Making DiversifyEU Deliver for European Industry

Written by philip armstrong

27 October 2026

Download the Consultation Response

Contribution to the European Commission’s public consultation on DiversifyEU

DiversifyEU should turn the EU’s existing powers into a coordinated, risk-based effort to secure the processing, manufacturing and technological capabilities on which Europe’s energy, industry and defence depend.

Key messages

  • Prioritise critical capabilities: use common risk assessments to identify the companies and facilities whose disruption would create an EU-wide gap, and require time-bound mitigation plans where risks are significant.

  • Make alternative supply viable: pair diversification requirements with purchasing commitments, production and scale-up support, and financing through the CRM Centre and use the power of investment networks such as E-MIN.

  • Use trade instruments decisively: deploy anti-dumping and anti-subsidy measures consistently, increase ex-officio investigations and close gaps across linked products.

  • Share the costs of retaliation: consider directing a share of trade-defence duty revenues to an EU solidarity mechanism for companies hit by countermeasures.

Europe’s industrial base is being squeezed by high energy costs, unfair competition and weaponised interdependencies. The EU’s goods trade deficit with China reached roughly EUR 1 billion a day in 2025, as imports rose and exports fell. At stake are Europe’s industrial competitiveness, technological leadership and freedom to pursue its economic and security interests.

DiversifyEU must secure critical processing, manufacturing and technological capabilities. Where risk assessments identify significant threats to strategic supply chains, companies should face enforceable mitigation requirements, paired with committed purchasing and financing for qualified alternative supply.

1. Prioritise critical capabilities and monitor their exposure

Focus diversification on supply chains underpinning strategic technologies, using principle-based criteria such as those set out in EIES’s framework to identify priorities.

Use risk assessments to prioritise bottlenecks within these technologies. Initial priorities should include rare-earth separation and permanent magnets; battery-grade processing, precursors, active materials and electrolytes; and critical inputs and components for dual-use technologies and defence applications.

Verify genuine diversification. Assess manufacturing origin alongside ownership, upstream inputs and control over technology, servicing and software.

The Commission and national authorities should monitor companies and facilities whose disruption would create an EU-wide capability gap. For material dependencies, the Commission should draw on the proposed EU CRM Centre’s supply chain intelligence avoiding a parallel function under DiversifyEU.

Require verifiable action where assessments identify significant risks to strategic supply chains. Companies in scope should implement time-bound mitigation plans, with actions and milestones proportionate to their strategic importance and the potential spillovers from disruption.

Provide proportionate enforcement and justified flexibility. The legislation should empower the Commission to require corrective action and impose proportionate penalties for persistent non-compliance with defined obligations.

“Diversification means freedom of choice. DiversifyEU should offer proportionate, proactive action against existing and emerging risks to safeguard the strategic industrial capabilities and emerging technologies that Europe needs.”
— Petya Barzilska, Head of Policy & Research, EIES

2. Make alternative supply commercially viable

Diversification requirements should be coupled with demand, production support and financing tailored to the material and production stage.

Create predictable demand and purchasing commitments. Strengthen IAA procurement and public-support conditions to reward European production, including critical battery materials and components.

Translate demand into long-term offtake and aggregated purchasing commitments connecting European and reliable partner-country projects with industrial buyers.

Support production and scale-up. Pair investment support with ramp-up finance, guarantees and production-based support tied to verified output and process improvements.

Mobilise financing through the CRM Centre and through the use of the European Minerals Investment Network (E-MIN). For critical-material supply chains, give the Centre a multiannual budget, equity and debt instruments, loss-absorption capacity and expertise to co-invest alongside private platforms and funds.

3. Use trade instruments decisively across linked value chains

Demonstrate political willingness to use existing tools. The EU should deploy anti-dumping and anti-subsidy instruments consistently where evidence warrants action and sustain justified measures.

Accelerate risk-based action. Prioritise enforcement in strategic supply chains, provide adequate Commission resources and increase ex-officio investigations so the burden does not fall on individual producers.

Calibrate remedies to supply conditions and coordinate enforcement. Use the supply-chain assessments described above to calibrate timing and scope against qualified alternatives, immediate supply needs and costs to European users.

4. Share the costs of retaliation and diversification across the EU

EU trade measures pursue common European objectives, and retaliation can concentrate losses on individual companies, sectors or Member States.

Directing a defined share of revenues from EU trade-defence duties towards companies affected by retaliatory countermeasures should be considered. An EU solidarity mechanism should help viable businesses manage disruption and develop alternative markets or supplies, with support available across Member States and affected sectors.

Diversification requires coordinated action

DiversifyEU should align trade, investment and industrial policy to secure the capabilities underpinning Europe’s prosperity and security. Success should mean stronger strategic industries, the capacity to scale emerging technologies and reduced exposure to disruption and coercion.

Related EIES work

philip armstrong
Next

Don’t Let the Accelerator Become a Brake