The European Union has officially abandoned global free market ideals with the introduction of the Industrial Accelerator Act (IAA). The European Commission (EC) has unveiled this sweeping plan to protect its domestic manufacturers. Protectionism, long considered a taboo subject in Brussels, has now become official doctrine. The EC stated explicitly that state subsidies and EU taxpayer funds must primarily benefit the local economy, while foreign access to European capital will be strictly limited.
The Industrial Accelerator Act: French Engine and Draghi’s Blessing
France has been the primary ideologue and driver of this radical pivot. For years, French President Emmanuel Macron has called for a European version of America’s protectionist legislation. Now, his ally Stéphane Séjourné, serving as the European Commissioner for Industrial Strategy, has successfully pushed through the “Buy European” concept—an idea that seemed like absolute heresy to Brussels bureaucrats just a few years ago.
However, French ambitions required a strong academic foundation to gain traction. This was provided by former European Central Bank President Mario Draghi, who released a landmark report on the decline of European competitiveness in 2024. Draghi’s report provided Paris with an ironclad justification: Europe is losing the global race and requires radical protective measures. Washington also played a role; the U.S. Inflation Reduction Act began draining European business across the Atlantic with massive subsidies. Caught between the American financial magnet and cheap Chinese imports, opponents of French protectionism ran out of arguments.
Division Within the EU and Germany’s Fears
Behind the polished exterior of the new law lies a deep internal rift. Export-oriented nations, led by Germany, view these measures with poorly concealed anxiety. The German economic model has been built on global free trade for decades. Berlin pragmatically fears retaliatory trade barriers from Beijing, knowing that German automakers and machine tool manufacturers would be the first targets of Chinese sanctions. Séjourné had to exert immense pressure to break the resistance of neighboring member states and secure their agreement to build these protectionist walls.
New Rules of the Game and the Chinese Barrier
The law fundamentally changes how public contracts—worth an estimated €2 trillion—are distributed. From now on, only companies manufacturing within the EU or using local raw materials will be eligible for these funds. The requirements are stringent. For an electric vehicle to qualify for subsidy programs, at least 70% of its components must be European, and it must feature an EU-made battery. Construction firms working on state projects will be required to purchase only local cement and aluminum. Steel producers faced slightly less pressure; while the obligation to use only European steel was omitted, the text still mandates a requirement for low-carbon production.
A specific strike is aimed at Chinese expansion. Large foreign investments exceeding €100 million in strategic sectors, such as battery or solar panel production, are now subject to harsh conditions. Foreign entities will be barred from owning more than a 49% stake, required to hire at least 50% local workers, and forced to transfer technologies and licenses to Europeans.
An Ultimatum for the WTO
For ordinary Europeans, the new law signals that preserving domestic jobs has become more important than low consumer prices. The question of which foreign nations to allow into the market sparked the most heated debates. While France pushed to exclude all non-European countries from public procurement, the final compromise is broader. The list of potentially reliable partners includes about 40 nations that have free trade agreements with the EU or are signatories to the WTO’s Government Procurement Agreement. This opens the door for the UK, Canada, the US, Turkey, and others. China is categorically excluded from this list.
However, WTO partners should not celebrate prematurely. Brussels is issuing a strict ultimatum regarding reciprocal access. The European Commission will audit foreign laws; if it is determined that countries like the US or Canada are blocking Europeans from their own public contracts, the EU will not hesitate to remove them from the list of reliable partners. Trade has officially become a two-way street where only the most calculated survive.
