EU’s Industrial Accelerator Act Raises Competitiveness Concerns

The European Commission has presented the Industrial Accelerator Act, which includes several proposals aimed at strengthening European industry and the EU’s resilience in an increasingly fragmented world. However, several of the proposals also entail significant risks to the EU’s competitiveness, writes Stefan Sagebro, Director Industrial Policy, Competition and State Aid Law.

The Industrial Accelerator Act contains a number of new initiatives. The most far‑reaching proposals concern requirements for EU content and CO₂‑free content in certain public procurement and public funding schemes, as well as requirements that restrict certain types of foreign direct investment.

Requirements that certain content must originate within the EU are fundamentally a protectionist measure that does not strengthen companies’ competitiveness, but rather shields them from global competition. In addition to leading to higher costs for taxpayers, it is unclear how far‑reaching the consequences of these requirements will be for the sectors that have been selected. There is a risk that they will result in higher costs along the value chain and reduced competitiveness in different parts of the value chain, at least in the short term. Not least, there is a risk of increased administrative costs, as the origin and content of certain materials will have to be traced throughout the entire value chain. This is problematic given that the stated ambition is to reduce, not increase, the regulatory burden on companies.

Further restrictions on foreign direct investment are also problematic. Productive foreign investments that bring capital and expertise can often enhance productivity and innovation capacity. Here, the Commission proposes additional restrictions beyond those already in place. One factor that makes it difficult to take a position on the proposals is that it is not clarified which countries are included and which are excluded from the scope of application. This is to be determined through delegated acts. It is problematic when key elements of the proposals are left to the discretion of the European Commission and are not subject to democratic decision‑making.

Taken together, we are therefore preliminarily critical of both of these proposals, which entail significant risks of generally higher costs, reduced competitiveness, and lower levels of investment.

The proposal also includes requirements for Member States to establish industrial acceleration areas, where companies that set up operations would benefit from various advantages. While many of the measures proposed here may be supportive and positive, it would have been preferable if they could be applied more generally. Fundamentally, the state is not best placed to determine where a particular industrial activity should be located, and favourable criteria for a specific geographical region may distort competition vis‑à‑vis other existing production sites.

Finally, the proposal contains general ambitions to make permitting processes more efficient. This is welcome, and something we have called for in connection with earlier legislative acts such as the Net‑Zero Industry Act and the Critical Raw Materials Act, which introduced similar provisions. The Industrial Accelerator Act is a wide‑ranging and far‑reaching proposal from the European Commission, which will now be subject to consideration by the European Parliament and the Council.