Understanding the EU's Upcoming 'Made in Europe' Legislation

Overview of the 'Made in Europe' Law

By Kate Abnett and Julia Payne

BRUSSELS, Feb 17 (Reuters) - The European Commission will propose a law next week requiring that when public money is used to support key strategic technologies, a minimum share of those products is "made in Europe".

Here is what you need to know.

Purpose of the Legislation

WHY DO IT?

The "made in Europe" plan is part of broader EU efforts to help local industries compete with manufacturers in China and other countries where they do not face Europe's strict regulations and higher energy prices.

By prioritising European-made goods in public contracts, the EU will aim to harness the huge financial firepower of its members' public procurement - which totals more than 2 trillion euros ($2.37 trillion) or 14% of EU economic output - to support domestic industries.

Key Provisions of the Law

WHAT WILL THE LAW DO?

The "Industrial Accelerator Act" due to be published on February 26, will set EU-made content and low-carbon requirements for products bought through public procurement or subject to manufacturing subsidies, according to a draft seen by Reuters.

The proposed rules cover "key strategic sectors", including batteries, solar and wind energy, hydrogen manufacturing, and nuclear power plants.

Each technology has a specific Europe-made requirement. For example, for solar panels, the inverter and two other main components must be Europe-made after one year - increasing to three main components after two more years. 

Makers of electric vehicles bought or leased through public procurement would have to ensure their vehicles are assembled in the union, and that 70% of their components - measured by value and excluding the battery - are made in Europe.

Aluminium manufacturers that benefit from subsidies would face a 25% minimum for Europe-made and low-carbon products, with a 5% Europe-made minimum set for concrete.

The draft also proposes a voluntary label for the greenhouse gas emissions intensity of steel to make lower-carbon products more visible.

Investment Conditions

CONDITIONS ON INVESTMENTS

The draft proposal would also set conditions for foreign investments of more than 100 million euros in strategic sectors, and where the investor is from a country that controls at least 40% of that sector's global manufacturing capacity.

The criteria include the requirement that the foreign investor cannot hold a majority stake in an EU company, and that the investor must license its intellectual property to benefit the EU investment.

WHAT IS 'EUROPE'?

The fiercely debated proposal has already been delayed twice and could change before the European Commission publishes it, and later when EU countries and the European Parliament will negotiate the final law.

A key question is how it will define "made in Europe". The draft goes with the European Economic Area, which comprises the 27 EU member states, Iceland, Liechtenstein, and Norway, but excludes Britain.

But it also said the Commission could add other "trusted partners" in future, including those that have reciprocal international commitments, such as the World Trade Organization's Government Procurement Agreement, or which contribute to EU competitiveness and security aims.

The draft provides some exceptions - for example, it could lift the "Europe-made" requirement if a product is only made by one company worldwide, or if switching to Europe-made would be at least 30% more expensive.

WHO BACKS IT, WHO HAS DOUBTS?

Support and Opposition

The plans have strong backing from France, whose EU Commissioner Stephane Sejourne is responsible for developing the law.

Much of European industry also supports the plan, with more than 1,100 business leaders co-signing his article published this month. Carmakers were absent, however, reflecting concerns that a "made-in-Europe" definition would exclude their sprawling global supply chains.

German Chancellor Friedrich Merz has also struck a cautious tone, telling an industry event last week that European preference rules should be a "last resort" and suggesting a "made-with-Europe" approach that could include other trade partners.

Some governments are more critical. Sweden and the Czech Republic have warned that the plans could deter investment and raise prices in Europe.

($1 = 0.8442 euros)

(Reporting by Kate Abnett, Julia PayneEditing by Tomasz Janowski)