A deeper dive into the fight for European competitiveness

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Introduction
This report looks at the growing pressure on Europe’s industrial competitiveness and the policies being introduced to respond. It matters because rising costs, global trade tensions, and internal market barriers are pushing production, investment, and jobs outside the EU, raising concerns about long-term economic security.

Key Takeaways

• The proposed Industrial Accelerator Act aims to strengthen EU manufacturing and supply chains, including a requirement for companies to base at least 50% of their workforce in Europe.
• Large foreign investments in strategic sectors will face tighter rules, including local content requirements and technology transfer obligations.
• High energy costs, carbon pricing, and regulatory complexity are driving companies to relocate production outside Europe, with sectors like chemicals and plastics already seeing sharp declines.
• Trade tensions with the US, including tariffs on steel and aluminium, have worsened an already fragile industrial base and risk flooding the EU market with excess global supply.
• Internal fragmentation remains a major issue, with inconsistent national rules acting like heavy tariffs and making it harder for businesses to scale across the Single Market.
• The EU is rolling out a broad policy response, including the Competitiveness Compass, a European Competitiveness Fund, and plans to simplify regulation, speed up permitting, and improve access to investment.

Conclusion
Europe is trying to balance industrial strength, sustainability, and open markets, but the gap between ambition and execution remains a risk. If reforms succeed in cutting red tape, lowering costs, and coordinating action across Member States, competitiveness could recover. If not, further industrial decline and reliance on imports look likely.

Competitiveness is a hot topic among policymakers in Europe. In this edition of the Brief, we take a closer look at the challenges to the EU’s industrial independence, and take stock of the current and upcoming measures designed to protect it.

On 4^th March 2026, European Commission executive vice-president Stéphane Séjourné joined local and regional leaders at the plenary session of the European Committee of the Regions, where attendees discussed the incoming Industrial Accelerator Act. The regulation is built to accelerate the transition into cleaner, future-ready technologies while bolstering European manufacturing, creating new jobs, and helping businesses grow.

Support for the measure dates back to the foundation of the Antwerp Declaration for a European Industrial Deal in February 2024. Companies dealing in raw materials, chemicals, biotech, and more came together and backed a deal to unlock self-sufficiency for raw materials, boost demand for sustainability-minded products, motivate EU-based companies to invest, and support the Single Market in Europe.

Fast forward to March 2026, and a legislative proposal has been adopted. Among its various measures, it requires companies to guarantee that at least 50% of their employees are based in Europe – an addition hoped to result in economic security, a resilient supply chain, and a Single Market that benefits businesses and citizens as well as industries.

Furthermore, the proposal intends to crack down on investments exceeding €100 million, specifically in strategic sectors where a single third country controls over 40% of global manufacturing capacity. These investments will be required to comply with local content requirements, enable the transfer of technology and knowledge, and create high-quality jobs.

The Commission has also acknowledged that companies sometimes wait for years for their energy projects to be approved, even when the financing is ready. It plans to introduce a single digital permitting process to simplify and accelerate the transition.

Indeed, the Committee of the Regions discussed the importance of faster permissions for energy-intensive sectors. Regional leaders upfronted the importance of effective territorial implementation, adding that, if the Commission fails to implement effective multilevel governance and a place-based approach, it runs the risk of ‘widening territorial disparities instead of unlocking growth potential across all regions.’

These discussions are undoubtedly important, but they are not happening in a vacuum. Competitiveness has been a point of discussion for years, with the high costs of carbon and energy taking a toll on local production and pushing businesses towards cheaper imports. The financial pressure is even accelerating plant closures, eliminating jobs within the EU, and driving companies to relocate to more competitive regions overseas.

Join us as we dive deeper into the industrial and geopolitical factors applying pressure on Europe’s Single Market, and the steps policymakers are taking to rectify them.

Global competition

Europe is one of multiple global powers experiencing friction with the United States. President Donald Trump has been busy enforcing tariffs on various imports, starting with a 10% baseline tariff and an additional ‘reciprocal tariff’ of 20% for the EU.

Steel and aluminium were among the sectors facing an additional 25% tariff, raising alarm bells about their competitiveness. The European Steel Association (EUROFER) elaborated that Trump’s ‘America First’ policy would be “the final nail in the coffin” for the EU steel industry’s “already dire market environment”.

