EU mulls domestic content targets in upcoming industrial plan
The EU’s pending industrial roadmap could raise China-EU tensions.
On December 3, the FT reported that the EU’s Industrial Accelerator Act (IAA) will likely contain provisions to aggressively reduce EU reliance on foreign (read: Chinese) supply chains.
Some context: Europe thinks China's industrial policy unfairly supports Chinese manufacturers, which leads to cheap Chinese goods flooding the European market and undermining European manufacturers.
- Months of fruitless consultation and the collateral damage caused by China’s rare earth export controls have heightened Europe’s sense of urgency to remake economic relations with China.
- Even countries which, like Germany, previously pushed for a more conciliatory approach to China “would now look favourably on more buy-European rules.”
The IAA will seek to address EU concerns with China-style industrial policy:
- “Brussels is considering setting “made in Europe” targets of up to 70 per cent for the content of certain products such as cars.”
- “An EU official said…the legislation would mirror China’s industrial policies ‘Made in China 2025’ and ‘China Standards 2035’, which pushed foreign companies towards joint ventures with Chinese businesses in order to access its market.”
Get smart: A rising tide of European protectionism will further strain already brittle EU-China ties.
Get smarter: It’s going to be a long time before Europe can meaningfully reduce its heavy reliance on Chinese supply chains and cutting-edge technology.
What to watch: The EU is expected to adopt the IAA on December 10.