European flags fly outside the European Commission headquarters in Brussels, Belgium September 20, 2023. REUTERS/Yves Herman

By Philip Blenkinsop

BRUSSELS, Dec 8 (Reuters) - Nine EU member states urged the bloc on Monday to be extremely cautious over supporting its industry with "Buy European" plans, citing concerns over their potential impact on prices, supply chains and competition.

The European Commission is set to make proposals next month to bolster EU industry while cutting CO2 emissions and boosting clean-tech production, with requirements to prioritise locally manufactured goods that would reduce its reliance on imports from China.

France is among those to have championed the idea. President Emmanuel Macron urged Chinese leader Xi Jinping last week to help correct "unsustainable" trade imbalances and said he had threatened Beijing with tariffs if they did not act.

German Finance Minister Lars Klingbeil has called for a 'Buy European' approach on critical components while Chancellor Friedrich Merz says he backs a European preference in public tenders.

However, the nine countries - the Czech Republic, Estonia, Finland, Ireland, Latvia, Malta, Portugal, Sweden and Slovakia - said in a paper seen by Reuters that any 'Made in Europe' approach should be treated with "the highest possible caution".

In a paper to be presented at a meeting of ministers on EU competitiveness on Monday, they say the Commission should first carry out a comprehensive assessment of the policy's impact on prices, supply chains and competition.

The nine states said a European preference policy should only be pursued if there are no adequate alternatives and should apply only for a set time to specific strategic sectors.

It must also avoid cumbersome verification of the European origin of complex products, they said.

Proposals should not upset EU trade relations, given that deeper partnerships with like-minded countries are part of the EU's diversification strategy, the paper said.

Competition is needed for innovation and disproportionate rules could drive investment away, they said, while EU companies cannot provide sufficient supply for all emerging sectors.

"If applied broadly, 'European Preference' risks depriving European companies and our consumers of choice and competition, leading to higher prices and weaker innovation," the paper said.

(Reporting by Philip BlenkinsopEditing by Gareth Jones)