Following a 9-million-tonne decline in production capacity in 2024, the cumulative impact of a blanket import tariff, plus the removal of all product exemptions and Tariff Rate Quotas, was feared to prevent two million tonnes of steel from being exported to the United States. Furthermore, it was speculated that a rise in global excess could redirect more steel imports to the EU and ‘flood’ the market – posing a threat to local demand.

Meanwhile, Aluminium Deutschland president Rob van Gils urged the German government to advocate for export tariffs on aluminium scrap and ensure fair competitive conditions for recyclers: “Without quick and decisive action by the EU, circular economy structures that have been created over the years will be destroyed and companies will be forced out of the market.”

The Supreme Court of the United States has since ruled that Trump’s tariffs are illegal, and the EU has paused the ratification of its US trade deal (an outcome also linked to ongoing tensions around America’s desire to annex Greenland). Even so, Europe’s internal market is not out of the woods.

Local strain

“Europe cannot have strategic autonomy without industrial capacity,” cautioned Plastics Europe in a LinkedIn post, pointing out that the continent’s plastic production has declined for a third consecutive year.

“Production hasn’t disappeared; it’s moving abroad. And with it, investment, jobs and strategic control over essential materials. If Europe produces less, we depend more on imports from regions with lower energy costs and different carbon standards.”

Nor is this exclusive to polymers. INEOS chairman and CEO Sir Jim Ratcliffe asserts that 25 million tonnes of chemical capacity have been forced out of Europe by insufficient trade defence and rising carbon costs; and Cefic attributes just 13% of the global chemicals market to Europe, while China is thought to hold a 46% share.

Additionally, internal market barriers are thought to cost the chemical sector the equivalent of a 65% tariff for goods and as high as 100% for services.

“As things stand, too many companies have to look abroad to grow and scale up – partly because they face a new set of rules every time they expand into a new Member State,” European Commission president Ursula von der Leyen conceded at the World Economic Forum in January. “So, while on paper the market of 450 million Europeans is open to them, it is far more complicated in reality.”

Indeed, Speira has spoken on behalf of the aluminium sector about ‘incoherence’ in regulation across the bloc, which prevents scrap from being shipped overseas. Even in pulp and paper, Cepi has grappled with the number of national regulations stifling the industry’s growth, naming fragmentation in collection and recycling processes as a further roadblock.

Action plans

The Commission seeks to remove internal barriers and reinforce the Single Market through a 28^th regime. Although this measure is optional and will not replace national laws, it will recommend a single set of rules for investment and operation – including simplified aspects of corporate law, insolvency, labour and tax law. In theory, these measures will make it easier for start-ups and SMEs to invest, operate, grow, and share knowledge within Europe’s Single Market.

In a more all-encompassing move, the Commission has revealed its Competitiveness Compass. This will introduce horizontal enablers to support European competitiveness across sectors. One will involve proposals to simplify rules, fast-track the process of accessing EU funds, and relieve businesses of regulatory and administrative burdens – setting a specific target of at least 35% for SMEs.

Barriers to the Single Market will also be addressed through a Horizontal Single Market Strategy. In summary, this approach aims to modernize governance framework and replace intra-EU barriers with new rules; it seeks to improve and accelerate standard-setting processes, especially for start-ups and smaller companies.

A European Savings and Investment Union is expected to incentivize risk capital, streamline investments into the EU, and strengthen financing competitiveness. A Competitive Coordination Tool will also position Member States to introduce shared EU policy objectives and undertake cross-border projects.

To financially support this transition, a European Competitiveness Fund will replace several existing financial instruments. It is expected to invest in strategic technologies from conception to scale-up and support the Single Market, as per the Letta and Draghi reports.

Also under the Competitiveness Compass, the Commission has introduced a Clean Industrial Deal. As its name suggests, this measure is designed to lessen fossil fuel consumption and accelerate efficient energy; but it also seeks to overcome Europe’s dependence on raw materials from third countries by making the most of the EU’s resources.

In turn, the Industrial Decarbonization Accelerator Act forms part of the Deal. It sets out European preference criteria to prioritize EU-made clean products in public and private procurements. The Public Procurement Framework is set to be updated in accordance with this measure.

