Key Takeaway
Europe is not trying to bring every factory back inside its borders. Its emerging industrial policy is more selective: in strategic areas such as steel, aluminium, vehicles, clean technologies, critical raw materials and semiconductors, the European Union wants a minimum level of production capacity at home or through trusted partners. For Georgia, the shift creates both an opportunity and a new test: low cost alone will not secure a place in European supply chains; origin, technical compliance, resilience and sustainability will matter increasingly.
Why Europe is changing course
For decades, European manufacturing benefited from global specialization. Companies placed production where costs were lower and the European market received relatively cheap raw materials, components and finished goods. That model looked efficient as long as major supply disruptions remained exceptional. The pandemic, the energy shock, geopolitical fragmentation and heavy dependence on China demonstrated that the cheapest supplier is not always the safest one.
In March 2026, the European Commission proposed the Industrial Accelerator Act, which would introduce preferences for EU-made and low-carbon products in public procurement and public support schemes. The proposal initially targets steel, cement, aluminium, vehicles and net-zero technologies, with a framework that could later cover other energy-intensive industries. The Commission’s broader ambition is to raise manufacturing’s share of EU GDP from 14.3% in 2024 to 20% by 2035. The policy is therefore not only environmental; it is also about production capacity, employment and economic security.
Strategic autonomy is becoming an industrial target
The Financial Times reported in September 2026 that the United Kingdom, Japan, Türkiye and other trading partners were seeking clarity or tailored arrangements so their manufacturers would not be excluded from the new European preferences. That is revealing: industrial origin is becoming a new factor in trade diplomacy.
Three forces explain the change. The first is supply security. Under the Critical Raw Materials Act, the EU has set 2030 benchmarks under which at least 10% of annual consumption of strategic raw materials should be extracted in the EU, 40% processed in the EU and 25% met through recycling, while dependence on any single third country should not exceed 65%.
The second force is technological competition. The Net-Zero Industry Act sets a benchmark for EU manufacturing capacity to meet at least 40% of annual deployment needs for net-zero technologies by 2030. The European Chips Act aims to double Europe’s global semiconductor market share to 20% by 2030.
The third force is the use of public money. The Commission wants procurement and support programmes to create demand for European industrial products. Where public funds finance vehicles, energy equipment or industrial materials, the place and conditions of production may become more important than before.
Not a complete retreat from global trade
The shift should not be reduced to a simple return of protectionism. The Commission proposal leaves room for trade partners under free-trade areas, customs unions and relevant procurement obligations to receive equivalent treatment in some circumstances. The precise scope will depend on the final legislation and on specific agreements.
Europe is therefore not closing global trade. It is trying to replace uncontrolled dependence in strategic sectors with managed interdependence. Imports will remain essential, but critical components, energy technologies, industrial metals and digital infrastructure are increasingly expected to come from diversified and trusted sources.
What it means for Georgia
For Georgia, this matters because the European Union is one of its largest trading partners. According to Georgia’s National Statistics Office, Geostat, Georgia exported about $876.8 million of goods to EU countries in 2025 and imported about $4.71 billion from them. According to calculations by BTU researchers, the EU accounted for approximately 12.0% of Georgia’s total exports and 25.4% of its imports that year.
The asymmetry matters. Georgia buys much more industrial merchandise from the EU than it sells there. If European-made machinery, construction inputs, vehicles or other industrial products become more expensive, Georgian import costs could also rise. At the same time, European companies looking to diversify suppliers could create openings for nearby producers that can demonstrate quality, reliable delivery and rules-of-origin compliance.
Georgia’s Deep and Comprehensive Free Trade Area with the EU is an important advantage. It removes most customs barriers in goods trade, supports regulatory approximation and provides for gradual mutual opening in public procurement. It does not automatically make Georgian output equivalent to EU-made goods under every future preference rule, but it gives Georgia a stronger legal and institutional platform from which to negotiate access and build compatibility.
