Just as Brussels did with the Audi site, the European Commission is set to establish priority industrialisation zones. Public procurement, foreign investment: it is planning further measures designed to protect its businesses.
Following up on one of the many recommendations in the Draghi report, the European Commission adopted the Industrial Accelerator Act last month. Its aim: to protect its businesses in a range of sectors considered strategic for the Old Continent.
It was about time. Over a year ago, 1,300 European companies had already sounded the alarm by signing the Antwerp Declaration, calling for a clearer and more predictable European industrial policy. “The European Union should review all policy instruments to combat unfair competition in order to ensure a level playing field for its industries, both in the internal market and on international markets,” the text stated, among other things.
A minimum share of local production
With this new measure, the primary aim is to protect sectors highly exposed to energy costs, including cement production, steelmaking, aluminium production and – in the long term – the low-carbon chemical industry. For all companies in these sectors, the EU will make the disbursement of public funds – public procurement, grants, state aid and any form of financial support – conditional on a minimum percentage of production taking place on its territory.
But Europe also intends to support its companies in a range of areas deemed vital to its economic future. In particular, the production of electric and plug-in hybrid vehicles, as well as clean energy technologies: batteries, wind power, electrolysers, heat pumps, photovoltaic panels and nuclear facilities. Here, a minimum proportion of ‘Made in Europe’ components will be required of all relevant companies.
By ‘Europe’, the scheme covers not only the 27 Member States, but also the other members of the European Economic Area – Norway, Iceland, Liechtenstein – as well as a list of partner countries with which trade agreements will be concluded, the details of which are yet to be finalised.
Priority industrialisation zones
Another measure is designed to strengthen controls on foreign investment. Investments of over €100 million originating from a country with a global market share of more than 40% in a sector deemed strategic will have to meet a minimum set of criteria. These criteria relate to the obligation to transfer technology or form partnerships with European companies, the proportion of employees based in the EU, a limited equity stake, or a share of global turnover invested in R&D within the EU. Here too, a minimum proportion (30%) of the components of the finished product must originate from the EU.
Finally, the Commission intends to create “priority industrialisation zones” with fast-track licensing and priority access to energy and critical materials.
A change of doctrine?
Having been steeped for decades in the spirit of free trade, is the EU now, with ‘Made in Europe’, changing its doctrine? Viewed from the perspective of competition law, this is less a paradigm shift than a rebalancing, explains Nicolas Hipp, Senior Associate at the law firm Fidal. In 2019, he recalls, the Commission blocked the Alstom-Siemens merger, prioritising a very strict application of the law over the creation of a European champion. “Today, the geopolitical context has shifted priorities. Europe acknowledges that its rivals were ignoring the rules by which it intended to play,” he summarises. As for the restrictions imposed on foreign investment, the expert notes that several Member States, including Belgium, had already introduced screening mechanisms. “The proposal extends the Commission’s desire to move from a minimal framework to a more harmonised and binding system. But, with high thresholds and limited sectors, the impact will remain modest,” he predicts.
Alexandre Marescaux, also a lawyer at Fidal, expects that the implementation of a European preference will give rise to tensions and difficulties of interpretation that the courts will have to resolve. “Foreign operators who are sidelined will not remain passive. And the tensions will not come solely from outside: the differences between Member States, or between car manufacturers and suppliers, show that Europe is not united on this issue,” he notes. He also observes the growing complexity of the European state aid regime. “Every crisis – Covid, energy, the green industry, and now reindustrialisation – calls for an exemption. It would be useful to put an end to the accumulation of texts and return to a clear and unified framework. But beyond that, Member States too often lack the means to fulfil European ambitions,” he concludes.
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