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EU Commission Proposes Controversial 'Buy European' Rules and Tighter Investment Controls
At a glance
- •The Industrial Accelerator Act would strengthen FDI screening and introduce Buy European preferences for procurement and subsidies.
- •Target sectors include the auto industry, energyintensive firms and makers of wind turbines and heat pumps; biotech and AI were excluded initially.
- •Buy European rules include origin thresholds for inputs (example: 5% cement, 25% aluminium) but allow waivers if nonEU bidders are >25% cheaper.
- •Investment limits would apply when a foreign country controls over 40% of a sectors global market share; affected investors might be capped at 49% ownership unless conditions are met.
- •Industry bodies such as DIHK and BGA warn the proposal could increase bureaucracy, raise costs for SMEs and hurt international price competitiveness.
- •The Commission softened parts of the draft to account for trade agreements and memberstate concerns, leaving implementation details to be negotiated.
EU pushes industrial protectionism critics warn of bureaucracy and weaker competitiveness
The European Commission has put forward a package of industrial measures aimed at shielding European industry from strategic dependencies and foreign influence. Presented on Wednesday as the "Industrial Accelerator Act," the proposal tightens scrutiny of foreign direct investment in selected sectors and promotes a Buy European approach for public procurement and state-supported projects. The Commission says the measures are designed to secure production, create jobs and strengthen Europes economic sovereignty; industry groups warn they risk adding bureaucracy and undermining international competitiveness.
Commissioner for Industry Stéphane Séjourné framed the proposal as a necessary step to prepare the Union for the 21st century, arguing the act would channel taxpayer support into European production, reduce dependencies and bolster economic security. The regulation targets three main areas for preferential treatment: the automotive sector, energy-intensive industries and producers of key technologies for the energy transition for example, manufacturers of wind turbines and heat pumps. Initially proposed wider restrictions on biotechnology and artificial intelligence firms were trimmed and are not included at the outset.
Several elements of the draft were softened after internal Commission debate and objections from member states, including Germany. The current text allows the Commission to consider not only EU suppliers but also non-EU countries with which the EU has trade agreements granting firms reciprocal access to public tenders or subsidies. Those relationships would be assessed on a country-and-sector basis rather than included automatically, as Berlin had initially requested.
Critics say the operational details of Buy European are complex and burdensome. Under the draft, public authorities would need to track origin thresholds for input materials for example ensuring that at least 5% of cement and 25% of aluminium used in building contracts comes from the EU while retaining the option to bypass Buy European rules if a non-EU bidder undercuts European suppliers by more than 25%. Trade bodies warn such rules would create substantial compliance costs, particularly for small and medium-sized enterprises.
The German Chamber of Commerce and Industry (DIHK) warned that new documentation duties, broad origin-verification requirements and high standards for so-called strategic markets would impose administrative burdens that hurt competitiveness. DIHK foreign trade head Volker Treier said these obligations cost time, money and market agility. The Federal Association of Wholesale, Foreign Trade and Services (BGA) welcomed the Commissions intent but criticized the drafts design. BGA president Dirk Jandura warned that the proposed implementation could generate more bureaucracy instead of accelerating industry, and that forcing European firms to use more expensive local inputs could harm price competitiveness abroad.
The act also includes tighter investment screening for foreign takeovers in strategic areas such as electric vehicles, critical raw materials, batteries and solar manufacturing. Restrictions would apply where a single foreign country holds more than 40% of global market share in a sector a threshold aimed largely at Chinese suppliers. Affected foreign investors could be limited to minority stakes (capped at 49%) unless they accept specific conditions and mitigation measures.
The proposal attempts to thread a needle between protecting strategic industries and honoring trade commitments, but its complexity has fuelled concern. Industry associations fear that increased protectionism and reduced competition will not resolve underlying weaknesses in European productivity and innovation. They urge policymakers to pair any protective rules with measures that improve investment, scale-up and regulatory clarity so European firms can compete globally without economic isolation.
As the Industrial Accelerator Act moves into the EU legislative process, member states, industry groups and trade partners will scrutinize the fine print. Lawmakers must balance strategic autonomy with open markets a politically charged task that will shape Europes industrial policy for years to come.
