[EN] Targeting European Preference Criteria Where They Matter Most

Increased geoeconomic rivalry, strengthened technological global competition particularly with respect to China, and the erosion of the free-trade order are stress-testing Europe’s economic model. As a result, politically salient sectors like the automotive and steel industry face severe losses in employment and value-added without a clear pathway for the future.

European Preference Criteria provide a promising response.

The following decision framework assesses where, when, and how to apply EU Preference Criteria (EUPC) to effectively support jobs, competitiveness, scale, and transition rather than the protection of incumbents. Based on Eurostat and product complexity data we provide a comprehensive sector analysis of 32 sectors and 234 products. The following recommendations set out a targeted, action-oriented approach to deploying EUPC:

• Adopt a single EU-wide decision framework for EUPC: Apply EUPC only a) where sectors meet clear thresholds on socio-economic relevance, future competitiveness, b) where EUPC effectively addressing sectoral challenges posed by global competition, and c) where trade-offs (price, competition, international relations) are acceptable. Make this framework mandatory for all new EUPC proposals

• DEFEND – Concentrate EUPC on sectors where the EU is already strong: Use EUPC in frontier sectors such as mechanical engineering, capital goods, machinery, semiconductors, and electronic components, where the EU retains strong competitiveness and spillover potential. This includes the EU’s clean and renewable energy technologies

• STRENGTHEN – Target EUPC in growth sectors to accelerate scale and learning: Prioritise sectors with growing markets where the EU holds technological leadership position (optical and precision equipment) or holds a moderate but recoverable competitive position where demand-side support can unlock scale effects (batteries, energy storage)

• TRANSFORM – Make EUPC strictly conditional and time-limited for sectors of high employment relevance but limited future relevance and competitiveness: Use EUPC only where they support technological catch-up or value-chain restructuring towards competitiveness (e.g. steel and chemicals), with clear benchmarks and automatic phase-out if competitiveness does not improve

• Apply EUPC to the automotive industry on a value-chain basis: Restrict support to EV-focused value chains, to ensure catch up to the technological frontier and steer the demand pull towards upstream sectors like batteries, vehicle assembly, electronics, and optical systems and away from legacy ICE supply chains

• Anchor steel support in value-chain restructuring: Focus EUPC on downstream steel segments to avoid protecting upstream primary iron production with weak cost positions

• Avoid supporting structurally uncompetitive import sectors: Do not apply EUPC in sectors with low current and future relevance, such as household appliances, coke production, basic textiles, industrial steam generators, and printing and media

• Require ex-ante checks on prices and competition: Approve EUPC only where consumer price impacts are acceptable and where EUPC design safeguards prevent entrenching incumbents or weakening innovation incentives

• Build Partnerships around “Made with Europe”: use access to the Single Market as leverage in geopolitical partnerships to pursue the EU’s geostrategic interests