EU Commission hopes to boost industrial demand with "Made in EU" rule

The European Commission aims to increase demand for critical industries by requiring capitals to spend more public money on products made in the European Union or in partner countries.

The proposal intends "to boost demand and guarantee resilient supply chains in strategic sectors" despite "unprecedented global uncertainty and unfair competition," said European Commission Vice President Stéphane Séjourné on Wednesday.

"It will create jobs by directing taxpayers’ money to European production, decreasing our dependencies and enhancing our economic security and sovereignty," he said.

The EU's manufacturing sectors have come under intense pressure amid stifling global competition, including from China, high production costs and low demand.

According to EU figures, 200,000 industrial jobs were lost in the past 15 months and many more are at risk.

The commission aims to reverse the decline by channelling more public funding in domestic manufacturing.

The selected sectors include steel, cement, aluminium, cars and innovative technologies aimed at reducing carbon emissions, so-called net-zero technologies, like batteries, solar, wind, heat pumps and nuclear.

Under the new rules, public money going into the aluminium sector is to support projects where 25% of the aluminium is produced in the EU and using low-carbon technologies. The threshold for cement is set at 5%.

Under the plan, a minimum number of components of the final product are to be produced in the EU if public money contributes to the production of batteries, solar panels, heat pumps and electrolyzers as well as applications needed in the electricity generation from wind and nuclear.

The "made in the EU" rules can include other countries outside the bloc who have signed a Government Procurement Agreement with the World Trade Organization (WTO) or have a free trade agreement with the EU, the commission said.

The proposal also foresees stricter rules for foreign direct investments in a strategic sector "exceeding €100 million where a single third country controls more than 40% of global manufacturing capacity," it added.

The proposal still needs to be finalized in negotiations between EU countries and the European Parliament before it can be adopted.

The plans to possibly introduce rules for a European preference in public procurement and public support schemes have already sparked controversy within the bloc.

French President Emmanuel Macron is a vocal supporter of a European preference in public procurement, while German Chancellor Friedrich Merz is more cautious.

Ahead of the presentation, German Economy Minister Katherina Reiche has critizised the proposal for adding red tape to existing rules instead of simplifying European legislation.