Protectionist act by EU seen as self-defeating

China has formally submitted a complaint to the European Commission (EC) over the European Union's proposed Industrial Accelerator Act, warning that the legislation would create "serious investment barriers and institutional discrimination" against Chinese companies, and vowing countermeasures if Brussels pushes ahead.

The proposed act, according to analysts, represents a serious departure from World Trade Organization rules, a discriminatory blow to foreign investors and a self-defeating strategy that will ultimately harm Europe's own interests.

The act imposes numerous restrictive requirements on foreign investment in four emerging strategic sectors — batteries, electric vehicles, photovoltaics and critical raw materials — while introducing "EU origin" exclusivity clauses in public procurement and support policies, a spokesperson with the Ministry of Commerce said on Monday.

The ministry submitted its official comments to the EC, the executive arm of the EU, on Friday, expressing China's formal position and grave concerns over the draft law, the spokesperson said.

China has called on the EU to remove discriminatory requirements against foreign investors, local content mandates, compulsory transfers of intellectual property and technology, and restrictions on public procurement, the spokesperson added.

The spokesperson added that China will closely follow the legislative process and stands ready to engage in dialogue and communication with the EU. However, the spokesperson cautioned that if the EU ignores China's suggestions and insists on pushing the legislation through, thereby harming the interests of Chinese companies, China will have to take countermeasures.

Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, said the core problem with the act is not its ambition to streamline approvals — measures that could benefit all manufacturers equally — but its explicit targeting of foreign investors.

Zhou said the provisions in the act apply exclusively to third-country investors that account for more than 40 percent of global production capacity in the aforementioned sectors — a threshold that transparently targets China, which leads the world in electric vehicle batteries, solar panels and critical materials processing.

"By creating a two-tier system where EU products are systematically favored, the act undermines the rules-based multilateral trading system that Europe itself once championed," Zhou said.

Gao Lingyun, a researcher at the Chinese Academy of Social Sciences' Institute of World Economics and Politics, said that another damaging aspect of the act is its disruption of global supply chains. In the EV battery sector, for example, European automakers rely on cost-effective, high-performance batteries from China based on market principles.

Forcing public procurement and support schemes to favor "EU Origin" batteries will artificially constrain supply, raise costs for European automakers and ultimately burden European consumers with higher prices, Gao added.

China is not alone in its concerns. Major trading partners including the United States, Japan and the United Kingdom have also voiced objections to the act's protectionist tilt. Even within the EU, the act has faced strong opposition from free-trade-oriented member states such as Sweden and Ireland, as well as from industry groups.

Swedish Prime Minister Ulf Kristersson warned in February that "Buy European" measures should not be used to shield European businesses from competition, arguing that Europe must "compete because of quality and because of innovation, not because we try to protect the European markets".

wangkeju@chinadaily.com.cn