BRUSSELS, October 2 — European capitals are recalibrating their industrial policy stances amid shifting trade dynamics and decarbonization pressures, with significant implications for Central and Eastern European economies. The mechanics here reveal a pragmatic shift away from entrenched positions. Berlin now recognizes the need for cross-sector protections against Chinese overcapacity, while Paris avoids triumphalism over its earlier advocacy for strategic autonomy.
The Tusk government in Poland has notably shifted to outwardly support the Carbon Border Adjustment Mechanism (CBAM), a policy tool that can justify protective measures against imports from countries with weaker emissions standards.
Competitiveness Concerns
These developments may bring attention to the CEE region’s remaining manufacturing base. The catch is that upcoming policy initiatives are unlikely to address CEE’s core concern: that the European Green Deal’s mandatory decarbonization targets have harmed competitiveness. On closer reading, the data reveals a stark reality.
Industrial electricity prices in the EU averaged €0.199 per kWh in 2024, compared to €0.082 in China and €0.075 in the United States. Between 2019 and 2023, industrial electricity prices rose 171% in Hungary and 137% in Poland, far exceeding the 21% increase in the United States over the same period.
Labor costs in CEE are now higher than in China and in countries like Morocco, which benefit from favorable EU trade agreements and have attracted substantial Chinese investment.
Fiscal Constraints
CEE governments face tighter fiscal constraints, borrowing at higher rates than Western EU members. Poland and Romania, despite high growth and reduced reliance on German exports, run high and growing deficits. This limits their ability to fund infrastructure and subsidies needed to benefit from potential reshoring trends.
The article argues that tariffs, taxes, and subsidies alone will not suffice without attracting private investment. But questions remain about whether global capital will commit to European manufacturing without an economic security mandate providing market certainty.
Policy Developments
The Industrial Accelerator Act—currently in early legislative stages—could benefit stronger EU manufacturers. It aims to bind the objectives of the February 2025 Clean Industrial Deal into law, including local content rules for public tenders and subsidies, and pathways for screened foreign investors to commit to onshoring through local employment and technology transfer. Originally named the Industrial Decarbonization Accelerator Act, the dropped term reflects a policy shift that CEE capitals may welcome.
They remain concerned, however, that new rules could raise production costs without guaranteeing increased demand. CEE needs a more deliberate strategy to seize opportunities from what could be an unprecedented inflection point in EU industrial policy.
The region must navigate these complex dynamics carefully to avoid being left behind in the evolving economic landscape.
