Europe should become less naive about strategic dependencies, but not mistake restriction for industrial strength, René Winkin, general manager of Fedil, argued at the Luxembourg industry federation’s press conference on Wednesday.

“What is important to us is that this should not be understood as a protectionist or restrictive appeal,” he said. “It is about drawing attention to the fact that restrictions can make sense in specific cases.”

The position responds to the European Commission’s planned Industrial Accelerator Act, presented in March, which has pushed the idea into the EU’s industrial-policy debate as Europe tries to reduce dependence on foreign suppliers.

Preference as an exception

European preference means giving European production or supply chains an advantage. For Fedil, that can be justified only where the absence of European capacity would leave the bloc exposed, not as a general rule for shielding industry from competition.

That makes the debate uncomfortable for a small economy. Luxembourg’s prosperity has long depended on cross-border trade, international value chains and access to markets far larger than its own, but Winkin said the past few years had shown that not all dependencies are harmless.

Covid-19 exposed gaps in supply chains, Russia’s war in Ukraine exposed energy dependence, and recent tensions have raised fresh questions over raw materials and industrial inputs Europe no longer produces at sufficient scale.

Any restrictions should remain limited by time, sector or application, Winkin said. “They must remain the exception,” he said. “We want to continue to stand by the principle of openness.”

Where dependence becomes strategic

Fedil would reserve preference for defence and security, health and medical supply chains, digital infrastructure, clean technologies, and heavy industries such as steel, aluminium and cement.

The case for limiting preference is based on disruption risk: security, public services, social stability or the continuity of wider production chains, according to Yves Germeaux, Fedil’s head of trade and international relations.

“The basic principle is openness,” Germeaux said. “But a certain dose of European preference, applied very specifically in certain sectors, can strengthen our resilience.”

In some cases, Europe could require a defined share of production or supply chains to be located inside the EU. Steel is one example: producers encouraged to invest in lower-carbon production need early buyers for those more expensive products.

Existing tools still matter

European preference should not be used to mask the weakness of existing EU trade tools, Germeaux said, referring to anti-dumping, anti-subsidy, safeguard measures and the carbon border adjustment mechanism.

“The European Commission must strengthen the existing instruments, because they are not yet effective,” he said. Preference, he added, should be used only for “specific problems”.

Fedil’s warning is that preference will not solve Europe’s industrial problem if the continent remains too slow, too expensive and too difficult as a place to invest.

Energy costs, infrastructure gaps, regulatory complexity, slow permitting and financing constraints all matter more than the label attached to a product. Without action on those obstacles, preference risks protecting weakness rather than rebuilding strength.

The same warning applies to consumers and businesses. Restricting access to foreign goods or services without building European alternatives would mean higher prices, less choice and weaker access to innovation, Winkin said. “We cannot restrict and close ourselves off without developing capacity ourselves,” he said.

Digital sovereignty makes the problem visible

Digital sovereignty is one of the clearest examples of where the debate becomes practical.

Europe remains heavily dependent on US and Asian technologies, said Georges Santer, Fedil’s head of digital and innovation. Three American hyperscalers account for about 65% of the EU cloud-services market, while the US controls roughly 75% of global computing capacity for AI, against about 5% for the EU.

For Fedil, those figures do not justify shutting out international providers. “Digital sovereignty means neither complete technological independence, protectionism nor economic closure,” Santer said. “We need better control over critical dependencies.”