EU's protectionist misstep will hurt itself: China Daily editorial

The European Commission's proposed Industrial Accelerator Act has raised concerns that the European Union is taking a protectionist step.

While the initiative aims to bolster European manufacturing and reduce dependency on external supply chains, critics rightly argue that it is a form of protectionism that undermines the EU's long-standing commitment to open markets.

Nowhere is this tension more apparent than in the context of China-EU economic relations, where the IAA could exacerbate existing trade frictions and complicate an otherwise win-win partnership.

The IAA seeks to prioritize "Made in EU" goods in public procurement and state supported projects, targeting strategic sectors such as energy-intensive industries, net-zero technology manufacturing and the automotive supply chains. The European Commission's goal is to raise manufacturing's contribution to the EU's GDP to 20 percent by 2035.

However, the act's emphasis on local content requirements and restrictions on foreign investment could distort trade relations and provoke retaliation from key trading partners.

The IAA introduces low-carbon standards and "EU-made" thresholds for public procurement and support programs, covering strategic industries such as aluminum, cement, steel, wind turbines, electrolyzers and electric vehicles. The scope may even extend to other energy-intensive sectors such as chemicals. While the intent is understandable, protectionism is not the right invigorator.

If enacted, the IAA could lead to trade tensions by imposing barriers that favor local industries over foreign competitors.

The China Chamber of Commerce to the EU has expressed regret over the IAA's design, warning that it could reshape market access in ways that discourage global investment, turning the market into "an exclusive protectionist system". To some extent, the IAA is a part of a broader trend of "decoupling" under the pretext of "de-risking".

China and the EU have long enjoyed a robust trade relationship underpinned by complementary economic strengths. However, in recent years, the economic relationship has faced growing strains largely because of some EU politicians' ill-advised moves and misjudgment. The IAA risks further complicating the situation. This is particularly concerning in sectors such as renewable energy, electric vehicles and critical raw materials, where Chinese companies have made significant investments.

Other key trading partners of the EU, including the United States and the United Kingdom, have also expressed reservations about the IAA's potential to distort global trade flows.

The IAA is motivated by the EU's need to sharpen its economic competitiveness. But the IAA's approach risks overcorrecting. It could isolate the EU at a time when global cooperation is needed to address challenges such as climate change and supply chain resilience.

Rather than resorting to protectionism, the EU should focus on creating a more competitive business environment by addressing its high energy costs, streamlining regulations and investing in research and development.

The visits to China by multiple European leaders in recent months stand as a compelling testament that China and the EU are cooperative partners. Faced with the complex and challenging international landscape, the EU should strengthen strategic communication with China to resolve differences through friendly consultations, and reject protectionist moves.

Only by pursuing a balanced approach that promotes European industries without alienating global partners will the EU be able to achieve its strategic goals while preserving the openness that has underpinned its prosperity.