What Is European Preference?

“European Preference” is the commonly used term for a new EU policy that requires public procurement contracts and subsidised industrial projects to source a minimum percentage of their goods and materials from European producers.

The policy is formally part of the Industrial Accelerator Act, proposed by the European Commission and published on February 26, 2026. It was championed by French Industry Commissioner Stéphane Séjourné and backed by Commission President Ursula von der Leyen.

What Does It Actually Require?

The law creates mandatory “European content” thresholds for specific sectors. If you’re bidding on a public contract or receiving EU industrial subsidies, you must demonstrate that a defined percentage of your products or components are manufactured within the European Economic Area.

The thresholds vary by sector — for example, electric vehicles need 70% European content (excluding batteries), while steel in construction projects requires 25% to be low-carbon European-sourced. The law also introduces mandatory low-carbon labelling for steel and cement, with more materials to follow.

What It Is Not

European Preference is not a tariff. It doesn’t impose taxes on imports. Non-European goods can still be sold freely in European markets. The requirements apply specifically to public procurement (government purchasing) and subsidised projects (those receiving EU industrial support funding).

It’s also not a blanket ban on non-European suppliers. Companies from outside the EEA can still participate in supply chains — but they may need to partner with European manufacturers or demonstrate that their products meet the origin requirements.

Who Decides What Counts as “European”?

The definition of “European” under this law is the European Economic Area: the 27 EU member states plus Norway, Iceland, and Liechtenstein. The UK and Turkey are explicitly excluded.

However, the draft legislation includes a flexibility mechanism: the European Commission can designate specific third countries as “equivalent” through delegated acts. This was a concession to member states concerned about supply chain disruption — particularly Germany, which imports significant industrial components from outside the EU.

What Happens Next?

The Commission’s proposal is just the starting point. The law now enters the EU legislative process, where the European Parliament and Council of Ministers will negotiate amendments. This typically takes 12–24 months. A revision of the broader Public Procurement Directives is also expected in Q4 2026.

Businesses should use this window to assess their supply chains, understand which sectors they operate in, and start preparing for potential compliance requirements.