Made in Europe: Not the Actions of a Friend

The EU’s Industrial Accelerator Act (IAA), proposed on 4 March 2026, is Brussels’ most explicit ‘Buy European’ measure to date. It would direct public procurement and public subsidies in clean technology, energy-intensive materials, and cars towards EU-made goods, with the aim of lifting industry to 20 per cent of EU value added by 2035. The text is in trilogue and adoption is not expected before 2027. The EU is currently using it as a bargaining chip to extract concessions out of the UK by threatening to exclude the country from it. Foolishly, the British government looks set to capitulate. Both sides are wrong.

At this point, it is helpful to point out what the IAA will actually do. Under the proposal, public buyers in strategic sectors must favour products with enough EU content, and government grants and consumer incentives for items such as electric vehicles carry similar conditions. Foreign investment above 100 million euros from countries that control more than 40 per cent of global output in a sector faces extra conditions, reportedly including at least half of staff from the EU, local partners and know-how transfer. The Commission’s draft treats content from free trade partners and from parties to the WTO Government Procurement Agreement (GPA) as EU content, though the Commission keeps discretion to exclude third countries.

There is a strong case to be made that this is unlawful for three main reasons.

First, the GPA. The EU, UK, US, Japan and Canada are among its parties, and for covered contracts it requires national treatment and prohibits offsets such as domestic content conditions. A rigid Made in Europe test applied to covered tenders is in direct conflict with this.

Second, there is the issue of subsidies. The WTO Subsidies Agreement prohibits subsidies contingent on using domestic over imported goods, which describes a grant or consumer incentive conditioned on EU content. The Made in Europe provision flies in the face of this.

Third, conditions on workforce nationality, local partners, and technology transfer are counter to WTO investment and services rules. Ironically, they cut against the EU’s own long-standing complaints about forced technology transfer.

Excluding the UK from Made in Europe is not only against WTO rules, it arguably also violates the Trade and Cooperation Agreement (TCA) between the UK and the EU. If UK-origin content is not counted as EU content, or is counted only after product-by-product assessment, UK bidders lose what the treaty promises.

The same logic applies to cars. In December 2023 the two sides postponed the TCA’s tougher battery rules of origin by three years, and the permanent rules take effect in 2027. The clean transport group T&E describes the TCA as a miniature version of the IAA. A Made in Europe vehicle test that fails to credit TCA-compliant UK content would undermine this.

Made in Europe is arguably unlawful on its own terms. As an aside, I wrote elsewhere that Andy Burnham would be wrong to pursue a similar ‘Made in Britain’ policy for this very reason. Moreover, threatening to exclude the UK from it would violate the terms of the TCA.

These are not the actions of a friend. Using measures which could be described as ‘legally ambiguous at best’ to extract concessions from another country or to drag it closer into its orbit is the type of thing one would expect from China or Donald Trump. It is a form of economic coercion and the UK should not be cowed by it.

It is important for the UK to maintain close economic ties with the EU, but it should not allow itself to be bullied in the relationship. It certainly should not allow the EU – or any other actor – to use an unlawful instrument to do so.

The appropriate short-term response would be to state that if the UK firms are discriminated against as a result of the Made in Europe provision then the UK will treat this as a violation of the terms of the TCA. While regrettable, it is important that the UK takes a firm stance on this and threaten to use any reasonable measures in response.

Moving forward, the UK should remind the EU that the past few years of trade have been something of an aberration with the US first retreating from the international rules based trade system and then pursuing a deeply aggressive mercantilist trade policy. We do not know what the future holds, but whoever is the next President of the US is unlikely to view free trade in such negative terms. The UK should work with the EU and other like-minded nations and blocs to make the case for free trade and rebuilding the global trading system, including at the WTO.

Free trade has made us rich and lifted billions of people out of lives of subsistence and poverty. It is worth fighting for. Rather than the EU embracing the very worst of its protectionist instincts, it should join Britain in the battle for free trade.