The European Union's "Made in Europe" Push

Government contractors and suppliers in the U.S. with European public-sector business should take note: A sweeping European Union legislative proposal could restrict access to one of the world's largest procurement markets by favoring domestically manufactured, low-carbon products in key strategic sectors.

The EU is poised to reshape its public procurement landscape with a bold new "Made in Europe" framework. On March 4, 2026, EU Industry Commissioner Stéphane Séjourné unveiled the Industrial Accelerator Act (IAA), a legislative proposal designed to channel public funds toward European-manufactured products in key strategic sectors. The proposal was presented in Brussels and must still be approved by the EU member states and European Parliament before it can take effect. Adoption is not expected before 2027.

A Closer Look at IAA

The aim of the IAA is to strengthen European industry and competitiveness, as well as accelerate decarbonization through targeted measures in the awarding of public contracts and public subsidies. Its central pillars are accelerated approval procedures, preference for "Made in Europe" products with low carbon dioxide (CO2) emissions in tenders and stricter rules for foreign direct investment. The proposal seeks to reverse Europe's industrial decline, setting a target for manufacturing to represent 20 percent of Europe's gross domestic product (GDP) by 2035, up from 14.3 percent in 2024.

Under the proposed rules, public funds, state aid and contracts would increasingly be conditioned on "Made in Europe" products in sectors such as steel, cement, aluminum, clean technologies (clean tech), electric vehicles (EVs) and plug-in hybrids. Sectors such as microchips, sensors, autonomous driving systems, biotechnology, robotics and cloud services – included in earlier versions of the proposal – have been excluded. This likely reflects the EU's recognition that these sectors depend heavily on global supply chains that cannot be easily localized. In the covered sectors, government contracting authorities and funding programs would be required to apply criteria that favor products manufactured in the EU and meet climate-friendly standards.

Notably, the draft regulation stipulates that countries with a free trade area or customs union agreement with the EU are considered local countries. This would include countries in the European Economic Area, such as Norway and Iceland, as well as Turkey. The same openness could also apply to the 21 countries that have signed the World Trade Organization (WTO) Agreement on Government Procurement (GPA), including the United Kingdom and Canada. Entities from non-covered or nonreciprocal countries could face significant disadvantages; countries such as China and the U.S. would be excluded due to the absence of such agreements, meaning entities from those countries could face significant competitive disadvantages in EU procurement.

Key Takeaways from the IAA Proposal

• Public procurement and incentives would be used to boost demand for the EU's clean tech industry and products. The IAA covers several key sectors, including steel, cement, aluminum, automotive components and net-zero technologies.
• The new rules would set minimum local content requirements for projects using public funds. For example, aluminum-sector projects would require that at least 25 percent of the aluminum be produced in the EU using low-carbon technologies.
• "Made in EU" designations could also extend to non-EU countries where there is reciprocal market access (i.e., a free trade agreement or participation in the GPA).
• Foreign investments exceeding 100 million euros in batteries, EVs, solar photovoltaic and critical raw materials would be subject to a workforce localization requirement: At least 50 percent of the project's workforce must consist of EU workers. The stated aim is to ensure that large-scale foreign investment generates tangible economic value within the EU – not just capital inflows, but jobs for European workers. The enforcement mechanisms for this requirement and how it would interact with existing EU labor and investment law remain to be clarified as the legislation develops.

Practical Implications for Businesses and Investors

The IAA, if adopted, would have significant consequences for a range of stakeholders. Companies bidding on EU public contracts in covered sectors would need to demonstrate compliance with local content and low-carbon requirements – potentially requiring supply chain restructuring. Non-EU firms, particularly those based in countries without a free trade agreement or GPA membership, could find themselves effectively locked out of major procurement opportunities.

The stakes are considerable. American companies have established significant footholds in several of the sectors the IAA targets. In clean energy, U.S. firms have captured substantial shares of the European EV market, and American solar panel, battery storage and heat pump manufacturers have supplied EU-funded renewable energy projects. In heavy industry, U.S.-based aluminum producers and specialty steel suppliers have long served European construction and infrastructure programs. EU public procurement spending exceeds 2 trillion euros annually, representing approximately 14 percent of EU GDP, and American firms have historically competed for a meaningful share of that market on the strength of price, technology and quality. The IAA's local content and origin requirements put that access at risk.

