Europe | Industrial policy: protecting ourselves without protectionism?

Europe is embracing industrial policy once again. The Industrial Accelerator Act, currently under discussion in Brussels, is one of the first steps toward putting the recommendations of the Letta and Draghi reports into practice. The goal is to restore competitiveness vis-à-vis the United States without abandoning climate objectives. In doing so, Europe is reopening a chapter in its long history of industrial policy, one that stretches back to French Colbertism in the 17th century. What lessons can we draw from those experiences, and what challenges does this new wave bring?

Judging by its design, the Commission seems to have done its homework. It is not pursuing protectionism under a zero-sum mercantilist imperative, which would inevitably undermine the liberalization of international markets in a race to the bottom. Instead, it seeks targeted interventions to address externalities or other specific market failures.

In particular, Made in EU is not an end in itself, but rather a tool to ensure that the interdependence created by globalization does not turn into critical dependencies that leave us exposed to abusive practices by third countries. This approach is already recognized under World Trade Organization rules, for example through so-called antidumping measures. These are “second-best” policies, justifiable when diversification toward other countries is not feasible or, in more geopolitical terms, when dependence in one sector cannot be offset by reverse dependence in other sectors.

In line with Draghi, the Act introduces Made in EU or low-emissions requirements in public procurement and government support for strategic sectors, ranging from clean technologies and the automotive industry to materials such as steel, cement, and aluminum. But it departs from Draghi by failing to advance deregulation mechanisms. The Act streamlines permitting, but it does not resolve Europe’s regulatory paradox: it seeks to reduce bureaucracy by adding new rules to an already overregulated system.

The strongest criticism of the proposal, however, concerns what it leaves out: its reluctance to move toward greater EU-level authority and agility. Europe’s institutional framework, built to preserve broad areas of national autonomy, was created—successfully!—to eradicate the internal wars that ravaged the continent for centuries. Moreover, that autonomy has sustained a rich diversity that brings significant benefits. But diversity is one thing; fragmentation is another. And the reluctance to pool sovereignty at the European level has been costly: Europe still lacks a single capital market, a European safe asset, a fully integrated energy system, and, most urgently today, the capacity for common action in defense and industrial policy.

The mistrust and political obstacles standing in the way of deeper integration are enormous, but the need to strengthen EU-level institutions is greater still.