‘Made with Europe’ not ‘Made in Europe’ should guide EU industrial policy

The European Commission is expected to propose on 25 February 2026 the Industrial Accelerator Act (IAA). Among other things, this could include provisions on introducing industry local-content (so-called ‘Made in Europe’) requirements into public procurement, and consumer schemes. The IAA could also impose restrictive criteria on foreign direct investment in the European Union. The proposal will follow on from a 12 February meeting of EU leaders who will discuss how to accelerate progress on EU economic policy goals of strengthening the single market, reducing strategic dependencies and boosting competitiveness.

Effective industrial policy should be cost-effective and concentrate resources where Europe has competitive potential; it should avoid spreading resources thinly across sectors without strategic prioritisation. It should also promote healthy competition so industries have incentives to innovate, while reducing exposure to economic-security risks. This implies an industrial policy that embraces global comparative advantages.

The risk is that the IAA will work against this. Made in Europe requirements could raise costs for export-oriented industries, slowing domestic industrial transformation and ultimately the clean-energy transition. Europe’s clean value chains already benefit from foreign expertise. For example, four-fifths of EU battery-cell manufacturing capacity has been built by Korean companies, aiding European automakers that are investing in electric vehicle manufacturing. 

The IAA could thus mark a break from the EU approach to trade and industrial policy, potentially leading to conflicts with likeminded partners. This is despite the Commission reiterating that international commitments should be respected and trade strategy should be based on partnerships. And international trade rules are very clear. Local-content requirements are prohibited. The EU is committed to non-discriminatory access to procurement for suppliers from countries that are party to the World Trade Organization Agreement on Government Procurement or have free-trade agreements (FTAs) with the EU.

Breaches of such commitments would damage the EU’s reputation and likely lead to legal challenges by close allies, such as Japan or the United Kingdom. Meanwhile, any introduction by the EU of mandatory joint ventures and technology transfer requirements could trigger moves in other countries to restrict outward investment by European companies.

Instead, the EU can promote lead markets for decarbonisation and protect its economic security in a cost-effective manner and without slowing its clean transition, breaching international commitments or unnecessarily disrupting global value chains. Its toolkit can be strengthened through targeted changes in three areas:

1. Rather than creating a new law that introduces new mandatory requirements, EU rules on investment screening should be amended. Intervention would be justified when there is clear evidence that foreign investment could threaten EU economic security because of a high degree of dependence on a single-country supplier. Authorisation of an investment could be linked to a determination that the investment will have a sufficiently positive impact on the EU economy and that there are effective remedies to counter any economic security risks (in coordination with potential investigations under the EU Foreign Subsidies Regulation). This way, rigid requirements on joint ventures, technology transfer or local content can be avoided, while leaving leeway for negotiation with the investor concerned.

2. Public procurement in the EU can create lead markets by favouring low-carbon products. Foreign suppliers should be included in this, based on reciprocity. Suppliers from countries that are party to the WTO Agreement on Government Procurement or that are covered by procurement chapters in EU FTAs should be eligible. Developing countries that conclude Clean Trade and Investment Partnerships with the EU could also be included. Such partnerships are crucial to increase the supply of low-carbon energy-intensive basic and intermediate products that EU industries need to be competitive in green steel, chemicals and other industrial value chains.

3. The Commission has already published guidelines on the implementation of ‘sustainability and resilience’ criteria for low-carbon products. This is intended to safeguard EU industry and reduce dependence on any one dominant foreign supplier. This approach, rather than local-content requirements, should continue to be the basis for conditioning access to public incentives. More precise EU standards can be developed for low-carbon products including batteries and electric vehicles.

More than ever, the pursuit of European competitiveness and economic security requires international cooperation. The EU should remain ready to work with like-minded partners as much as necessary to build diversified, resilient and sustainable value chains. It should not retreat behind inward-looking policy instruments that will ultimately undermine competitiveness and the transition to a low-carbon economy.

When the European Commission proposes the IAA, it should thus avoid ‘Made in Europe’ requirements and instead embrace a ‘Made with Europe’ approach. This would strengthen Europe’s industrial base while remaining open to trusted partners, consistent with international commitments and supportive of global decarbonisation.