Thursday Feb 19, 2026
Thursday Feb 19, 2026
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The EU has agreed to proceed with its proposed ‘Buy European Only’ policy, reinforcing a shift towards strategic autonomy and regional supply chains. In a recent note, Frontier Research examined the policy’s direction and its possible implications for Sri Lanka.
“Broadly, the impact on Sri Lanka does not appear to be direct and significant yet. The EU has not specifically targeted consumer sectors that Sri Lanka has integrated itself into, such as traditional exports and commercial export products, namely, tea, rubber, and textiles, and other consumer goods which the EU is highly relying on,” Frontier Research said.
It noted that if the Generalised Scheme of Preferences Plus (GSP+) is impacted through the ‘Buy European Only’ policy, this could then directly impact key exports of Sri Lanka to the EU, which therein impacts income growth to the country. “So far, there has not been clarity on this possibility—the emphasis has been greater on strengthening national security, technology, and the digital landscape, all of which is largely supplied by the US and China and some other bigger players who will cut the bigger losses,” Frontier Research noted.
However, the story on regionalism and a stronger ASEAN and China can materialise in Sri Lanka if the EU strengthens their protectionist policies.
“This can even strengthen the case for more low-tech manufacturing activity to trickle down to Sri Lanka, while the ASEAN and China take on high-tech manufacturing. The lack of integration of Sri Lanka in the global markets during such a protectionist backdrop can act as an advantage in the long term. Nonetheless, if Sri Lanka does integrate into global manufacturing in IT, medical services, and electronics, stricter eligibility rules of the EU can directly impact how Sri Lanka can do business there,” the research firm said.
EU leaders endorsed ‘Buy European Only’ at a summit in Belgium, identifying defence, artificial intelligence (AI), space, quantum technologies, clean technology, and payment systems as priority sectors. European Commission President Ursula von der Leyen has said an action plan will follow, aimed at improving competitiveness, simplifying regulation, integrating capital markets, and reducing energy costs.
Frontier Research states that the policy seeks to prioritise EU-produced goods and services to consumers within the region with the aim of boosting the regional economy, and characterises the current trajectory as a systematic reduction of reliance on traditional external partners while strengthening regional supply chains.
Recent steps include tighter non-EU procurement rules in defence and the activation of the International Procurement Instrument to restrict certain foreign suppliers in response to market access concerns.
On global trade, Frontier Research notes that smaller players can lose negotiating leverage because the EU is closing itself off, particularly in high-technology and defence-related industries. In the short term, access barriers for non-EU firms may increase. Over time, if the policy is implemented strictly, the firm observes that limited external integration could create space for other regions to scale technological capacity.
