Explainer-What is in Brussels' 'Made in EU' law and why is Britain worried?

By Philip Blenkinsop

BRUSSELS, Sept 22 (Reuters) - British Prime Minister Andy Burnham said on Tuesday he would make the case for Britain to be considered a "trusted partner" under the European Union's proposed "Made in EU" rules, warning that excluding the UK could damage the British car industry.

Here are the key points of the European Commission's proposed Industrial Accelerator Act, unveiled in March.

RATIONALE

The Industrial Accelerator Act is part of broader EU efforts to help local industries compete with producers abroad who do not face Europe's strict regulations and higher energy prices.

It is aimed in particular at reducing reliance on China, which dominates production of many green technologies, including most solar panel components.

The EU law aims to use the huge financial firepower of its member countries' public procurement - worth more than €2 trillion ($2.29 trillion) or 14% of EU economic output - to shore up struggling domestic industries.

WHAT WILL THE LAW DO?

The proposal introduces local-content and low-carbon requirements for products bought through public procurement, public auctions or via subsidy schemes.

It covers strategic sectors including steel, aluminium and cement, electric vehicles, batteries, solar and wind power, hydrogen technology and nuclear energy.

It sets a specific requirement per technology, depending on whether the aim is to maintain an existing industry - like hydrogen electrolysers, where EU manufacturers currently lead the local market - or to pull back to Europe a small share of an industry which China dominates.

For solar panels, the inverter plus the cells would need to be Europe-made within three years. 

Aluminium bought through public procurement would need to be 25% EU-made and low-carbon. Steel would not face EU-made requirements, but would need to be 25% low-carbon.

Makers of electric vehicles bought through public procurement would have to ensure their vehicles are assembled in the EU, and that 70% of their components - excluding the battery - are EU-made, six months after the law takes effect.

WHAT IS 'MADE IN EU'?

A key point of contention is how to define "Made in EU".

Under the proposal, goods from the 27 EU member states, plus Iceland, Liechtenstein, and Norway - which are part of the single market - are automatically included.

Some non-EU countries could also be included if they provide reciprocal access to their public procurement or subsidy programmes. Eligibility would generally be limited to countries covered by WTO procurement rules or trade agreements with the bloc.

That could pose problems for countries like close ally Canada, where a "buy Canadian" policy prioritises local firms over foreign ones.

The Commission has yet to publish a list of qualifying countries. British carmakers' association SMMT said that excluding Britain would put shared investment and a €80 billion trading relationship at risk.

The proposal includes exemptions where products are unavailable in Europe or where switching suppliers would raise costs significantly.

RULES FOR FOREIGN INVESTORS

The law would also impose conditions on foreign investments above 100 million euros in strategic sectors where the investor's home country accounts for at least 40% of global manufacturing capacity, a provision widely seen as targeting China.

The criteria include the requirement that the foreign investor cannot hold a majority stake in an EU company, must employ mostly European workers, and must license its intellectual property to benefit the EU investment.

NEXT STEPS

EU governments and the European Parliament must agree a final text, with approval expected next year.

France is seeking stricter limits on which non-EU countries the law lets in, while Sweden and the Czech Republic have opposed strict rules, warning they could deter investment and raise prices. Germany has also struck a cautious tone, with Chancellor Friedrich Merz previously saying that sole European preference rules should be a "last resort".

Industries are also pushing for changes. Some sectors that have been left out, including steel manufacturers, want "Made in EU" rules for their sector.

Carmakers have been less enthusiastic, concerned that their sprawling global supply chains could be upended. 

($1 = 0.8728 euros)

(Reporting by Philip BlenkinsopEditing by Ros Russell)