The Commission also plans to introduce an EU Critical Raw Material Centre to jointly purchase raw materials on behalf of interested countries. In doing so, it expects to create economies of scale and give businesses more leverage to negotiate prices and conditions.

However, aspects of the Clean Industrial Deal have been criticized. For example, Cepi argues that carbon leakage is already contributing to a ‘mechanical increase’ in CO2 emissions, and that the upcoming legislation fails to prevent further relocation of business operations to countries with weaker climate policies.

Nevertheless, the Strategic Framework for a Competitive and Sustainable EU Bioeconomy was adopted in November 2025. From agriculture to biotechnologies, this framework intends to balance sustainability and practicality in the widespread adoption of biological resources; for our purposes, it expresses an interest in the use of biobased plastics to manufacture packaging.

Policymakers plan to simplify the regulatory framework to encourage a shift into circular business models. At the same time, they wish to maintain safeguarding for EU safety standards.

In order to direct funding towards biobased technologies, the Commission seeks to convene a Bioeconomy Investment Deploy Group – establishing a pipeline of bankable projects, sharing risk between market players, and crowding in private capital.

Legislative targets are anticipated to stimulate demand for biobased content in products, while initiatives to reward farmers and foresters taking steps to protect their soil, enhance carbon sinks, and uplift more sustainable biomass use are expected to foster progress.

Next steps

Ultimately, the Committee of the Regions culminated in an opinion on the Competitiveness Fund. The Committee warned that its combination of fourteen programmes into a single instrument should not weaken existing measures enforced in local and regional ecosystems, and argued that Member States should not be allowed to finance the Fund’s measures through National and Regional Partnership Programmes.

Further still, the Committee believed that the Fund should define competitiveness as both market-oriented and place-based. Everyone from start-ups and businesses to universities and civil society should be involved in the value chain framework, it was argued; all these organizations are considered to be key players in bringing regional innovation ecosystems to life, both through receiving funding and putting industrial priorities into action.

The Commission is urged to pursue European competitiveness via revisions to its Smart Specialization Strategies, which shape research and innovation across the bloc. Territorial cohesion is also prioritized by the Committee, which suggests that the Fund should include ex-ante territorial impact assessment and a ‘do no significant harm to cohesion’ principle.

At the European Industry Summit in February, Ursula von der Leyen also told attendees that ten omnibuses are on the cards. Only three are currently in action, she continued, urging both the European Parliament and Member States to push the remaining amendments forward.

To address ‘gold-plating’ – described by von der Leyen as the “extra layers of national legislation that just make your life harder” – the Commission plans to introduce a new company structure: EU Inc. This will comprise a single, streamlined set of rules across the European Union to simplify cross-border operations between Member States.

Additionally, the Commission has plans to channel more of its Emissions Trading System (ETS) resources into energy-intensive industries. ETS operates under a ‘cap and trade’ principle, in which industrial sectors are expected to remain within a decreasing emissions limit while allocating – and, indeed, selling – allowances that equate to one tonne of CO2.

Reportedly, this approach has already reduced the EU’s overall emissions by 14-16%, with further rebasing cuts set to eliminate 27 million allowances in 2026. Yet the system’s critics allege that carbon-intensive industries are handed excess allowances, subsequently devaluing each allowance to less than €5 per tonne of CO2 while allowing companies to sell off extras at a profit.

Other concerns centre on the actions of Member States themselves, especially those accused of absorbing ETS revenues into their general budgets. Ursula von der Leyen posited that only 5% of Member States direct the funding into industrial decarbonization, and proclaimed that it was “high time that Member States step up and match [the Commission’s] level of support.”

Some Member States are pushing for the ETS to be revised, claiming that they are disproportionately impacted by high pricing. Others argue that the existing system is effective, and that tampering with or replacing it puts Europe’s energy independence at risk. The debate continues to heat up as the war in Iran drives oil and gas prices higher.

Ultimately, the current state of European competitiveness has been developing for years and continues to unfold in multiple contexts. Industry players have advocated for renewable carbon technologies, a ‘Made in Europe’ rule for plastic recyclate thresholds, and other potential solutions, but the conversation is ongoing.

Packaging Europe will monitor its progress, so watch this space for more updates.

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