restrictive interpretation of Made in Europe risks plunging the bloc into “multiple trade wars with some of our closest partners.” The Parliament’s draft report “would unilaterally break many of the EU’s free trade agreements and WTO obligations, which opens our flank for retaliation,” they wrote.

In or out

The backlash has exposed a deeper split within the EPP over how far the EU should go in favoring European manufacturers — and raises questions about whether the lawmakers steering the IAA through Parliament can assemble a majority for their preferred approach.

While only a minority of the EPP’s 184 lawmakers signed the rejection amendment, more than half the group support a broader definition of Made in Europe that would initially include most of the EU’s trading partners, according to a Parliament official briefed on the negotiations. 

That puts them at odds with the three lawmakers leading the Parliament’s work on the bill.

The lead lawmakers — Renew’s Christophe Grudler, socialist Pierre Jouvet and Green Anna Cavazzini — argue that extending preferential treatment too far would undermine the purpose of the legislation.

“It would no longer be ‘Made in the EU,’ no longer ‘Made with the EU,’ but ‘Made Everywhere,’” Grudler told a recent joint committee hearing.

The rejection amendment was meant as a “political signal” and did not intend to kill the IAA outright, according to four people familiar with the EPP’s thinking. The rebels had wanted to drive home their opposition to restricting Made in Europe to the EU’s 27 members, while leaving open the possibility of a broader compromise.

“Bold moves are necessary, because the citizens and the industry expect results. We go ahead with our proposals and let’s see if a majority is possible to be formed around them,” said Romanian MEP Lóránt Vincze, one of the co-signatories.

Without commenting publicly on the rebellion, EPP leader Manfred Weber has given national delegations room to take their own positions on the IAA. At a group meeting in Strasbourg last week, Weber described the bill as a “complex” file and said delegations could propose amendments reflecting their preferences, according to internal notes seen by POLITICO.

“The group has not endorsed this amendment, and it will probably take its position once there is a clear compromise in the Council,” an EPP official said. 

The divisions leave the three lead lawmakers with an uncertain path to a majority in the Parliament, particularly if the EPP coalesces around a broader definition of Made in Europe than the one they are proposing.

Divided governments

The dispute goes beyond the European Parliament. EU governments are also struggling to agree on how narrowly to define Made in Europe, with France pushing to reserve preferential treatment for a relatively small group of countries while Germany and other more free-trade-oriented governments want to extend it to a broader range of trading partners.

The central disagreement is between a restrictive “opt-in” approach, under which trading partners would have to qualify for preferential treatment, and a broader “opt-out” model that would initially include more countries but then allow the EU to exclude those that fail to meet certain conditions.

France wants a narrow club, and has won the support of Italy, Greece and Cyprus, according to readouts of a recent meeting of deputy ambassadors in Brussels. Germany and 13 other member countries prefer a broader “Made with Europe” club that would include most trading partners. Eligibility would depend on reciprocity, including whether partners offer European companies comparable access to their public procurement markets.

The distinction matters beyond the EU’s borders. While China is a principal target of the proposed measures, a restrictive interpretation of Made in Europe could disadvantage close partners such as the U.K., which is lobbying for favorable treatment ahead of a November summit on resetting relations with the EU.

Among the options under discussion, Spain has proposed a three-tiered system for trading partners to qualify for Made in Europe, while Poland and at least 12 other countries have concerns about the methodology for defining low-carbon requirements, which they argue could disadvantage some member states.

Narrow path

MEPs have submitted some 5,300 amendments to the draft report authored by Grudler, Jouvet and Cavazzini. These reveal competing models: partner access with safeguards, a tightly defined European preference, or investment allowed only with substantial local commitments.

The sheer number of amendments underscores the challenge of finding a workable compromise on a proposal already branded “a bureaucratic monster” by the Federation of German Industries, a leading industry lobby.

The Irish EU Council presidency wants to deliver a new compromise text as soon as this week and finalize the general approach of member states in late November. With EU countries still divided, it’s unclear whether it can meet that deadline — unless a potential grand bargain under discussion between France and Germany materializes.

The Parliament faces its own difficult timetable, with lawmakers struggling to reconcile the thousands of amendments. The EPP remains divided over the scope of Made in Europe, while support for the narrower approach of the lead lawmakers is far from assured even within their own political groups.

If the regulation’s geographical scope ends up being too broad, “almost any country around the world can become a hub for repackaging Chinese equipment, changing a few nuts and bolts and then selling it in the European market as made in the EU,” warned Sander Tordoir, chief economist at the Centre for European Reform.

Yet the disagreements may be less fundamental than they appear, according to Tristan Beucler of Strategic Perspectives, a pan-European think tank. Beucler pointed to emerging accord among EU governments on issues such as reciprocity and preventing circumvention, while noting that the rejection amendment does not represent an agreed EPP position.

“The IAA’s objectives are widely shared in the European Parliament and Council,” Beucler said.

Additional reporting by Jakob Weizman, Aude van den Hove and Tom Schmidtgen. 

Fonte: Sustainability – POLITICO