The defense sector, though specifically excluded from the IAA's scope, offers a cautionary parallel. U.S. defense contractors have secured record-level orders across Europe in recent years – from fighter jets and missile systems to helicopters and tactical vehicles. Yet, the growing "Made in Europe" sentiment in defense procurement has already begun to redirect contracts toward European competitors, with countries such as Denmark choosing the European-built SAMP/T, a mobile surface-to-air missile defense system over the U.S.-made Patriot in 2025. If a similar preference takes hold in civilian sectors through the IAA, U.S. companies in clean tech, automotive manufacturing and industrial materials could face an analogous shift.

Foreign investors planning large-scale projects in the EU would need to factor in the 50 percent EU workforce requirement, which could affect staffing strategies and project economics. For U.S. companies in particular, the parallels to "Buy American" provisions under U.S. federal procurement law are striking – though the IAA goes further by tying procurement preferences to both origin and carbon intensity. Companies accustomed to navigating domestic content requirements under the Buy American Act and Build America Act may find the IAA's dual origin-and-sustainability criteria a new layer of complexity.

Trade Law and Policy Considerations

The IAA's preferential treatment does not apply solely to EU-made products: The draft regulation extends "Made in EU" equivalence to countries with free trade agreements with the EU, in a customs union with the EU or WTO GPA membership. However, the draft regulation extends equivalent treatment to only non-EU goods for the purposes of public procurement. The IAA's public support schemes such as subsidies and auctions are not available for non-EU products. The EU Industry Commission also retains broad authority to strip any third country of its equivalence status, including for failure to treat EU goods as well as domestic goods, or mitigate supply-dependency risks.

The U.S. may face a more complicated equivalence analysis than other GPA/free trade agreement partners, particularly given U.S. domestic preference rules and any EU assessment of reciprocity. Although the U.S. is a WTO GPA signatory, it will be difficult for the U.S. government to demonstrate reciprocity given the Buy American Act's domestic content thresholds, set to reach 75 percent by 2029. What is more, a January 2025 Trump Administration executive memorandum directed a review of all trade agreements, including the GPA, to ensure they favor U.S. manufacturers.

Reactions

The proposal has drawn a divided response. France, long an advocate for European industrial preference, has been broadly supportive – President Emmanuel Macron has championed "Made in Europe" quotas for years. Germany, by contrast, has urged caution: Chancellor Friedrich Merz has argued that Europe's trading partners should be included rather than excluded. Other critics warn that the new rules risk adding bureaucratic complexity to public procurement.

Proponents counter that the current global market is far from open. They point to aggressive Chinese industrial subsidies as a key driver of competitive imbalance, arguing that European subsidies should compensate for the resulting disadvantage faced by EU manufacturers. In their view, Europe – like the U.S. and China – must now pursue a more assertive industrial policy.

Defense "Made in Europe" Versus the European Sky Shield Initiative

Though the "Made in Europe" ethos is gaining traction across civilian sectors, one major European defense initiative tells a different story. The European Sky Shield Initiative (ESSI), launched on October 13, 2022, takes a decidedly different approach by incorporating non-European systems. ESSI aims to strengthen European air and missile defense, and nearly 30 countries have signed on to the initiative to jointly procure multilayered systems capable of countering drone, cruise missile and ballistic missile threats.

ESSI employs an integrated, multilayered air defense architecture. Only one layer – the German-built IRIS-T SLM (InfraRed Imaging System Tail/Thrust Vector-Controlled, Surface-Launched Medium Range) – is European-made. The remaining two layers rely on U.S. and Israeli systems: the Patriot missile system and Arrow 3, respectively.

This reliance on non-European systems is a major reason for skepticism surrounding the initiative – most notably from France. France views ESSI as a threat to EU sovereignty, arguing that the significant involvement of non-European defense contractors undermines Europe's military-industrial independence.

The tension between the IAA's "Made in Europe" ambitions and pragmatic defense procurement decisions such as ESSI highlights a fundamental question for the EU: How far can – and should – Europe go in prioritizing domestic production over established international partnerships?

Conclusion

As the IAA moves through the legislative process – with European Parliament and Council deliberations expected to begin in late 2026 – businesses, investors and trading partners would be well advised to monitor developments closely. The outcome will shape not only the EU's industrial and procurement landscape, but also the terms on which non-EU companies can participate in one of the world's largest public markets.

If you have any questions, please contact the authors or another member of Holland & Knight's International Trade Group.

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