Andy Burnham faces an early test of his ability to rebuild Britain’s relationship with the European Union as he seeks to prevent British manufacturers being shut out of sweeping new rules designed to protect European industry from Chinese competition.
The EU’s proposed “Made in Europe” policy would favour European-made goods in public contracts and subsidy schemes, potentially putting British car makers and other manufacturers at a serious disadvantage. The dispute is emerging as a major challenge to the Prime Minister’s ambition to turn warmer relations with Brussels into economic benefits.
Burnham raised the issue directly with European Commission president Ursula von der Leyen last month, declaring ahead of their meeting: “We are not your enemies.”
Chancellor John Healey, the former defence secretary, also pressed the case for including Britain in the new industrial policy when he recently met with EU finance ministers.
Europe relations minister Hamish Falconer warned this week that excluding Britain would make Europe weaker. “If we were to fracture that industrial base, that would simply mean a weaker Europe, both in the UK and in the EU,” he told Euronews.
The issue is likely to dominate discussions at the next EU-UK summit, expected in Brussels next month, although the meeting has already been delayed amid disagreements over its agenda.
But Burnham faces a complication: the EU has yet to decide what “Made in Europe” actually means, with France and Germany divided over whether Britain and other close trading partners should qualify.
UK could be locked out of trade on cars, drugs and energy
The legislation, formally known as the Industrial Accelerator Act, is part of Brussels’ response to Europe’s industrial decline, China’s growing dominance of manufacturing (particularly electric vehicles, batteries and clean technologies), as well as the US’ increasingly entrenched trade policies.
It would use the EU’s enormous purchasing power to favour European suppliers, encouraging manufacturers to produce more within the bloc rather than rely on cheaper imports.
“Yes, this could bring all our European economic forces together – especially at a time when other trading partners do not play by the rules,” an EU diplomat in Brussels told The i Paper. “And yes, it could also bring the EU and the UK closer at an important moment. But we still need to decide, internally, what the rules should be.”
For Britain, however, the danger is that decades of closely integrated industrial production could be disrupted by a new economic dividing line across the Channel.
The automotive industry is particularly exposed. Cars and components worth around €80bn are traded annually between Britain and the EU, with parts routinely crossing borders during production.
Similar concerns have been raised by the chemicals, aerospace, pharmaceuticals and energy sectors, where British suppliers are closely integrated into European production.
The British Chambers of Commerce has joined British chambers across Europe in calling for the UK to be recognised as a trusted partner, arguing that excluding British suppliers would raise costs, disrupt investment and damage manufacturers on both sides of the Channel.
Yet, the dispute is far from settled in Brussels.
What European counties want
France is championing a strict interpretation that would reserve the greatest benefits for manufacturers within the EU’s 27 member states. French industry minister Sébastien Martin has insisted that European taxpayers’ money should support European factories and workers.
Germany backs a more flexible “Made with Europe” approach, allowing trusted trading partners, including Britain, to benefit where there is reciprocal market access.
Spain has proposed a compromise distinguishing between EU members, trusted partners and other countries with trade agreements. Several other governments favour flexibility, but the European Parliament is pressing for tougher European-content requirements.
The European Commission, meanwhile, has kept its position deliberately flexible. Its original proposal leaves the door open to Britain and other trading partners, subject to conditions including reciprocal market access, but stops short of guaranteeing their inclusion. With EU governments divided, the Commission has avoided making firm commitments to London.
The arguments extend beyond Britain. Canada, Japan and other trading partners are watching closely, concerned that Europe’s attempt to reduce its dependence on China could become a broader exercise in protectionism.
For Burnham, the awkward question is what Britain can offer in return.
UK left facing big Brexit concessions
Brussels has raised concerns that Chinese manufacturers could exploit differences between British and EU trade policies to gain indirect access to European markets.
The EU has imposed substantial additional tariffs on Chinese electric vehicles, while Britain has declined to follow suit. Some EU officials argue that joining the customs union would resolve many of these problems, but Burnham has maintained Labour’s commitment to remaining outside both the customs union and single market.
Falconer has disputed reports that Brussels is demanding matching tariffs on Chinese cars, insisting that Britain is not a backdoor for Chinese goods.
He has also argued that Britain’s existing post-Brexit trade agreement provides protections against new barriers, although that does not guarantee British manufacturers the preferential treatment they are seeking.
There is a determination to avoid repeating last year’s failure over the EU’s €150bn Security Action for Europe (Safe) defence fund, when negotiations on British participation collapsed over a multibillion-euro entry fee.
The immediate difficulty is timing. EU governments and the European Parliament are still negotiating the legislation, which is unlikely to receive final approval until next year, with key provisions expected to apply from 2029.
That means next month’s summit could produce a political declaration on Britain’s treatment, but cannot guarantee the final outcome.
For Burnham, who has opened the door to Britain eventually reconsidering EU membership, the challenge is more immediate: persuading Europe’s leaders that British factories belong inside their definition of European industry, even if Britain remains outside the Union.
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