EU's "Made in Europe" venture raises fears among Asian exporters

Japanese automakers such as Toyota Motor and Honda Motor have voiced concerns over unclear legal provisions after the European Commission's recent presentation of plans for the strengthening of manufacturing in response to what it sees as unfair competition from China.

After months of delays, the commission recently proposed that its Industrial Accelerator Act (IAA) would tie access to public funding and procurement — estimated at €2 trillion annually — to “Made in Europe” content rules and low-carbon standards across sectors including automobiles, clean technologies and energy-intensive industries.

Heavy industry groups within the European Union have welcomed the initiative. However, as an article by Nikkei Asia points out, manufacturers from several close partners — including the United Kingdom and Japan — worry their exports could be affected if European authorities do not provide clear exemptions.

One key uncertainty is whether vehicles assembled in so-called trusted partner countries outside the EU would qualify for any of the funding or procurement schemes. Japanese and South Korean carmakers that export vehicles directly to the EU are seeking inclusion.

"Without this inclusive approach, the currently proposed IAA brings great risk of division," Matt Harrison, chief corporate officer at Toyota Motor Europe, told Nikkei Asia. He warned that increasingly complex regulations could divert resources away from innovation and toward tariffs and compliance costs.

Katsuhisa Okuda, president of Honda Motor Europe, expressed similar concerns, saying trusted partners such as Japan should be “part of the solution” as Europe seeks to balance strategic autonomy, decarbonization and affordability.

The proposed legislation aims to leverage Europe’s public procurement market — which accounts for roughly 14 percent of the EU’s gross domestic product — to increase manufacturing’s share of the bloc’s economy to 20 percent by 2035, up from about 14 percent today.

The IAA would also introduce stricter rules for foreign investment in strategic industries. Investments exceeding 100 million euros from countries controlling more than 40 percent of global manufacturing capacity in a given sector could face restrictions. These may include a 49 percent cap on foreign ownership, requirements for joint ventures with European partners and provisions for technology transfer.

"For the first time, the EU has decided to use market access as a strategic policy tool to protect manufacturing in Europe," said Joseph Dellatte, resident fellow at the Paris-based think tank Institut Montaigne.

Elephant in the room 

Many analysts say the measure is primarily aimed at China.

"Chinese overcapacities are hitting EU industry everywhere — in China, in third markets and increasingly at home," said Nils Redeker, co-director of the Jacques Delors Centre.

The steel industry is among the sectors heavily affected by what European officials describe as dumping from China. Although the “Made in EU” rule would not apply to upstream materials like steel, public procurement projects would need to meet a minimum 25 percent low-carbon requirement.

The proposal has also been welcomed by the clean technology sector, which sees it as a step toward competing more effectively with Chinese manufacturers.

However, some analysts question whether such policies will achieve the EU’s intended industrial transformation. Xie Yanmei, senior associate fellow at the Mercator Institute for China Studies in Berlin, argued that Europe is unlikely to replicate the conditions that enabled China’s industrial rise.

When China opened its economy to foreign investment, multinational firms were attracted by a vast labor pool and a rapidly expanding consumer market.

"In contrast, Europe is a high-cost production site with a stagnant market," Xie said. "I am skeptical that joint ventures and technology transfer can magically upgrade European industry."

By Nazrin Sadigova