After stringing together various delays, the College of Commissioners will give the green light this Tuesday to its new industrial regulation, with which the European Union intends to begin to end its subordination to the United States or China. An initiative announced a year ago that is part of the clean industrial pact and that aspires to serve as a revolution in the European sector, introducing greater dynamism.
“A significant change in European economic doctrine”, community sources pointed out regarding the new legislation that imposes specific criteria in public procurement processes of the continent. After discussing for weeks the scope and affected sectors, Executive Vice-President Stéphane Séjourné would have achieved the necessary consensus for the norm to prosper, limiting its content solely to electric vehicles, intensive industries, and zero-emission technologies.
What Séjourné's cabinet seeks with this regulation is to try to mitigate the fall of manufacturing in the European gross domestic product, with the intention that the sector reaches 20% of the European economy in the next ten years. For companies, the aim is to create a solid “business case” for decarbonization, protecting local industry from unfair competition and dependencies on third countries. In the Commission, they justify its design in the resilience of the productive fabric.
The drafts focus on three critical areas which, despite representing only 15% of manufacturing production, are considered vital for strategic autonomy. On the one hand, energy-intensive industries, among which are included the manufacturing of steel, aluminum, cement, chemical products, paper, and plastic. Regarding the automotive industry, the focus will be on motor vehicles and their components. Finally, in relation to zero-emission technologies, it will cover batteries, solar energy, wind energy, heat pumps, and nuclear technologies.
Brussels has identified as one of the biggest problems the “long and uncertain” bureaucratic processes. Now, the States will be obliged to create a digital interface to process permits through a single access point. A competent authority will be designated to coordinate all procedures and issue a single decision within strict deadlines.
The European Business Wallet will be used so that companies do not have to submit documents that the administration already possesses, through the principle of “only once”.
Public procurement and green quotas
The Executive's strategy involves using public procurement, which accounts for around 15% of the EU's GDP, to generate demand for sustainable and local products. From 2029, European public works contracts must include minimum percentages of low-carbon materials.
The regulation establishes specific Union origin quotas for these materials:
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Steel: at least 25% of the total volume will have to be low-carbon. In this case, the environmental criterion is prioritized over the origin due to already existing commercial measures.
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Cement: at a minimum, 5% of the volume must be low-carbon and of Union origin.
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Aluminum: from 25% of the volume must be low-carbon and of European origin.
Furthermore, public purchases of electric vehicles will only be eligible if they meet strict criteria such as their assembly within the borders of the European Union and that at least 70% of the value of the components, excluding batteries, is of community origin. Always, with battery cells manufactured in the twenty-seven.
The vehicle must be assembled obligatorily within community borders. Regarding batteries, the Executive explains that it must contain specific European components. Initially, the inclusion of three main components will be proposed, which will be increased to five within a period of three years after the entry into force of the regulation.
Now, then, for small-sized electric vehicles, a derogation will indeed be endorsed. It will be necessary that they are assembled in the European Union and meet either the seventy percent criterion or the requirement of the three components.
Conditions for foreign investment
For all those investments exceeding 100 million euros in emerging sectors, such as batteries or electrical raw materials, new conditions will apply if the investing country controls more than 40% of the global manufacturing capacity in that sector. The investor must meet at least five of the six proposed criteria:
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Not owning more than 49% of the ownership or control of the European asset.
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Investment through a joint venture with EU entities.
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Intellectual property licenses and technology transfer to the EU entity.
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Annual R&D expenditure in the EU of at least 1% of gross revenue.
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Workforce with at least 50% EU workers in all categories, including management.
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That products incorporate at least 30% of inputs manufactured in the Union.
Strategic industrial zones
With the new legislation, the States will designate geographical areas for industrial clusters. In any case, they will have a prior environmental assessment, allowing companies that set up there to only need specific permits for their facilities, drastically reducing times. Said areas will have priority analyses of network needs and access to strategic supplies.
The Commission estimates a total net profit of eight million euros for the European economy in the next four years, along with a reduction in administrative costs of 240 million for businesses thanks to the simplification of procedures.
Exceptions: international reciprocity
Under this new legislation, various categories of countries are included that are totally or partially exempt from the "made in Europe" requirements or from the conditions imposed on foreign investment. Mainly, the exceptions are based on international agreements and economic reciprocity.
The Executive will identify third countries whose products will be treated as equivalent to the origin of the Union. On the one hand, international agreements will be taken into account, such as the public procurement agreement of the World Trade Organization, or those that have trade treaties with the Union. Along with these, there will be countries that have legal provisions that recognize Union products as originating from their own territory.
Furthermore, the drafts seek the progressive integration of candidate countries into the internal market. By identifying “trusted partners”, the continent will especially take into account those candidate countries that demonstrate an effective alignment with the community acquis in public procurement matters.
Safeguard clauses and sanctions
Economic security measures aim to protect the internal market, not restrict it internally. Therefore, Member States will not be able to invoke economic security to prevent or condition investments from other Member States.
Also relevant are exceptions due to lack of alternatives or costs. Even in the event that a product comes from a non-exempt country, authorities may ignore the requirements in specific cases: when the product can only be supplied by an operator without alternatives, if applying the requirement increases the cost of the contract by more than 25% or if the origin requirement would cause a delay of more than seven months in the delivery of the project.
Nevertheless, the text contemplates the possibility of applying sanctions to those companies that fail to comply with the notification requirements or investment conditions. In no case will these be less than 5% of the investor's average daily turnover. The Commission will review every five years these measures to adapt them to market developments.
The position of Spain
The Spanish Government is among those most in favor of the measure. Sources from the Ministry of Economy, consulted by Demócrata, confirm that they see the “useful” European preference as an instrument of industrial policy. However, they warn that preferences must be based on the real contribution in the Union: local investment, European employment, technology transfer, and high value-added activities.
From the team of the Minister of Industry, Jordi Hereu, they assure that they are analyzing the proposal “to fully understand its commercial impact”. They advocate for a “prudent approach”, with gradual thresholds for the European contribution, but always considering the maturity of the sector and its dependence on external markets. They add that Spain already applies this criterion through the program “Auto +”, which grants subsidies for the purchase of electric vehicles.