It is targeted, but it’s a significant shift: the European Union is prioritizing its own home-based industrial production. The European Commission proposed on 4 March a comprehensive legislative package, dubbed the ‘Industrial Accelerator Act’ (IAA), meant to strengthen European industry by raising the share of EU-made materials and components in public procurements, government purchase incentives or tax breaks.
This concept of European preference is controversial. There have been over 40 draft versions of the Act, which has generated heated debates, inside the Commission and among the EU-27 bloc. Its announcement has been postponed several times.
Even if its scope ends up being limited, the discriminatory measure represents a significant change in the EU’s current legal framework for investment and, moreover, a change of mindset in addressing globalization and the business environment. Under this legislation, for instance, state-subsidized electric cars will have to be assembled in the EU and contain a substantial portion of European components.
For the bloc’s trading partners, the IAA looks like some sort of sophisticated protectionism. For some member states, it appears to impose costly new bureaucratic hurdles to the detriment of entrepreneurial freedom. Northern EU member states are skeptical. Local authorities and SMEs fear more paperwork and rising costs.
But for its proponents, headed by France, it simply reflects what other powers are already doing, to respond to punitive US tariffs and aggressive Chinese trade practices. Ottawa, for instance, launched a ‘Buy Canadian Policy’ in December 2025, rolling out new federal procurement rules to prioritize local suppliers and Canadian-made goods and services.
A broader shift in EU policy
Given all the contradictory priorities it had to consider, the Commission’s regulation is a cautious endorsement of ‘Made in EU’. It is a balancing act between economic security, free trade and decarbonization needed to tackle climate change. It makes European preference an exception, not a principle.
The concept is part of a broader shift towards a more interventionist EU economic policy. The IAA adds to other legal and fiscal European measures, such as the new carbon tax, the screening of foreign investments on strategic assets and the anti-coercion instrument. All aim at levelling the playing field with China and the US and overcoming economic dependencies that risk being politically weaponized.
European discrimination is already introduced in the new defence financial instrument (SAFE), whereby procurement contracts must ensure that no more than 35 per cent of component costs originate from outside the EU, EFTA or Ukraine.
Imposing some ‘Buy European’ provisions is another step in this new geopolitical direction. Its purpose is not just defending energy-intensive European industries (such as steel, cement, aluminium, as well as the automotive sector and cleantechs) against unfair competition but to proactively save them through public subsidies.
Overall public procurements already represented 14 per cent of the EU’s GDP in 2023. The IAA will be adopted against a background of increasing defence spending, while the EU-27 is discussing its future seven-year budget and Germany is starting a €500 billion public investment plan over twelve years to modernize its infrastructure.
The extent of European preference is thus proportionate to the growing amount of state and EU allocations becoming available. The argument for the IAA is also political: by ensuring that some measure of this public spending must ‘buy European’, European taxpayers will get more of their money back.
But the ‘accelerator’ – another key concept of the legislation – will only be as effective as public tenders can be swiftly processed. It plans to simplify administrative authorizations. By adopting the IAA, public authorities, whether local, national or European, are therefore taking direct responsibility in gearing up the continent’s manufacturing capacities.
This also depends on which critical sectors will allow only EU manufacturers to receive state aid. In earlier drafts of the Act, European preference was intended to cover a variety of strategic sectors for the future, such as artificial intelligence and advanced semiconductors. But these have been taken out in the final draft.
The list will surely be debated again during the legislative process the IAA will now go through, in both the European Parliament and the EU Council.
Yet the industrial ‘accelerator’ also relies, paradoxically, on foreign direct investment. The Act forces third countries investing over €100 million to enter into joint ventures with European companies, providing access to their intellectual property, hiring Europeans and transferring know-how to local partners.
By doing so the EU hopes to reconcile its economic security concerns with the technological disadvantage it faces – pointed out by the Draghi Report. Such requirements make the IAA look remarkably like Chinese-style market access restrictions – those that the EU has frequently complained about.
What does ‘European’ mean?
The other much debated question for third countries, not least for the UK, is how will the ‘European’ preference be understood? The Commission’s proposal does not limit strictly to the EU-27. It extends the discriminatory measure to all of the bloc’s free-trade so-called ‘trusted partners’ that are in customs union with the EU or respect reciprocal international agreements such as the WTO Agreement on Government Procurement.
But it allows reciprocal measures against countries limiting access to their own public procurements in certain sectors, such as Canada, Japan, South Korea or the US, to ensure equal treatment for EU companies.