The example of the battery industry reveals the harsh truth about the Commission’s plans

The leaks of the Commission’s Industrial Accelerator Act, which will be announced on Wednesday, reveal the problems of the “European priority”.

The Commission’s Industrial Accelerator Act (IAA), to be announced on Wednesday, was supposed to be ready last November, but it has been constantly postponed. Along the way, the original name of the regulation also changed, when the difficulties of European industry and the upheaval in world politics hit the minds of the politicians in Brussels. Originally, the name of the regulation was the regulation on the acceleration of industry’s exit from coal, but last fall, climate concerns were partly at the feet of trade policy and European protectionism, so the name of the regulation was changed to the industry acceleration regulation.

In the regulation to be announced on Wednesday, it is intended to present the means to strengthen the success of European companies in the global market and accelerate the demand for clean solutions.

From the point of view of companies and the economy, IAA’s biggest problems are, according to preliminary information, related to the European priority orientation. It means that products manufactured in the EU area would be preferred in public procurement and subsidies.

This is no small policy, because public procurement makes up about 15 percent of the entire EU’s gross domestic product.

Many member states have already warned in advance that the European requirements will increase procurement prices and weaken the EU’s global competitiveness. The problem is also that in many industries the EU is not able to provide all the necessary components, in which case strict rules of origin would easily lead to more expensive and slower processes.

A good example of the challenges of the European requirement is the battery industry, because around 80 percent of the EU’s battery capacity is built by Korean companies. European priority rules could therefore directly hit the EU’s own goals and slow down the clean transition.

Will the bureaucracy increase?

Another big problem with the European priority is the increase in administrative burden and bureaucracy, even though the current Commission has specifically promised to reduce them.

Calculating the degree of Europeanness in global supply chains is complicated. It could lead to burdensome reporting requirements for companies and procurement authorities would have to monitor origin shares, which the Commission could change annually with changing criteria. This would make it especially difficult for SMEs to participate in public procurement. The situation could also lead to the fact that the commission could in practice choose the winning companies participating in the procurements.

The European priority requirements have also caused controversies within the Commission. The dispute can be summed up by stating that French sovereignty has faced pressure from the German car industry.

The Commission’s challenge is that energy-intensive European industrial sectors, such as the steel and chemical industries, are already suffering from global overcapacity and high costs.

The message from the companies in the sector has been clear: additional bureaucracy and new requirements will not help keep production and jobs in the EU, but can accelerate the transfer of production elsewhere.

At the same time, the Commission is also aware that energy-intensive industries produce around 20 percent of the EU’s greenhouse gas emissions.

In terms of companies, the positive aspect of the presentation to be announced on Wednesday should be that the permit processes are supposed to be accelerated and a one-stop shop principle created.

However, based on the latest IAA leak version, the reform work is supposed to be connected to the Commission’s upcoming EU business wallet proposal. This may lead to the fact that the timetables for the reform may be longer and conflict with, for example, the national permit process reforms recently made in Finland.

ME: a kanta

The Confederation of Business and Industry also said on Tuesday that it questions the usefulness of the European criteria.

According to EK, European requirements and the preference for local production in public procurement do not strengthen sustainable competitiveness, but can distort competition and increase bureaucracy.

According to EK, the EU should focus on reforming the internal market instead of European demands. The dismantling of internal market barriers would correspond to a 44 percent customs relief in goods trade and more than 100 percent customs relief in services.

According to EK, the removal of internal market barriers would strengthen industrial supply chains and investment security more effectively than the means likely to be presented by the Commission on Wednesday.