Turkiye and EU’s ‘Made in Europe’ plan

The EU is scheduled to announce on Wednesday, after seven postponements, its new “Made in Europe” plan. As much as the package has divided the EU and delayed the announcement, concern has spread much more widely, including to Middle Eastern nations such as Turkiye.

In recent decades, Turkiye and some other Middle Eastern countries have increasingly become key parts of European supply chains as part of the “nearshoring” economic phenomenon in industries including automobiles, machine manufacturing, steel and defense. Turkiye is engaged in a significant lobbying campaign alongside other non-EU nations that might be affected, including the UK, to influence the big EU announcement and be included in the geographical scope of the “Made in Europe” initiative.

This new plan, part of a broader Industrial Accelerator Act to be unveiled on Wednesday, is the latest phase of the EU’s Clean Industrial Deal, which aims to boost the bloc’s global competitiveness and may become the signature policy of Commission President Ursula von der Leyen’s second term of office. The proposal will introduce elements of European preference in EU aid and public procurement to European-made content in strategic sectors such as renewables, batteries, vehicles, and steel.

With key competitors such as the US and China increasingly challenging EU businesses, France seeded the idea a few years ago to steer major contracts toward European industrial and tech champions. While this has proven controversial within the EU and beyond, it has since gained traction, with the final package imminent.

European Commissioner for Prosperity and Industrial Strategy Stephane Sejourne wrote an article in February asserting that “without an ambitious, effective and pragmatic industrial policy, the European economy is doomed to be just a playground for its competitors. We must establish, once and for all, a genuine European preference in our most strategic sectors.”

However, the “Made in Europe” package has divided the 27 EU member states, with multiple delays in finalizing the initiative over several months. Skeptical governments include the Czech Republic, Estonia, Finland, Ireland, Latvia, Malta, Portugal, Sweden, and Slovakia. They have warned that the plan could have significant, unintended “consequences for effective competition, price and quality levels, and effects on businesses.”

Moreover, according to a leak in December, the bloc’s largest economy, Germany, has lobbied for a “Made with Europe” rather than “Made in Europe” approach. This “Made with Europe” alternative, which is more favored by much of the global business community, including in Turkiye and potentially other Middle Eastern nations, would see EU preferences more limited in time, and defined broadly to include products made in countries with which Brussels has a trade and/or economic partnership deals, and/or are otherwise “likeminded partners.”
 

The ‘Made in Europe’ package has divided the 27 EU member states, with multiple delays in finalizing the initiative over several months.

Andrew Hammond

For instance, Turkiye is advocating that accords such as the Pan-Euro-Mediterranean Cumulation of Origin agreement allow for the geographical scope of “Made in Europe” to be extended beyond the EU and and European Free Trade Agreement — Iceland, Norway, Switzerland, and Liechtenstein — to include other nations key to EU supply chains. Companies are joining countries in these lobbying campaigns as the potential alternative would be relocating manufacturing back to the EU which would take much time and money.

Moreover, Turkiye also asserts that signatories of the Barcelona Declaration should be included in “Made in Europe” on the basis of a rules-of-origin provision in international trade whereby products from one country of origin can have value added to it in another as if it were native to that country. According to Turkiye, this would allow for a product designed in an EU country, manufactured in Barcelona Declaration signatory country, and assembled in a third system country, to benefit from “Made in Europe” provisions.

While the overall “Made in Europe” package is scheduled to be released on Wednesday, a hint of what may be announced is shown in the automotive plan announced by the European Commission last December. This shifts the focus of incentives and financial support in the sector toward an increasingly “Made in Europe” emphasis.

As the commercial pressure from foreign-made car brands on the European market increases, especially from China, Brussels has established special incentives to protect the automotive sector, including tax breaks. This is founded on a 70 percent domestic production requirement within the EU.

This and wider European Commission announcements, such as the Clean Industry Agreement, the Automotive Industry Action Plan, and the automotive package, are based on intent to strengthen local industrial capacity. This includes compliance with EU criteria in environmental, social, and technological areas.

The development of clean manufacturing technologies is another pillar. Decarbonization of the automotive industry through the EU Net-Zero Industry Act and the Industrial Acceleration Act requires car makers to have a 40 percent low-emission fleet by 2030 and 75 percent by 2035. This also applies to industries such as automotive supply and automotive steel manufacturing industries.

Moreover, a new European Critical Raw Materials Center is being established to ensure the supply of critical raw materials and reduce external dependence. This will perform joint purchasing and stocking of critical raw materials and support not only the automotive industry, but also battery manufacturing, defense, and AI chips industries. New battery and battery conversion investments will be supported.

Taken together, despite all these controversies, the package has too much momentum to be stopped in its tracks. The devil will be in the detail of the big announcement for Turkiye and other Middle Eastern nations as they finalize their EU lobbying campaigns.

• Andrew Hammond is an associate at LSE IDEAS at the London School of Economics.