The European Commission is set to unveil the 'Industrial Accelerator Act' on Wednesday, a regulatory framework designed to mandate that electric-vehicle manufacturers ensure at least 70 percent of car components are produced within the bloc to qualify for public funding. The proposal marks a decisive shift in Brussels' industrial policy, moving from passive support to active protectionism as the EU seeks to insulate its strategic sectors from what it terms unfair global competition, particularly from China.

Stricter Conditions for Foreign Capital

The core of the new regime targets foreign investments exceeding 100 million euros ($116 million) in emerging strategic sectors, including electric vehicles, green technology, aluminium, and steel. Under the draft rules, any investor from a nation holding more than 40 percent of the related global manufacturing capacity faces stringent operational constraints. To access the EU market, these entities must employ at least 50 percent EU workers and are prohibited from holding more than 49 percent of the targeted EU company. Furthermore, the transfer of technological know-how is expected to be a prerequisite for approval.

France has spearheaded the initiative, with EU Industry Chief Stephane Sejourne, a former French government minister, set to announce the measures. The urgency behind the push stems from supply chain vulnerabilities exposed by the post-pandemic era and the energy shocks following the Ukraine war. Supporters argue that without such shields, the bloc risks losing its industrial base entirely. "If access to the EU market is one of the most valuable industrial assets in the world, it is legitimate to attach conditions that strengthen European capabilities," said Joseph Dellatte of the Paris-based Institut Montaigne, dismissing accusations of protectionism.

Geopolitical Friction and Domestic Dissent

The proposal faces significant headwinds, both within the EU and internationally. Germany, the bloc's largest economy, has expressed skepticism, favoring a softer "Made with Europe" approach that integrates trading partners rather than excluding them. This internal division, combined with the proposal's aggressive stance, has triggered diplomatic friction. Britain, Canada, Japan, and Türkiye have already voiced concerns regarding the strictness of the new conditions, fearing they will erode the open trading environment.

While the Commission aims to ensure taxpayers' money strengthens Europe's industrial base rather than subsidizing Chinese overcapacity, trade experts suggest alternative tools might be more effective. Niclas Poitiers of the Bruegel think tank noted that if the goal is to counter unfair competition, existing instruments allowing the EU to investigate and counteract foreign subsidies could be superior to blanket ownership caps.

Broader Regulatory Overhaul

The Industrial Accelerator Act is part of a wider strategy to regain the EU's competitive edge. Later this month, the Commission plans to propose a pan-European legal regime for start-ups across all 27 member states. This initiative aims to slash the time required to establish enterprises, creating a unified legal environment to foster innovation in green tech and other high-growth areas. The measures, expected to face final approval from EU states and parliament, represent a fundamental rethinking of how Europe engages with global capital in an increasingly fragmented geopolitical landscape.

Source: Hurriyet Daily News Economy | Analysis by Rumour Team