EU proposes ‘Made in EU’ rules for strategic sectors to limit China reliance
Critics warn the plans may lead to partners erecting trade barriers
Add BT as a preferred source
[BRUSSELS] The European Commission unveiled plans on Wednesday (Mar 4) to boost the competitiveness of the European Union’s manufacturing sector during its drive to decarbonise and avoid reliance on cheap Chinese imports by setting local content requirements.
The intensely debated Industrial Accelerator Act (IAA) will set low-carbon and “Made in EU” requirements for public procurement of, or subsidies for, making aluminium, cement and steel, and technologies including wind turbines, electrolysers or electric vehicles.
The IAA aims to ensure that by 2035, manufacturing represents 20 per cent of the EU’s national output, from 14 per cent today, stemming a potential loss of 600,000 jobs in the automotive sector over the next five to 10 years and preserving or creating some 150,000 jobs in other sectors.
Together, the sectors covered by the IAA represent some 15 per cent of EU manufacturing.
Critics say the IAA could prompt trading partners to close their doors.
Proponents point out that rivals such as the US, China, Brazil and India already have rules on local content in place, and that similar requirements could help fill the EU’s massive investment gap.
Navigate Asia in
a new global order
Get the insights delivered to your inbox.
The EU law aims to use the huge financial firepower of its member countries’ public procurement – worth more than two trillion euros (S$3 trillion) or 14 per cent of EU economic output – to shore up struggling domestic industries and push into newer growing sectors.
Divided views on local content
The Commission has delayed the proposal numerous times due to disagreements about its content, with changes made even as late as this week. A key point of contention is which non-EU countries will be considered “trusted partners”, exports from which will be treated as equivalent to EU products in meeting Made in EU requirements.
The EU executive has drawn up lists of partners, including Britain, Canada and the US, with which it has free trade agreements or which are parties to the World Trade Organization’s government procurement agreement. China is not one of the countries.
SEE ALSO
The Commission will assess whether the partners offer EU companies reciprocal access to their markets, and then cut the lists down for those that do not. Provisions of the Buy American Act or the Buy Canadian Policy could count against those countries.
After the Commission proposal, the European parliament and EU governments will negotiate the final text – meaning further changes are likely.
France believes this could be limited to the EU27 and EU single market members Norway, Iceland and Liechtenstein, which are automatically included. Some EU countries such as Germany advocate a broader range of countries including Britain.
The IAA proposal also includes rules on foreign direct investment in the bloc, specifically for investments of more than 100 million euros from countries that have over 40 per cent of global production, which in most cases would be China.
The bloc wants to avoid Chinese companies assembling products in Europe using imported components, with minimal European employees.
Under the IAA, investors would need to meet some conditions, including having EU workers make up at least 50 per cent of their staff, limiting foreign ownership to 49 per cent, and offering transfer of technology with agreements about licensing and access to know-how. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
