Made in EU: Asian countries criticize Merz and Macron’s car pact – Chancellor surprised

Chancellor Friedrich Merz (CDU) was surprised by the sharp criticism from Asian trading partners of the planned European “Made in EU” requirements for cars.

Just two weeks ago, at the EU summit in Brussels, Merz agreed with French President Emmanuel Macron to significantly tighten the rules for the automotive industry. Now the move is encountering resistance in Japan, South Korea and Singapore.

The intensity of the criticism “a little surprised” Merz said on Friday at the end of his trip to Asia in Seoul. The heads of state and government had expressed considerable concerns that the Europeans could trigger a new wave of protectionism and seal off their markets from foreign competitors.

“I contradicted everyone and tried to dispel these concerns,” said Merz. “We have to stay open, we have to have competition,” emphasized the Chancellor. This is the only way German companies can continue to sell their products successfully in Asia.

Merz announced that he would take the criticism to Brussels. “I will of course raise this at the next European Council, that I have had these concerns very intensely here,” he said. “I take it seriously and I take it with me.”

The Chancellor is taking a different tone, at least rhetorically, than he did two weeks ago. At that time, he had agreed on a comprehensive car pact with Macron in Brussels. Merz implemented further easing of the ban on combustion engines. In return, he accepted the stricter “Made in EU” rules demanded by France, which are intended to secure jobs in Europe.

In the future, government funding such as purchase bonuses will only be paid out for cars that are assembled in Europe and whose components come from at least 70 percent of European added value. An exception is planned for Great Britain. To do this, however, London must align its trade protection and investment rules with those of the EU in order to prevent Chinese manufacturers from accessing EU subsidies via Great Britain.

Japan, South Korea and other Asian manufacturing countries, on the other hand, would be excluded from EU subsidies for vehicles if they do not meet the requirements for European production and value creation.

It was already foreseeable before Merz's trip that these plans would meet with resistance in Asia. Immediately after the Franco-German agreement on October 16, the Japanese car manufacturer Toyota called for the special regulation planned for Great Britain to be extended to other close trading partners such as Japan and Turkey.

On Tuesday, before Merz's arrival in Tokyo, Japan's economics minister announced that he would expressly warn German guests against discriminating against Japanese electric cars. On Wednesday, Prime Minister Sanae Takaichi personally brought her concerns about the Industrial Accelerator Act, the European legislative proposal to strengthen industry, to Merz.

South Korean President Lee Jae-myung followed on Thursday. After his meeting with Merz in Seoul, Lee said he had expressly asked the Chancellor for support so that South Korea would be treated in the same way as the member states of the European Union under the planned EU law.

The EU has concluded comprehensive free trade agreements with Japan, South Korea and Singapore. The three countries are also among the partners with whom Merz wants to work more closely in view of US President Donald Trump's protectionist trade policy and China's growing economic power.

In Singapore on Tuesday, Merz himself proposed a global alliance of like-minded countries to strengthen rule-based trade. Europeans should integrate their existing trade agreements more closely and aim for a large interregional trade agreement in the long term.

On Friday, he left it open whether Merz would actually seek to relax the rules agreed with Macron in view of the resistance from Asia. He did not announce a change in the Franco-German position. However, he promised his Asian partners that they would bring their objections into further EU negotiations. He had already declared in Tokyo on Wednesday that the European preference only applies to the automotive industry and public procurement.

The Commission's Industrial Accelerator Act also provides for corresponding rules for other industrial sectors. Here Berlin is pushing for equal treatment of partner countries. For example, heat pumps from Asia should also be eligible for European purchase bonuses.