The European Union is preparing a major overhaul of its industrial policy, with the European Commission set to unveil the Industrial Accelerator Act (IAA) on January 28, a legislative package designed to channel investment toward European manufacturers, strengthen strategic industries and reduce dependence on foreign suppliers amid intensifying global competition.
The proposed legislation marks one of the bloc’s most ambitious attempts yet to bolster domestic production capabilities in sectors ranging from steel and aluminum to clean technologies and critical raw materials.
At the heart of the proposal is a “Made in Europe” framework that would tie EU funding and public procurement contracts to domestic manufacturing requirements. According to media reports citing draft documents, Brussels is considering local-content thresholds of between 60 per cent and 80 per cent for projects receiving European financial support, a move that would mirror elements of the United States’ “Buy American” policies.
The proposal also includes plans to build strategic stockpiles of critical raw materials, reflecting growing concerns over supply-chain vulnerabilities exposed by the Covid-19 pandemic, the energy crisis following Russia’s invasion of Ukraine and rising geopolitical tensions with China.
Tougher conditions for foreign investors
One of the most closely watched provisions in the draft legislation concerns foreign direct investment in strategic sectors.
According to a draft reviewed by Bloomberg News, foreign investments exceeding €100 million could be subject to a range of conditions aimed at ensuring economic benefits remain within Europe.
These conditions may include mandatory technology transfers, commitments to local hiring, requirements to establish joint ventures with European firms and other measures designed to strengthen domestic industrial capabilities.
The proposed safeguards reflect growing concerns within Brussels that foreign investments, while providing capital, do not always generate long-term technological and industrial benefits for European economies.
European policymakers have increasingly argued that strategic industries should not merely host foreign-owned facilities but should also develop domestic expertise, supply chains and intellectual property.
The measures would represent a significant shift in EU industrial policy, which has traditionally emphasized market openness and competition rather than local-content mandates.
Response to industrial competitiveness concerns
The legislation comes as Europe faces mounting concerns about its industrial competitiveness.
European manufacturers have struggled in recent years with high energy costs, sluggish economic growth and increasingly aggressive industrial policies from major trading partners, particularly the United States and China.
The U.S. Inflation Reduction Act, enacted in 2022, introduced hundreds of billions of dollars in incentives for domestic manufacturing, renewable energy technologies and electric vehicle supply chains. European policymakers have repeatedly warned that generous American subsidies risk drawing investment away from the EU.
China, meanwhile, continues to dominate global production in numerous strategic sectors, including batteries, solar panels, rare earth processing and critical mineral refining.
Supporters of the Industrial Accelerator Act argue that stronger preferences for European suppliers are necessary to preserve industrial capacity, safeguard jobs and ensure strategic autonomy in critical sectors.
The proposed legislation aligns with the European Commission’s broader effort to strengthen what it describes as Europe’s “economic security” and reduce strategic dependencies on external actors.
Divisions emerge among member states
Despite broad agreement on the need to strengthen European industry, the proposed measures have triggered resistance from several member states concerned about their economic impact.
According to Euronews, Finland, Sweden and Ireland have expressed reservations about rigid domestic-content requirements, warning that such measures could undermine competition within the EU single market and increase costs for businesses and consumers.
These countries argue that strict quotas risk fragmenting the bloc’s internal market, which remains one of the EU’s foundational economic principles.
Poland and the Netherlands have reportedly called for a comprehensive impact assessment before any binding targets are introduced.
Their concerns focus on whether local-content requirements could distort investment decisions, reduce efficiency and potentially provoke trade disputes with international partners.
The debate highlights a growing tension within the EU between advocates of a more interventionist industrial strategy and countries that continue to favor open-market principles.
Critical minerals and strategic reserves
The Industrial Accelerator Act is expected to complement a series of recent EU initiatives aimed at securing access to critical raw materials.
In December, the European Commission unveiled the RESourceEU strategy, designed to strengthen supply chains for minerals essential to clean energy technologies, defence systems and advanced manufacturing.
The bloc has also intensified efforts to establish strategic reserves of key commodities, including rare earth elements, lithium, cobalt and other materials viewed as vulnerable to supply disruptions.
The urgency is driven by Europe’s heavy dependence on imports. China currently dominates global processing of many critical minerals and controls significant portions of the supply chains for rare earths, graphite and battery materials.
European officials increasingly view access to critical minerals as both an economic and national security issue.
The proposed stockpiling measures are intended to provide a buffer against future disruptions caused by geopolitical conflicts, trade restrictions or supply shortages.
Part of a broader economic security agenda
The Industrial Accelerator Act would form part of a wider shift in EU economic policy toward strategic autonomy.
In recent years, Brussels has introduced tougher foreign investment screening mechanisms, export-control measures and initiatives designed to protect critical technologies.
The European Commission has argued that while the bloc remains committed to open trade, it must also reduce excessive dependencies in sectors considered vital to economic resilience and security.
If adopted, the Industrial Accelerator Act would represent one of the most far-reaching examples of this new approach, combining industrial subsidies, procurement preferences, investment conditions and strategic stockpiling under a single policy framework.
The proposal is expected to spark intense negotiations among member states, industry groups and trading partners before any final legislation is approved.
For Europe, the debate will test how far the bloc is willing to go in prioritising domestic industry while maintaining its longstanding commitment to open markets and international trade.