Where the opportunity is realistic
Georgia is unlikely to compete with China, Germany or Poland in the scale production of complete strategic products. The more realistic opportunity is in selected stages of the supply chain: processed metals, intermediate industrial goods, components for energy or construction projects and production-related services where proximity and compliance can outweigh sheer scale.
Geostat data show that ferro-alloys exports were about $225.8 million in 2025, indicating an existing base of metallurgical export experience, although the value was lower than in the previous year. That experience does not by itself guarantee entry into new European value chains, but it shows that Georgia is not starting from zero.
The key variable will be compliance rather than scale. Europe’s new industrial policy increasingly links market access and public support to product origin, carbon intensity, traceability and technical standards. A Georgian producer that adapts early could compete through faster delivery, geographic proximity and regulatory compatibility rather than through low wages alone.
Risks for a small economy
The first risk is exclusion. If future European preferences are tied too narrowly to production physically located inside the EU, Georgia could remain outside important support schemes despite its free-trade agreement. European companies might then favor suppliers inside the Union or in partner countries that secure specific arrangements.
The second risk is the cost of energy, logistics and capital. Strategic manufacturing requires reliable electricity, transport links, quality control and long-term finance. For a small economy, a supplier may need to invest in capacity and certification before it wins a large contract, creating a financing problem if demand is not assured.
The third risk is price. Bringing production closer to Europe does not automatically make it cheaper. Higher wages, energy costs and environmental requirements can raise production costs. Europe is effectively placing a price on resilience and security. Consumers may face higher costs in the short term in exchange for lower vulnerability to future disruptions.
BTU researchers’ assessment
According to an assessment by BTU researchers, Georgia’s most credible opportunity is not a rapid attempt to build giant factories, but to become a reliable neighboring link in European industrial networks. That requires selecting a small number of sectors where Georgia already has know-how or export experience and aligning technical standards, vocational skills, energy infrastructure and investment policy around them.
If these policies remain fragmented, the new European manufacturing cycle may bypass Georgia. If they are coordinated into a coherent industrial offer, supplier diversification by European companies could create a new export market for Georgian firms.
Conclusion
Europe’s return to strategic production is not a recreation of the old industrial economy. It is an effort to recover control over essential supply chains while keeping trade open. The central questions are no longer only “where is this cheapest to make?” but also “who are we dependent on?”, “how quickly can supply be replaced?” and “how much value remains within Europe and trusted partner economies?”
For Georgia, the opportunity is real but not automatic. The free-trade agreement and geographic proximity provide a useful starting point, but Europe’s next phase of industrial policy will reward countries and firms that can demonstrate origin, quality, lower carbon intensity and reliable delivery. The challenge is whether Georgia can move from being merely a free-trade partner to becoming a practical production partner.
Data and Main Sources
Financial Times, 16 September 2026 – UK and Japan seek to fully benefit from ‘Made in Europe’ car sector rules – https://www.ft.com/content/7265f15f-c1e4-49c5-b6e0-8c3a29e70892
European Commission – Industrial Accelerator Act, proposal published 4 March 2026 – https://single-market-economy.ec.europa.eu/publications/industrial-accelerator-act_en
European Commission – Critical Raw Materials Act – https://single-market-economy.ec.europa.eu/sectors/raw-materials/areas-specific-interest/critical-raw-materials/critical-raw-materials-act_en
European Commission – Net-Zero Industry Act – https://single-market-economy.ec.europa.eu/industry/sustainability/net-zero-industry-act_en
European Commission – Chips Act – https://digital-strategy.ec.europa.eu/en/factpages/chips-act
National Statistics Office of Georgia (Geostat) – External Merchandise Trade of Georgia, 2025 – https://www.geostat.ge/media/76336/Annex-1—EM.pdf
European Commission – EU trade relations with Georgia – https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/georgia_en
Prepared by the academic team of Business and Technology University and the BTUAI Research Team, Tbilisi, Georgia.