Brussels Will Subsidize Companies and Production Outside the EU

The European Union is preparing a new industrial policy that could open the door to subsidies for production outside the EU itself. The legislative package is called Industrial Accelerator Act, and Brussels is attempting to strengthen the continent’s industrial base and increase the share of manufacturing in the economy. It also plans to ‘extend a hand’ to countries with which the EU has signed trade agreements and which Brussels considers reliable partners.

Reciprocity Condition

Among these countries are the United Kingdom, Japan, Norway, Switzerland, South Korea, Canada, and Australia, and ultimately, up to forty countries could be included in the system. The condition is reciprocity: if their companies want to participate in European industrial support programs, European manufacturers must also be granted access to their markets, public procurement, and industrial projects.

This is part of a new legislative package through which Brussels is trying to strengthen the continent’s industrial base and increase the share of manufacturing in the economy. The goal is to raise the share of industry in the EU’s gross domestic product to around 20 percent by the middle of the next decade, given that this share has fallen to just over 14 percent in recent years.

Subsidies for a Range of Sectors

Subsidies would apply to a range of sectors considered strategic: the production of electric vehicles, batteries, clean energy, aluminum, cement, and other industries important for the energy transition and technological autonomy of Europe.

The inclusion of partner countries represents a significant shift from the initial ideas of some member states that advocated a strict ‘made in the EU’ rule. France, for example, sought to reserve European public money exclusively for production within the Union. However, in the final proposal, the Commission opted for a broader model that attempts to reconcile industrial protection with the reality of global supply chains.

Such an approach is particularly important for the automotive sector, which is deeply integrated with manufacturers from Japan, South Korea, and the United Kingdom. Excluding these countries from industrial projects could seriously disrupt European supply chains.

Subsidies for Companies

In practice, this does not mean that subsidies would go directly to foreign countries, but rather that companies from partner countries could participate in European industrial projects and consortia that receive public support.

For example, a Japanese battery component manufacturer could participate in a joint battery development project with a European car manufacturer or technology company, with part of the project potentially receiving financial support from European funds or national support programs.

In other words, the goal is not to finance production outside Europe but to ensure that key parts of global supply chains remain connected to European industry.

Additional Conditions

At the same time, Brussels is introducing additional conditions for large investments from countries that dominate certain technologies. Investments exceeding around 100 million euros will have to include European suppliers, employ local labor, and share part of the technology with European partners. This is an attempt by the Commission to avoid a scenario where foreign companies open factories in Europe that operate in isolation from the European industrial ecosystem.

Part of the package also relates to speeding up the issuance of permits for industrial projects. Brussels wants to simplify administrative procedures and shorten the time required to launch new manufacturing facilities, which is often cited as one of the weaknesses of the European industrial environment compared to the US and Asian markets.

Lex China

However, the real political context of this package lies in the growing pressure from the Chinese industry, particularly in the electric vehicle sector. Chinese manufacturers have dramatically increased their presence in the European market in recent years, and their cars are often significantly cheaper than European models.

Companies like BYD, SAIC Motor, or Geely are rapidly expanding sales in Europe, while the Chinese industry simultaneously dominates global production of batteries and key components for electric vehicles.

In Brussels, there is therefore an increasing discussion about the need for Europe to protect its own industrial base from competition that, according to European institutions, is strongly supported by state subsidies.

As a result, some analysts are already informally calling this package ‘Lex China’. Although the law is not formally directed against one country, its mechanisms largely target the production model that has developed in the Chinese electric vehicle and battery industry.

The European Commission already launched an anti-subsidy investigation into Chinese electric cars last year, and the new industrial package represents a broader attempt to strengthen the competitiveness of European manufacturing in the long term.

At the same time, by including countries like Japan or the United Kingdom, Brussels is trying to avoid complete protectionism and create a broader industrial bloc of developed economies. In practice, this would mean connecting European industry with partners who share similar standards and concerns about the growing dominance of Chinese production in key technologies.