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EU's manufacturing decline sparks controversial trade and industrial policy shift

As the EU's industrial share plummets, bold new policies target foreign investors—but at what cost to open markets? Critics warn of a risky economic turn.

,   and  Administrator
2 min read
The image shows a graph on a white background with text that reads "eu imports and non-eu imports"....
The image shows a graph on a white background with text that reads "eu imports and non-eu imports". The graph is composed of two lines, one in blue and one in red, that represent the number of EU imports. The blue line is steadily increasing, indicating a decrease in the amount of imports over time. The red line is slightly higher than the blue line, indicating an increase in imports.

EU's manufacturing decline sparks controversial trade and industrial policy shift

The EU's manufacturing sector has shrunk significantly over the past two decades. Its share of the bloc's GDP fell from 17.4% in 2000 to just 14.3% in 2024, far below the 20% target set for 2035. Now, new trade and industrial policies are raising concerns about the region's economic future and its alignment with global trade rules. The EU has rolled out a series of policy tools under the themes of security, sustainability and fairness. These include stricter cybersecurity rules under the NIS2 framework, which now assess risks based on factors like a company's foreign government ties—not just technical standards. The proposed Industrial Accelerator Act goes further, prioritising 'union origin' products in public contracts and imposing tight restrictions on foreign investments in key sectors.

Under the Act, non-EU investors in areas such as battery tech, solar energy, and electric vehicles face limits: a maximum 49% ownership stake, mandatory EU joint ventures, and requirements for at least 50% of the workforce to be EU-based. Companies must also spend 1% of turnover on EU research and development, source materials locally, and transfer knowledge—though up to two conditions can be waived. These rules would hit firms from countries like China, which dominate over 40% of global production in these industries. Critics argue that these measures are reshaping the EU market into a more selective and exclusionary system. Some policies appear to stretch beyond the EU's legal authority, blending security concerns with economic decisions. Chinese companies, which have long operated in Europe under local laws, may find themselves increasingly shut out despite their contributions to competition and industrial growth. The EU's direction seems to clash with core WTO principles, particularly non-discrimination. Experts warn that if the bloc continues down this path, it risks weakening ties with economic partners and undermining its own long-term competitiveness.

The EU's manufacturing decline is largely tied to internal structural issues rather than outside competition. Yet the latest policies focus on tightening controls over foreign firms, particularly in strategic sectors. If maintained, this approach could reshape trade relationships while testing the bloc's commitment to open markets and global trade rules.

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